New housing regulations for the FHA put in place by the Department of Housing and Urban Development (HUD) will extend anti-flipping measures all the way until December 31, 2014. The FHA was granted a temporary waiver in January of 2010, but HUD has decided to extend it in order to further stimulate the housing recovery. When the housing market finally crashed it has been estimated that nearly 7 trillion dollars of household wealth was lost. A good portion of that wealth still has not been recovered.
These policies will further aid investors looking to benefit from low mortgage rates and increasing home values. The new regulations allow home buyers to resell homes with less red tape and make returns on their investments more quickly.
Previous regulations forced investors to wait at least 90 days after purchasing a home before it could be put back onto the market for resale. However, investors looking to flip homes quickly still need to show documentation detailing the home renovations as well as an additional appraisal to help justify the higher resale price if the house was insured through the FHA.
Even with these limitations, today’s housing market and the less strict regulations provide ample opportunity for savvy investors to turn a profit by repairing and reselling homes.
3 Tips to Reselling Homes in Today’s Housing Market
1. Know your potential investment property’s market.
Just because the average price for a home is increasing nationally, this does not mean that every state and local market is doing equally as well. Indeed, there are some locations where the housing sector is actually doing worse than it was a year or two ago.
Knowing your local market is the first step to being successful at selling real estate. Realty Trac, a real estate information company, has listed Orlando, Florida; Richmond, Virginia; Tucson, Arizona; and Charlotte, North Carolina as being the optimal locations to resell homes for a profit.
2. Determine profitability after the total amount of expenses.
Buying a home requires one to take into consideration all of the expenses both upfront and hidden which need to be taken into account if the home is going to be resold. Keep in mind how much remodeling, maintenance, utility expenses and finance costs will add to the original price of the home. You may end up determining that you simply can’t make a profit by reselling a certain home at the price the market is willing to bear. Moreover, there is a certain point at which many investors may determine that purchasing a home simply isn’t worth it for the prospective return they will receive once the sale is complete.
3. Buying properties with cash has significant advantages.
Andy Heller, author of “Buy Low, Rent Smart, Sell High: Real Estate Investing for the Long Run,” argues that buying with cash “can actually generate you some significant discounts on the deal.”
Of course, not everyone has the capital means to subsidize such heavy investments with cash, but those that can are at a significant advantage.
Such investors have the luxury of forgoing many of the banking restrictions that come with purchasing real estate. And for that reason, they can often move faster and close more quickly than home buyers without the adequate cash reserves.
This has become especially important in lieu of the new regulations allowing home buyers to flip houses within 90 days of purchase. In reality, wealthy investors will likely constitute the main purchasing block that could even take advantage of the new rule.
Flipping homes requires time, dedication, knowledge of the market and a bit of luck. With home prices steadily increasing and mortgage rates remaining near record lows, now is as good a time as any to at least consider the possibility of investing in a new property.