Revolving Doors: Changing Markets & New Opportunity for Real Estate Investors

We’ve all seen it on TV, especially when the market was hot. Some guy (or gal) finds the ugliest house in a nice neighborhood. They buy the property, fix it up fast, and sell it for huge profits. During the boom times, it looked like anyone could make their millions flipping Real Estate.

Times change. People learned the hard way that Real Estate is a business. The more you know, the better you can perform.

The markets are constantly changing. For the unprepared, it can mean the loss of their fortunes.

The good news is that I’m about to share a little insider information. Here it is: The Real Estate market is changing!

I have been writing since the end of July about some of the positive indicators in housing. New and existing home sales are on the rise. New foreclosure filings are down. The number of vacant properties is dropping. And most recently, the listing price of houses are on the rise.

According to Trulia.com data compiled by Inman News, the median asking price for new listings rose by 2.5% from a year ago. That number is 0.5% higher than the seasonally adjusted numbers from last month. Increasing prices are a very good sign for Real Estate investors.

During the historical boom and bust of the last decade, many Real Estate Investors made their money catering to a segment of the population previously limited in their ability to become homeowners. Neighborhoods traditionally occupied by tenants saw a burst in home ownership spurred by aggressive lending. Prices jumped with higher demand. These areas were also places to find great deals. The opportunity led to investment and profits.

In today’s market, banks have increased lending restrictions. The result has been a significant decrease in the risk-reward potential in these transitional areas. For now, that door has closed.

When one door closes, another door opens.

Much of the economic housing activity is coming from the sale of homes to young professionals. These individuals have higher paying jobs and more consistent employment. Armed with good credit and ample savings, they are looking to buy.

Two incentives have driven this group of home buyers into action. First, there are the interest rates. The thirty year rate for a home load is lower than it has been in decades. Second, the recent increase in rental rates and lower price of homes has created an environment where it costs less to own than to rent.

These qualified and newly active buyers are opportunity. They want properties in nice neighborhoods where they can move right in. Depending on your local market, target home values can range from $350,000 to $500,000. Real Estate investors catering to this segment of buyers can expect handsome rewards.

It is no surprise, then, that profits from flips are highest in areas where the home values are traditionally higher. According to USA Today, three North East metropolitan areas are among the nation’s top markets to flip for profit. New York, Washington, DC/Northern Virginia, and Philadelphia have average profits of $118,376, $72,297 and $69,212, respectively. Those numbers sure beats a measly $25,000 in lower priced neighborhoods.

The market is changing. Knowledge of those changes provides opportunity. It’s time to open that door before it closes.