Attention Real Estate Investors: 1 in 7 Homes = Money Loss!

April 24, 2023 by Mreese601

Attention Real Estate Investors: 1 in 7 Homes = Money Loss!

Real estate investors losing money on roughly 1 in 7 homes they sell is not a positive sign for the industry. This means that 14.3% of homes sold by investors are being sold at a loss, which is the highest share since 2016. This trend could be attributed to various factors, such as oversupply in certain markets, a slowdown in the housing market, or increased competition among investors.

When investors sell a property at a loss, they incur financial losses that can impact their overall profitability and their ability to invest in other properties. Additionally, selling a property at a loss can also have a negative impact on the investor’s credit score and their ability to secure financing for future investments.

To mitigate the risk of selling a property at a loss, real estate investors should conduct thorough market research to identify areas with high demand and limited supply. They should also have a clear understanding of the local housing market and the factors that drive property values in the area. Finally, investors should have a solid investment strategy that takes into account potential risks and uncertainties, as well as the long-term potential for growth and profitability.

Investors are selling at a loss as elevated mortgage rates curtail homebuyer demand.

SEATTLE, April 21, 2023–(BUSINESS WIRE)–(NASDAQ: RDFN) — Roughly one of every seven (13.5%) U.S. homes sold by an investor in March sold for less than the investor bought it for, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s comparable with February’s 14.5% rate—the highest since 2016. It’s also nearly triple the share of a year earlier and compares with a record low of 2.8% in May. By comparison, 4.8% of overall U.S. homes that sold in March sold at a loss.

This is according to a Redfin analysis of county records and MLS data across 40 of the most populous U.S. metropolitan areas. Redfin defines an investor as any institution or business that purchases residential real estate, including both large companies and mom-and-pop investors.

While most housing investors still reaped gains, those gains have shrunk. The typical investor who sold a home in March sold it for 45.9% more ($145,714) than the price they paid, down from 55.3% ($173,458) a year earlier and a pandemic peak of 67.9% ($199,274) in June 2022. It’s important to note that gains don’t necessarily equal profits. Just because an investor sold a home for $145,000 more than they paid doesn’t mean they’re making money because they may have spent more than that on renovating the property.

“Home flippers aren’t reaping the gains they used to,” said Phoenix Redfin agent Van Welborn. “I recently showed one of my buyers a three-bedroom single-family home in Glendale that was listed by an investor. My client ultimately found another house they liked better, and the investor ended up losing about $20,000. The investor bought the home for $450,000 and sold it for $480,000, but put $50,000 of work into it. The house also sold below the $550,000 list price after sitting on the market for almost four months.”

Investors Are Losing Money as Mortgage Rates Rise, Homebuyer Demand Drops

Investors are making less money selling homes—and losing money in some cases—because the housing market has slowed dramatically in response to rising mortgage rates.

The average 30-year-fixed mortgage rate is 6.39%, down from the 20-year high of 7.08% in the fall, but up from 5.11% a year ago and a record low of 2.65% during the height of the pandemic in January 2021. Higher mortgage payments have eaten into investor profits, and sent the typical homebuyer’s monthly payment up nearly $300 from a year ago, which has slowed homebuying demand and pushed down sale prices. As a result, the share of investor-owned homes selling at a loss has increased. While many investors buy homes in cash, they’re still sensitive to high interest rates because they often take out loans to get that cash.

“You might wonder why investors don’t just wait to sell until the housing market bounces back. Many long-term investors who rent their properties out are doing that, but many flippers—especially those who bought recently—can’t afford to,” said Redfin Senior Economist Sheharyar Bokhari. “Holding onto homes that aren’t producing income can be expensive because the owner is on the hook for property taxes, along with operating costs and monthly mortgage payments in some cases. Many short-term investors are also opting to sell because they know prices may have more room to fall and want to cut their losses.”

Roughly one in five (20.8%) homes sold by flippers in March sold at a loss, higher than the 13.5% share for investors overall. For the purposes of this analysis, Redfin defines a flipper as an investor that bought a home and resold it within nine months.

Investors who rent out their properties are also seeing their returns shrink in some areas. The median U.S. asking rent fell 0.4% year over year in March—the first annual drop in three years—and 13 major metros saw larger declines. Owners of short-term rentals are getting hit as well. The Airbnb market is oversaturated with supply, and authorities are imposing tougher restrictions on hosts, driving some to sell, Redfin agents said.

