These results are from the Gallup’s recent Economy and Personal Finances poll that asked Americans to choose the best option for long-term investments. Their choices? Real estate, stocks and mutual funds, gold, savings accounts and CDs, or bonds. The last poll was done in 2001 and gold was the favorite from the list.

Source:  http://www.gallup.com/poll/168554/americans-sold-real-estate-best-long-term-investment.aspx?ref=image

We  ♥ Real Estate

When we hit the subprime mortgage crisis in 2007 and we saw what some call the worst housing crisis follow in 2008, Americans were scared. But with the housing market has been improving and we aren’t as afraid to sell our homes anymore especially this year with home prices rising,  This current improvement in prices may be why more Americans now consider real estate the best option for long-term investments. The love affair of real estate has come back into play.

It is important not to read too much into these results however. It is upper-income Americans that are much more likely to say real estate and stocks are the best investment, possibly because of their experience with these types of investments, and possibly because they have the disposible income to invest in these. Home ownership plays a part too. Upper-income Americans are most likely to say they own their home, at 87%, followed by middle (66%) and lower-income Americans (36%). Gallup found that homeowners (33%) are slightly more likely than renters (24%) to say real estate is the best choice for long-term investments.

Keep an Eye on the “Hipster Generation”

While Gallup’s latest results show growing confidence in investing in real estate Americans between 18 and 29 years old are almost evenly split. This age group is a very targeted audience with about one-quarter each saying real estate, stocks, gold, and savings accounts are the best choices for long-term investments. It is a generation of renters that is every Realtor’s dream to convert them to home owners, every last one of them.

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The survey found that San Francisco was the third favorite city for foreign investors, with Houston and Los Angeles coming in at four and five, respectively. The U.S. remains the most “stable and secure” country for investment by a wide margin of more than 50 percentage points over second-place country Germany. This is the widest margin since before the crash of 2008.

Check out this video from CNN for further explanation on the current US Housing Market.

The U.S. remains the country providing the best opportunity for capital appreciation. It also leads the ranking for planned real estate acquisitions in 2014, with nearly 50 percent of respondents projecting a modest increase in their U.S. portfolio size and 20 percent projecting a “major” increase. “Foreign investors’ continued and growing interest in the U.S. real estate markets reflects fully functioning capital markets for both debt and equity that provide access to a broad range of investment opportunities,” said the association’s Chairman, Steven Hason.

Experts seem ambivalent on business investment and its potential importance or benefit to U.S. housing. “The lower-than-average homeownership rate and swarm of investor purchases might or might not be a long-term model for U.S. housing,” wrote S&P analyst Devi Aurora earlier this week.

The latest data from the National Association of Realtors, which was released last summer, showed that foreign buyers had scooped up $68.2 billion of single-family homes in the U.S. in the year ended March 2013. That’s about 7 percent of the total U.S. market. That number is slightly down from the $82.5 billion invested during the same period of 2012, but up from 2011. The fastest growth in foreign buyers was from China and Canada as much of the media is reporting now.

So what are you waiting for? You are already living in the best place in the world to invest. Check out our Flipping Houses University to see how you can get started.

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Again we feel too many new investors focus on national news.  We all know flipping is hot in Las Vegas and pretty much all the southern sand states.  But there are some markets out there that are making huge recoveries. We try to watch what is happening around the country, and as we start our Market Watch Series, we will share details of markets that look ripe for flipping houses.  You can compare these trends to your market and see how it stacks up. Next on the list,  Ocean City, New Jersey.

You mean Atlantic City right? Nope. Ocean city in the 3rd quarter was 6th highest priced for flipped home prices. Real estate investors there are taking in a average gross profit of $140,716. Granted the average price is in the mid to higher price range, ($467,113) there is still plenty of money to be made. The number of flipped houses was only a little over 50 last quarter but that was a rise of 35% from the previous quarter. Gross profits have risen substantially in the past year, however, from $18,542 in the third quarter of 2012 to $140,716 in the third quarter of 2013. This is despite the fact that the average price paid on a home that was flipped was more than $427,000. Those are some crazy growth numbers.

