The Great Recession of 2008 negatively impacted many industries. House flipping declined significantly but is back on the rise thanks to low interest rates and increasing home prices. In 2016, 5.7 percent of all home sales were flips; this is the highest number since 2006. Even Wall Street has taken notice of the increase in house flipping. In October 2017, Goldman Sachs bought Genesis Capital, a lender that works with house flippers.
A Resurging Market: Why House Flipping is Good for Our Economy
While fixing and flipping homes may not be quite as enjoyable as it looks on TV, it can still be a highly rewarding and lucrative career. Flippers buy houses, fix them up, and sell them quickly for a profit. As they make money off each sale, they’re able to use this revenue to put down on other properties.
Getting started with house flipping can be difficult, even for those who are re-entering the market for the first time since 2008. Flippers must have access to cash to begin the process, which can come from equity loans or hard money loans. Fix-and-flip loans are most popular because they are flexible, convenient, and secure.
The benefits to taking out a hard money loan include:
- Fast approvals. Financing can be available in less than a week, allowing flippers to invest in the properties they want.
- Flexible payments. Private lenders have more flexible repayment options, particularly once a relationship has been established.
- Fewer requirements. Traditional bank loans have many requirements. Hard money lenders do not have as many requirements, allowing the process to go faster and smoother.
- Poor credit OK. While it’s always helpful to have good credit, having poor credit is not a deal breaker for a hard money lender. Instead, the lender bases the loan on the value of the property.
Hard money loans aren’t just beneficial for house flippers. They are also good for investors, especially as many push into a resurging market. Lenders feel there is less risk and a lower loan-to-value ratio compared to traditional loans. They also like that these loans have a level of assurance. The borrowers have their own time and money invested, and are more likely to follow through with the project.
With lower-than-average interest rates and home prices, we can expect to see house flipping continue to rise. This is good for our economy and everyone involved, as it means more money to stimulate the housing market, increasing home prices and fewer distressed properties.