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Is the House-Flipping Market Headed for a Cool-Down?

Posted on in Residential Real Estate

Naperville residential real estate lawyerDuring the housing market crash of 2017, investors flocked to pick up every distressed property that they could find. Many sold their assets to other investors. Others remodeled the properties and rented them out, securing themselves a fairly steady cash flow. Still others decided to “flip” their houses and sell them. This last group of investors, otherwise known as “house-flippers” have become commonplace in the last decade, but with fears of a market cool-down mounting, many are now selling their assets and bowing out. Should you do the same, or is now the time to hold onto your assets?

The answer to this question may depend greatly on your current situation.

Profit Margins Shrink as the Cost of Repairs and Mortgage Prices Rise 

Although there are many factors affecting the house-flipping market, one of the biggest is the shrinking profit margin for investors. A healthy housing market means mortgage prices are on the rise. Since flipped houses tend to come at a premium price, many buyers are lowering their expectations. Some are even willing to make the repairs themselves if it means the difference between renting a little longer and owning their own home.

Repair costs and labor shortages are also affecting profit margins. Furthermore, distressed properties are becoming more difficult to find - and even houses that need repairs are going up in price. Investors are also finding that it takes longer to sell a flipped house now, which can be a determining factor in deciding whether to stay in the market or flee.

Did House-Flipping Reality Television Shows Lead to an Oversaturated Market?

With all the challenges that investors are facing, it makes sense that many would attribute the cool-down to an oversaturated market. Yet, the glorification of house-flipping on reality television shows may not have affected the market as significantly as initially thought. Many of the homes being flipped now are managed by companies. They have entire teams of people to scout out possible locations, secure financing, and manage repairs. It is proving to be a highly successful and effective business model - so much so that many individual investors are struggling to keep up.

Our Naperville Real Estate Attorneys Can Help You Manage Your Real Estate Portfolio

Real estate can be a lucrative but volatile market, and every misstep or oversight can cut into your profits. Get seasoned legal assistance while negotiating contracts, conducting due diligence, and deciding where to next invest. Call 630-778-3818 and schedule a personalized consultation with Lindell & Tessitore, P.C. today. Seasoned and experienced, our Naperville residential real estate lawyers can protect your investment, and your financial future.

Sources:

https://www.chicagobusiness.com/residential-real-estate/has-housing-market-reached-peak-flip

https://www.cnbc.com/2018/11/01/home-flippers-are-fleeing-the-market-as-their-profits-shrink.html

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