Again there is still money to be made from this segment of the housing industry, despite increased competition and decreased inventory. This is primarily due to overall buying activity in the area’s housing market picking up as the city continues to recover from Superstorm Sandy.

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Too many new investors focus on national news.  Real estate is hyper-local though.  Unless you live in Las Vegas, Phoenix, Washington DC, etc. it doesn’t matter what is happening in those areas.  Your market will be different.  In fact, your market may vary from one side of town to the other.

All of that being said, we do watch what is happening around the country.  In our Market Watch series, we will share details of markets that look ripe for flipping houses.  You can compare these trends to your market and see how it stacks up.

Spokane Washington

Earlier this summer the Spokesman-Review touted how its market was thriving.  Sales of homes on less than one acre were 20 percent higher than last year, the Spokane Association of Realtors reported. Through the first half of the year, 2,469 homes were sold in the county, compared with 2,046 in 2012. The median sales price of all homes sold this year for the city in the first half was  $162,500, or 5.9 percent above last year’s $153,450. The newspaper also stated earlier this year that the market was showing sure signs of rebound, a perfect piece to the real estate investing puzzle. Home sales and prices continued to climb across the Spokane region throughout the year. The number of homes sold so far in 2013 jumped 13 percent compared to the same period a year ago. “Together, those two numbers are helping brokers feel good, that the market is coming back,” said Rob Higgins, executive officer of the Spokane Association of Realtors. Not to mention Spokane’s average home sale price is up 10 percent compared to a year ago. More good news for flippers.

Spokane was enticing enough that flipping gurus FortuneBuilders set their course for the city this fall. For weeks, a deluge of advertisements for these their seminars flooded Spokane radio stations. Call now, said the voice of Than Merrill (FortuneBuilders founder, ex-NFL player, former Flip This House star) and get two free tickets to learn how to rake in profit with very little risk. Spokane is the perfect market, he said, for house flipping. 

Again the important thing to remember is to know your market. Make sure you know what the housing market in your area is doing. Real estate is hyper-local.  You don’t have to be Alex Foley to know that Detroit and Beverly Hills are not the same.  Some markets will lag national trends.  Others will never see the wild fluctuations that ‘hot’ areas such as California, Florida, Arizona, and Las Vegas will see. But there are those isolated not-so-obvious hot spots like Spokane. Remember that flipping houses is particularly profitable when you get both Forced Appreciation and Market Appreciation.

And this just in: http://www.khq.com/story/24066288/10-cheapest-houses-for-sale-in-spokane.

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MarketWatch reports :

For the market as a whole, flips of single family homes fell 13% in the third quarter, according to new research from RealtyTrac, with investors earning a gross profit of nearly $55,000 on each property. But at the higher end of the market, homes seem to flip as quickly as a griddle full of hamburgers. Flipping increased 34% among homes worth $750,000 and over, 42% among $1 to $2 million houses, and 350% for properties worth between $2 and $5 million.

Flipping tends to be most common in cities with a large supply of expensive homes. (To qualify as a flip, a home must be purchased and subsequently sold again within six months.) In fact, more than three-quarters of all high-end flipping took place in five markets: The New York metro area and Los Angeles, San Francisco, San Jose and San Diego.

What’s behind these quick turnarounds? “Flipping happens when prices are rising rapidly even if price levels are low,” says Jed Kolko, chief economist for real-estate firm Trulia.

It’s possible to double the value of a home, says Jeff Salgado, a San Francisco-based realtor. Investors could buy a dilapidated home for $1.2 million, invest $600,000 and sell it for $2.4 million, he says. “Our buying community is driven by the biotech and high tech sectors. These people are brilliant at what they do, but a good portion of them don’t know the difference between a screwdriver and a hammer.”