Overall, investor activity has fallen significantly from the height of the pandemic, when record-low mortgage rates and soaring homebuyer demand drove up investor purchases. Redfin recently reported that investor purchases declined a record 46% year over year in the fourth quarter.

Investors Own 10% of Homes for Sale, Higher Than Pre-Pandemic Levels

Investors owned 10.1% of new listings on the market as of December, the most recent month for which listing data is available. That’s down from a peak of 12.4% a year earlier, but higher than pre-pandemic levels.

To view the full report, including additional analysis, charts and metro-level data, please visit: https://www.redfin.com/news/investor-homes-sold-at-a-loss

8 Best Ways How to Find Houses to Wholesale

April 8, 2023April 7, 2023 by Mreese601

8 Best Ways How to Find Houses to Wholesale

Wholesaling houses can be a lucrative business for those who are willing to put in the work. However, finding houses to wholesale can be a challenge, especially for beginners. In this article, we will discuss the 8 best ways how to find houses to wholesale.

Drive for Dollars Driving for dollars involves driving around a neighborhood looking for properties that appear to be vacant, abandoned, or distressed. Once you have identified potential properties, you can reach out to the owners to see if they are interested in selling.
Direct Mail Campaigns Direct mail campaigns involve sending out letters or postcards to potential sellers in a specific area. You can purchase a list of homeowners in a particular area and send them personalized letters offering to buy their property.
Networking Networking can be an effective way to find houses to wholesale. You can attend real estate investment groups, meetups, and other events to connect with potential sellers and buyers.
Online Marketing Online marketing is another effective way to find houses to wholesale. You can create a website, blog, or social media account to promote your services and connect with potential sellers.
Real Estate Agents Real estate agents can be a great source of leads for wholesalers. You can establish relationships with agents in your area and ask them to notify you of any distressed properties or motivated sellers.
Auctions Auctions can be a great place to find houses to wholesale. You can attend local auctions or participate in online auctions to bid on properties that are being sold.
Craigslist Craigslist can be a good source of leads for wholesalers. You can search for properties that are being sold by owners and reach out to them to see if they are interested in selling.
Bandit Signs Bandit signs are small signs that are placed on the side of the road or in a neighborhood advertising that you buy houses. This can be an effective way to attract potential sellers in a specific area.

In conclusion, finding houses to wholesale requires some effort and creativity. By using these 8 best ways, you can increase your chances of finding profitable properties to wholesale. Remember, it’s important to build relationships and maintain a good reputation in the industry to succeed as a wholesaler.

What Is Wholesale Real Estate?

April 5, 2023 by Mreese601

What Is Wholesale Real Estate?

Wholesale real estate is a type of real estate investing strategy where an investor purchases a property at a discounted price and then sells it to another investor or end buyer for a profit, typically within a short timeframe. The main difference between wholesale real estate and traditional real estate investing is that the wholesale investor does not intend to hold onto the property for a long period of time, nor do they typically make any repairs or improvements to the property before selling it.

Instead, the wholesale investor typically finds a distressed property, negotiates a low purchase price with the seller, and then finds a buyer who is willing to purchase the property for a higher price, but still at a discount compared to its market value. The profit for the wholesale investor comes from the difference between the purchase price and the sale price, minus any transaction costs or fees.

Wholesale real estate is often considered a good entry point for new real estate investors because it requires less upfront capital and can generate quick profits with relatively low risk, assuming the investor has done their due diligence and understands the local market conditions. However, it does require a certain level of market knowledge, negotiation skills, and the ability to find motivated sellers and buyers in order to be successful.

Wholesale real estate refers to a type of real estate transaction where an investor (the wholesaler) finds a property with a distressed owner who is looking to sell quickly, often below market value. The wholesaler then enters into a contract with the distressed owner to purchase the property at a discounted price, and assigns that contract to another real estate investor (the end buyer) for a higher price, usually within a short timeframe.

In essence, the wholesaler acts as a middleman between the distressed owner and the end buyer, making a profit from the difference between the contracted price and the price at which they assign the contract to the end buyer. This can be a lucrative strategy for real estate investors who have a network of potential end buyers and are able to quickly identify and negotiate deals with distressed property owners. However, it requires a deep understanding of the local real estate market and the ability to accurately evaluate the potential value of a property.