Do Flipped Homes Dramatically Change the Housing Market?
When it comes to investing in distressed homes, I’ve heard it all.
You probably have, too, especially if you’ve been in the industry long enough and have explained what you do to enough of your friends and family.
Most recently, I had the opportunity to tackle a concern from an upset buyer who claimed that the rise in renovated houses was ruining the housing market. Coming to Spokane, Washington from a larger market where home prices had risen steadily over recent years, he noticed a correlation between the higher number of area investors and associated the two. According to him, flipped properties forced surrounding housing prices up so high that he could no longer afford to live in his desired neighborhood.
But does his concern hold water?
Do increased home values affect the economy?
Or is this a chicken vs. egg argument?
The economy is cyclical, with natural periods of expansion and recession. As such, one can assume the housing market is, too, and that anything that drives up the housing market—such as increasing home values—affects the economy. But does it?
In this business, we work off percentages and margins. In a volatile economy, those margins shrink, and when the economy is good, we have more opportunity to profit.
If the economy is doing well and unemployment is low, the demand for housing increases, and in turn, so does the cost of housing. Conversely, when the economy drops, and budgets tighten, the money allocated by the average American family for general upkeep on a property is shortened to cover the basics, like the mortgage, and housing values decline. Stretch this out long enough and extreme enough, and neighborhoods values reflect the dropping home values.
It is fair to say that the economy influences the housing market more than the housing market influences the economy.
Regardless of how simplified we’ve made the economic cycle here or how many details we’ve left out, the real issue is why anyone would believe flipped houses in any neighborhood would affect their buying power. It sounds to me like we’re dealing with a potential homeowner who would rather avoid bringing value and motivation to his market rather than live among distressed homes.
Instead, flipping breathes new life into communities by giving qualified buyers a chance to live in their dream home and adds value to the hardworking homeowners in the area who don’t want to live among run-down properties.
For investor lending, Cogo Capital offers quick turnaround, excellent terms, and millions to lend. Cogo Capital serves both local and national real estate investors, real estate agents, and private money lenders in quality, multiple loans.
Let’s make our communities stronger, increase values, and make real change in this oscillating world.
If you want to make a difference in your area’s communities, join us at the Lee Arnold System of Real Estate’s Master Lien Abatement specialty lab. To learn more about acquiring houses for pennies on the dollar, becoming the go-to investor in your town for nuisance properties, and flipping for huge profit, <CLICK HERE> or call NOW at (800) 473-6051.
Lee A. Arnold
The Lee Arnold System of Real Estate Investing