The Challenges in This Market

Epic House Flip Fail?

It happens to the best of us. Mistakes are made, time and money are lost. A bad flip. But don’t feel too bad; even pop star Ricky Martin had a failed flip in 2010. Guess he wasn’t Livin’ La Vida Loca that year. But how can you as a part time real estate investor stay out of the pitfalls? Let’s talk a little bit about why flippers fail.

Here are our top five reasons why we feel new house flippers fail.

1. Paying too Much

We know that you are excited when you get that first deal. Keep in mind that first flip can set the tone for your flipping career. While the first flip is a learning experience, you must do your research to make sure you know what you are getting into. Check out the neighborhood yourself or have your realtor work up comps for you. Over paying for a property will not leave you in a good situation. Don’t let a loss for a brand new investment business could be too hard to overcome.

2. Lack of Planning

We say this in about every blog: Have a system and stick to it. Jumping ahead in the flipping world with out laying out your strategy is not only dangerous it could ruin your flipping adventure. Having a system and using tools like your Property Repair Estimate Sheet will keep you organized and have an idea how the flip is going to turn out. Without a system, a flip could turn into a disaster.

3. Not Supervising Contractors

While we encourage part time flippers to hire contractors to keep the bulk of the work off your own shoulders, don’t forget to supervise. Often, first time flippers think that all they will have to do is hire contractors and then they can go back to their day job and not check in. So much can go wrong if you do not check in on how the contractors are doing with your Scope of Work (SOW). Let the foreman know if he is to make decisions on the spot, or should a contractor contact you first. Keep in mind that not all contractors have the same morals and values as Tim the Toolman Taylor. With out supervision, they could drag their feet getting the work done, take 3-hour lunch breaks or actually be doing another job while they are supposed to be doing yours.

4. Unrealistic Timeframes

This mistake can be avoidable if you educate yourself on how long it actually takes to complete a flip. How busy are you? How busy is your contractor. What is the market like in your farm area? A good rule of thumb to follow from Bigger Pockets: Give yourself six months; plan all your carrying costs and expenses for 6 months, then work towards getting it gone in three to four months depending on the extent of work needed.

5. Over Improving

Don’t make this mistake. Don’t rehab the home the way you would like for it to be. Don’t pick out designer tiles or trendy paint colors. Remember you are trying to appeal to potential home buyers, not your personal taste. Yes the marble counter tops will really look nice but an upgrade like that could price yourself right out of the neighborhood. Neutral options that are comparable to other homes in the area will best serve you to sell the house.

Read more about this at Bigger Pockets, a social network for the real estate investing community.

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A “wild and crazy” deal for Steve Martin

Steve Martin might be a “wild and crazy” guy but seems the comic has a fair amount of savvy when it comes to investing in real estate. MSN recently reports that the funny guy has listed his villa in St. Barts for $11.4 million. According to CNBC Martin paid about $9 million for the house. If he successfully flips that will put his ROI at about $2.4 million. Not too shabby for flipping houses on the side.

According to MSN Martin bought the property back in 2008. St Barts suffered with the rest of the real estate world in 2008 and 2009 having its share of foreclosed properties. His timing is perfect with luxury buyers pouring into the Caribbean area as the real estate market recovers. It seems house flipping has become the day trade of our time.

But in the rush to make a profit and jump on the flipping wagon, many would be real estate investors overlook the basics and end up floundering. Reality is you have to educate yourself on market trends and put systems in place. Make sure you can work the numbers and the “deal” is actually worth the risk.

Even if you get that deal of a lifetime, you need to know which renovations to actually do.  Keep in mind that you should also understand the applicable tax laws and know what repairs are not necessary. A lot of first time flippers fall into over improving.

