Are Market Conditions Favorable?
Anyone out there have opinions on the current market conditions for rehabbing? I'd like everyone's opinion but I'm especially interested in hearing from the experienced sages in the group, and those in the Phoenix area. It just seems to me that under some conditions, (perhaps an overabundance of buyers, short supply, etc.) that rehabbing may not be a very lucrative proposition. Here in Phoenix, I'm moving towards that opinion. Thanks.
Just to clarify my question, what is your opinion regarding the profitability of rehabbing relative to times past? Has anyone experienced markets when rehabbing was only marginally profitable, or not at all? If people aren't willing to discount a house a significant amount more than it will cost to repair it, where does the profit come from? Seems to me that in a market like that, the only way to make a profit is to find people who are ignorant of the buying frenzy and then take advantage of them. Which is not something I want to do. I want market forces to make my business viable, not Ignorant individuals.
The answer to all of your questions are yes and no. Market conditions vary by location. You should be able to figure out pretty quickly what the market is like in Phoenix.
You didn't state what your rehab goals are... flip or hold as a rental. Depending on your market conditions, one strategy will be better than the other.
And depending on your level of experience, the right strategy in the right market can be profitable but you have to tailor it to fit the local conditions. There is no specific answer to your broad question. Smart and experienced rehabbers can make money in any market whereas the inexperienced can take a financial bath. But the only way to learn and get experience is to start somewhere... and I always suggest to start out small as possible.
Thanks for the response. My original intent was to fix and flip, like in the Myer's book ('Buy it, Fix it, Sell it, Profit!'), but after my first deal I've found competition to be fierce, and I'm trying to figure out if I should use my energies elsewhere. I agree with you that markets vary from place to place, as do winning strategies, but what is at the core of my question is how to judge the profitability of strategies within individual markets. I'm not sure if this kind of analysis is available, perhaps universities or business groups publish studies of this sort, I don't know. What I do know is that my own experience has been marginally profitable, and not worth the time and effort required. So I'm just looking for extra confirmation that the market is truly a poor one for what I would like to do, and not that I'm just missing something as a newbie.
Beware of some of the new laws and industry changes with regard to “flipping” properties, there have been some recent changes that you should be aware of especially if your market would be FHA or HUD program type buyers.
I note that you quote in your 2nd post “Seems to me that in a market like that, the only way to make a profit is to find people who are ignorant of the buying frenzy and then take advantage of them. Which is not something I want to do.”
New legislation FR-4615 puts restrictions on “flipping” properties and will prevent Lenders from giving Loans to your Buyers. Read the following article within this web site. New "Anti-Flipping" Rule Holds Lenders, Sellers and Appraisers Accountable
http://www.thecreativeinvestor.com/Article280.html
If your goal is to Rehab and then rent you are O.K. But if your intention is to dump in cash during rehab that you will need to recoup via resale you may need to consider this.
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