Unfortunately house flipping is a thing of the past here in Melbourne. We currently have a glut of properties on the market and a very high percentage of them are actually flippers that got caught when the market turned around and started heading downward.
8-10 years ago we were buying investment property for $30K - $50K for a single family 3 bed 2 bath home, 1000 square feet, in decent rental areas. Then, as interest rates dropped to a 45 year low, buyers were scooping up Melbourne Real like hotcakes. Our home prices skyrocketed by 180% in just 5 years time. Buyers were counting on the market to continue up indefinitely (highly unlikely, as the market is cyclical) so they were buying homes with no money down, 100-125% financing, interest only, negative amortized loans with adjustable rates. And lenders loosened their criteria. So all of a sudden everyone could qualify!
Houses that had been sitting on the market for 7-8 months started selling in 7-8 weeks, then 7-8 days, then at the peak of the market in 2005-2006 we had a full blown sellers market and we were selling homes in 7-8 hours, with 10 buyers lined up at the door. Sellers were asking for everything and getting it, too. Buyers were paying absolute top dollar. All the flippers climbed on board. They were buying everything! We were also selling preconstruction properties. Builders were taking 1 year, then 1 1/2 years to build these homes because there were so many buyers. The buyers never stepped foot in the front door and were doing simultaneous closings on them, the same day. They would close on the house in the AM and then close on it again with the new buyer in the afternoon for anywhere from $40K to $100K more than they paid for it in the morning! It was nuts!
Then, buyers got their tax bills...with the new higher assessments. Some were not informed of the huge increase they would see. So houses that had been assessed at $40K, $50K, $60K now were selling for $175K and above, so taxes doubled and even tripled! Buyers had not figured this into the equation! Then we got hit with a couple 100 year hurricanes, Jean and Frances and our property insurance rates absolutely doubled over night. And insurance companies started dropping out of Florida.
Now buyers cannot pay their mortgage payments and their adjustable rates are adjusting up. Again many were counting on the market to continue on up. So everyone is trying to jump ship and get rid of those over inflated priced houses they bought at the peak of the market, trying to beat foreclosure. There were 5153 foreclosures filed in Brevard County last year. There were 700 filed in January 2008 here. The projection is the market is going to continue on the decline until the end of 2008. We have oodles of over priced homes on the market and those that can't sell are renting them out at a deficit because they are desperate. I feel sorry for the tenants, because I have heard of landlords that are pocketing the rent money, since they know they are going into foreclosure. It's awful.
I have lived in Melbourne since 1975. I have been buying single family rental houses since 1996 and have nearly 20 of my own. I believe that you create wealth over time in Real Estate. It is not a get rich quick proposition. All of the properties I own have tripled in value. They are all worth many times more than I paid for them. Plus, the tenants are paying off my mortgages, they are a tax shelter for me, as I am deducting the paper losses off of my ordinary income and I am depreciating them. Since I rent them for just a bit below market, I have tenants that have stayed with me for over 10 years!
Remember in Real Estate Investing, do the opposite of what everyone else is doing. If everyone else is buying, you sell. If everyone else is selling, you buy. But, make sure your timing is good. Remember you make your money in real estate when you buy, not when you sell. I think that in the next couple of months, through the summer and on there will be good deals available. I will be buying again then.
I know many investors that made a huge profit in flipping houses, only to have lost (and they are still losing and paying out) everything they made!
Best of luck to you John,
Sandy Shores Realtor
M & M Real Estate Inc
Residential & Investment Property
2851 NE Palm Bay Road
Palm Bay, FL 32905
321-253-4545 or 321-733-6080
I Also Buy, Sell, Rent, Own & Manage Investment Property