It’s not as easy as it looks on TV.  There are new real estate investors  out there, which means that the obvious deals are gone in a heartbeat. It is important to set up a good team from the start. Make sure your realtor is on the up and up on deals. Finding those houses takes time and once you find them, you’ll need to move fast.

But why all the TV shows about house flipping?

As The Wall Street Journal reports:

“When the financial crisis hit Wall Street in 2008 and the housing market began to unravel, many of these networks chose to retool those shows or take them off the air to keep current. New episodes of A&E’s “Flip This House” haven’t aired since 2009, and networks such as Scripps Networks’ HGTV introduced programs such as “The Unsellables” about making over homes to help owners who can’t sell their properties. The shows that weathered the storm and stayed on the air had to change their focus.”

Most of the time those  “reality” shows are leaving out key pieces to the puzzle like realtor and mortgage fees. We predict those shows will still show you a lot of fantasy and find it much more entertaining than the reality of standing in line for hours at the building-permit office.

So before you make your own “wild and crazy” deal, again educate yourself. Find out if you are in a good market or research a market you would like to break into.  Make sure you have your financing in order and make sure you have the right set of skills or can hire the people with the right set of skills to make flipping houses profitable for you and your family.

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A second look at Flipping Houses in the News

Since we posted our blog about flipping houses in the news there has been even more buzz about rehabbing. Enough that we felt some of the more newsworthly stories deserved a second glance.  It seems every day there is a new list of the “Top 5 Hottest Markets For Flipping Houses”.   Here’s a few articles worth reading on various markets around the country.

CNBC ran this story on how the housing market was heading into the spring selling season stronger than the previous year.  Los Angeles saw some of the earliest signs of the housing recovery.  The story discusses bidding wars and the return of house flippers for the first time since the bubble burst.

Shady investors helped create this mess, but legitimate investors have been an essential part of the housing recovery.  The reason for this is that during the housing bubble, speculators artificially helped inflate prices.   Now, rehabbers are helping to stabilize neighborhoods and preserve, if not raise, surrounding home values.  They are also luring first-time buyers into the marketplace.  But the how long will this fortuitous situation last?  Price increases mean some flippers may not be able to purchase homes and make significant profits.  Don’t wait until this situation passes you by to get into the game.

Flipping houses is on the rise.

According to RealtyTrac’s Midyear 2013 Home Flipping Report , house flipping was on the rise in more than two-thirds of housing markets.  These included New York, Washington D.C., Chicago and several Florida areas–some of the hardest hit with the foreclosures epidemic.  Nationwide, over 136,184 homes have been flipped.

RealtyTrac’s top 5 states for house flipping are as follows:

1. Washington DC, 80%

2.  Nebraska, 62%

3.  Oklahoma, 35%

4.  Pennsylvania, 31%

4.  Florida, 24%

“We’re seeing house flipping exceed what we saw back during the height of the housing bubble.”

—Daren Blomquist, vice president at RealtyTrac

The housing bubble burst caused a ripple effect in other markets, including Nebraska, causing home prices and demand to drop off in recent years, Blomquist said.  That occurred also in Oklahoma and other Midwestern markets.  Now that consumers in those markets have their confidence back , home prices in those markets are rebounding at a faster rate than almost ever before as the market plays catch-up from the down years.

Post a comment below and let us know how your market is doing.

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Flipping Houses in The News

From HGTV to CNN, network line-ups and newscasts are filled with stories of real estate investors and their success stories.  If you’ve ever watched the shows, “Flip This House” or “Flip That House” then you know what we are talking about.

Flipping houses involves buying a property, renovating it and then reselling the home.  When done correctly, this is a more viable plan than investing in the ever unpredictable stock market.  The recent housing slump dampened the mood of many potential investors, but markets all over the nation are on the rise.

Good Markets

The casual observer might be surprised at how strong the real estate market is currently.  Many markets around the nation are posting double-digit gains.  Even many of the “Sand States” that saw the worst of the foreclosure epidemic are recovering well.  For more information about what markets are hot for house flipping check out the links below.

