It was August of 2011 when we started to see a formation settling in on the Charlotte, North Carolina Real Estate Market targeted towards owner occupied housing. Yes, investment rental housing was (and is) still a Buyer’s Market; however, the statistic swung to a Seller’s Market for “Rehab(bers) to Retail” homes targeted directly at the owner occupants in more solidified in-town neighborhoods.
Despite the drones of the impending avalanche of vacant bank owned foreclosures hitting the market, the onslaught of Gold Buying hysteria from the ‘sky-is-falling’crowd, and the outright pain most of us real estate investors are still experiencing from licking our wounds of the 07-09′ Great Real Estate Depression, THERE IS MONEY TO BE MADE IN REAL ESTATE!
Truthfully, I need a good 3-4 months of data before I really believe a new trend (or pattern) and after our huge downfall -I had to pinch myself after reviewing consistent upward momentum in January of 2012. The facts are (and were) that our real estate markets were forming a foundation of stability, a limited supply of newly rehabbed homes (supply) in “in-town” healthy (turning) neighborhoods, and an up-tick in home buyer demand. Check out this article from October 2011: Stability in our Real Estate Markets.
As real estate investors, can we agree that all we really need is “Stability” in our housing market(s) to make good risk based business decisions in order to create wealth and momentum in our real estate operations???? Yes. With stability, we (more) accurately predict a safe zone of what a home will sell for over then next 3-6 months and the average time on market the house will require to sell. With those figures, we can then more accurately understand what we can buy for a home based on that sales price and the cost of the renovation.
FOLKs…, we are in a sweet spot right now for those that buy homes to rehab and then sell retail to an owner occupant.
Now -you need to stay out of Sub-Prime Housing (locally homes under $125K) as this is a market were great rates of loan & appraisal denials arise and homes above the Government Back Loans (such as Fannie, Freddie, and Ginnie) that put loan limits of $417k to 938K depending on the region of your investing. Locally, we are at $417K. I’m not saying you won’t or cannot be successful in those two markets; however, your odds are improved and greater efficiencies can be achieved if one can stay between the ranges.
In fact the market swung so far out of balance going into the new year of 2012, we witnessed multiple real estate investors from our hard money lending clients and our sphere of influence that experienced $10, 20, and $50k positive valuation increases by simply being lucky enough to have bought an investment prior to the end of 2011 and holding onto through 2012.
Seriously!!! I’ve not seen that since the old “Go-Go Days”… when I could accurately predict $10-20k price increases across the board in most of our active neighborhoods every March and August from 2004 through 2007.
In case I’m coming across as a cheerleader who drank to much kool-aide, let me add that I am not espousing rampant growth or appreciation in our local or national real estate markets. Sure -there will (and always will be) pockets (or niches) were it occurs; however, the fact that many existing home owners are (or feel) trapped in their homes till more appreciation and/or time occurs means that the supply of housing will always keep appreciation in check (certainly no more than high single digit annualized appreciation) for at least 4-5 years.
This of coarse helps foster the sweet spot we are in. To much appreciation and hype creates hysteria and irrational judgement’s for buying and investing (ie: rapid growth creates rapid competition). Meanwhile if competition is stiffled due to fear, lack of financing, and/or prior inexperienced investing, those who run smart rehabbing businesses can have a free-for-all. Of coarse the never ending challange of finding good inventory always has and always will be the number one challenge.
So if your looking for an avenue to invest, are willing to raise the bar with the quality of rehab, and run on spreadsheets (versus the napkin from yesteryear), then the rehabbing avenue of real estate investing is a great arena to enter.
There will be challanges and we certainly have headwinds with the coming elections, tax & spend decisions, and the World Economy as a whole –but the choice is yours. Are you going to do nothing, complain, and watch life go by or are you going to take the bull by the horns and get back into the real estate game that you love so much????