It is once again time to start flipping properties. For the first time in about 6 years, property demand in Arizona has outpaced supply. There is only about a 25 day supply of homes priced at $250,000 or less. The foreclosure market that everyone believed would dump excess supply of homes onto the market did not live up to the media's expectations (at least in AZ). The legal system has created a sort of bottle-necking of foreclosures and Short sales resulting in more of a trickle of distressed homes onto the market instead of a flood. This trickle of foreclosures and Short sales has caused a feeding frenzy among investors as they hit the market. To add fuel to the fire, HUD properties have put restrictions on investors by placing 15 day black out periods before an investor can submit an offer. The idea behind this policy is to give homeowners a chance to make an offer first (which really doesn't make much sense considering the government's overt policy is to try to find a way to decrease the country's inventory of distressed homes as fast as possible).
The current demand for cheap housing has had an effect on housing such that prices are starting to rise quite rapidly. As a result of the current supply/demand ratio, I decided that I would begin flipping properties at a very optimistic pace of 1 to 3 flips per month to take advantage of this move in the market. These flips would not be homes that had been completely destroyed but rather homes with very manageable rehabilitation turn around times of a week or two at most. I assembled a very competent team to handle everything that goes into the process, and I was ready to submit my first offer. After carefully scouring the MLS for homes that had the margins I could work with, I optimistically submitted offers on 3 homes. To my disappointment, there were no takers on my offers. Shrugging off the disappointment, I submitted offers on 4 more homes. Only 1 offer, out of the 4 submissions, ended in an acceptance by the sellers, but the seller's bank will still have to sign off on the Short sale before it goes to escrow.
So what's going on you may be asking? Well, the first obstacle I faced was trying to get an offer accepted before there were a dozen offers on the table. Selling agents are now expressing that only the highest and best offers will be accepted. What a change from about 6 months ago when an agent would jump up and down if they received just 1 offer in a timely manner from the date their property hit the MLS. Secondly, HUD restrictions (as mentioned above) have made it near impossible to get an accepted offer at a price worth investing in. So what's an investor to do? I'll keep you posted on what works and what doesn't in my next Blog.
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