Philadelphia

Yahoo Real Estate News

Washington Post

Consumer confidence on the rise

Consumer Confidence

The backbone to our economy, consumer confidence is on the rise. According to the National Commerce Department, sales of new homes in May rose to the highest level since July 2008!  This is very good news for rehabbers.

House Prices Make a Comeback

Recent Boom Attributed to Flipping Houses

Educate Yourself

Make sure you know what the housing market in your area is doing.  Real estate is hyper-local.  You don’t have to be Alex Foley to know that Detroit and Beverly Hills are not the same.  Some markets will lag national trends.  Others will never see the wild fluctuations that ‘hot’ areas such as California, Florida, Arizona, and Las Vegas will see.  Remember that flipping houses is particularly profitable when you get both Forced Appreciation and Market Appreciation.

Should I be Flipping Houses in this Market?

Flipping Houses 101: Important Basics

The Part-Time Real Estate Investor

Investing in real estate on a part-time basis can be that extra kick in your finances that you need to secure your financial future.  For many people, the quick ROI is a huge benefit.  By making a plan and executing it you can achieve you goals without taking time away from your family friends and your livelihood.

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What is the flpping houses market like?

If you are a Doomsday Prepper and have been living in a shelter since the Mayan Apocalypse, you may not realize that the above-ground real estate market is back.  The rest of us have once again been inundated with news articles and TV shows about flipping houses.  From HGTV to CNN, the airwaves are filled with love for rehabbers.  But, how do you know whether to enter into the fray or return to your underground home for another few months?

There are 3 main questions to ask when determining whether your specific market is right for investing in real estate.  These questions revolve around consumer confidence, absorption rate and days on market.

Consumer Confidence

This past May, sales of new homes rose to the highest level since July 2008, according to Commerce Department. Increased consumer confidence has driven this growth as has a reduction in foreclosure activity.  According to Jed Kolko, chief economist for the real estate website Trulia, “most of the foreclosure crisis is behind us, so there are far fewer foreclosed homes now on the market waiting to be sold.”  Ask your agent about increased market activity to see whether consumer confidence is up in your area.

Absorption Rate

The definition of absorption rate according to Investopedia is:

“The rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market. A high absorption rate may indicate that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.”

Days on Market (DOM)

Days on Market is an industry statistic that simple tracks how long it takes an average property to sell in a given area.  DOM and absorption rate are often strongly correlated.  In other words, as absorption rate decreases, DOM often does as well.  This is simply because with less homes to choose from, buyers feel more pressure to act quickly when they find what they want.  When flipping houses, this is great as it means your carrying costs will be lower.

Good Markets

Most markets around the nation are surprisingly good right now. For example, the median sales price for homes in Philadelphia from December, 2012 through January, 2013 was $140,000 which represents a 16.7 percent increase from the same time the previous year.  Here are some other strong real estate markets for flipping homes according to the main-stream media…

Yahoo Real Estate News

Washington Post

Use Your Team

Don’t hesitate to ask your Realtor, “Should I be flipping houses right now?”  It’s her job to stay apprised of market conditions and she should have Absorption and DOM data readily available.  Remember, real estate is hyper-local.  Make sure you know the numbers not just for your town, but for the specific neighborhood you are looking to invest in.

Additionally, make sure not to over improve a house. The market in the area may be good but you want to make sure your house is sellable too. Ask your Realtor for comps of the neighborhood. Sometimes even if you renovate a house well, in the wrong neighborhood, the wrong area, you are not going to get the ROI you were hoping for.

Markets are up

The key is to look at what you can control. “There are fewer real estate investors now, compared to during the boom. But this time, they have really done their homework,” says Andy Heller, author of “Buy Low, Rent Smart, Sell High: Real Estate Investing for the Long Run.” You cannot control the market, but you can educate yourself on market trends and put a system in place that will guarantee profitable results.

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