Wholesaling Trumps Fix And Flip Real Estate In 2017
Is wholesaling the better real estate strategy in 2017?
The real estate market is always changing. That makes it smart to have a good mix of tactics to ensure cash flow remains consistent. Fixing and flipping was made cool by reality TV. Yet, current and emerging market conditions may make things easiest for wholesalers in 2017 and 2018.
There are several dynamics in play which may make things more difficult for house flippers and buy and hold investors this year, and looking forward. This includes; rising interest rates, declining rental rates, high property prices, and limited access to credit for retail home buyers.
Data from Zillow and reports from local landlords suggest that rents in San Francisco have been falling sharply. Zillow also predicts property prices there are peaking and will decline later this year. Lower rents make properties worth less. That can also cause havoc for landlords who are leveraged and have loans to cover. At the same time some parts of the country are seeing sellers and agents prices properties wildly high. They are pricing properties based on Airbnb rentals, or may just be throwing listings against the wall and are hoping for the best. While capital may be plentiful for real estate investors, it is still really hard and unappealing for regular home buyers to apply for mortgage loans.
This means some house flippers may find themselves caught with no profit, especially if they are taking extended timelines to fix and flip, or wind up spending too much on rehab. In contrast, wholesaling can work in any market. And there will still be demand for prime property, providing it is priced well.
Just think about what is easier. To put a property under contract for $150,000, that may be worth $250,000 after repairs, and selling it for $199,000. Or taking 3 months and putting in another $30,000 plus in improvements? In this scenario wholesaling would probably still be more profitable. The market for the property priced at $199,000 is also going to be a lot bigger than priced at its full retail ARV. Wholesaling gives the opportunity to get in, out, and paid, fast, with the least amount of risk.
There will still be viable rehab and rental deals out there today, but wholesaling may provide a much needed tactic for ensuring consistent returns and income in the months ahead.
Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.
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