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House Flipping is Good for the Economy

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How House Rehab Contributes to a Healthy Community

house flippingThere are few things more destructive and demoralizing to a community than homes in in foreclosure and disrepair. Properties that have been abandoned or suffering the effects of little attention and care bring down the property value of the houses around them and create a less desirable neighborhood. When an area has a number of these houses, it can have a negative impact on efforts to rebuild and revitalize the local economy. With so many of these properties nationwide being a drain on the economy, having investors fix them up and make them available to qualified homeowners provides a benefit for everyone.

 

The term “flipping a house” typically refers to investors buying distressed property at low prices, repairing and upgrading, and selling them at market value. It was big business prior to the economic downturn, then saw a decrease during the housing bust, and now is making a considerable comeback. The housing crisis lead to a bad name for people who “flip” houses, for a number of reasons.  Now these individuals are playing a positive role in the upturn of the economy. The practice of house flipping is now regarded as a shot in the arm to pump life into the housing market and some government agencies are doing their part to help. The Department of Housing and Urban Development dropped a regulation prohibiting a home from being insured if the seller owned it for less than 90 days. HUD said in their announcement of the change that the idea is to “facilitate the return of repaired and habitable properties to the market in a timely fashion”.

Businesses, such as R & F Commercial & Debt Equity, are contributing to the recovery of the economy and the housing industry by purchasing these distressed properties, rehabbing and selling them. These properties would otherwise be sitting indefinitely on the market, falling further in disrepair, creating a problem for the neighborhoods and other homeowners around them, and slowing down the progress of the economy to get back to a healthy level. It is very difficult to revitalize a neighborhood, city, state, or even the country, when so many houses sit vacant and banks, instead of homeowners, hold mortgages on millions of properties.

One of the significant elements of a successful house flipping scenario is the repair and rehabilitation of that house. It is not enough for investors to simply buy up foreclosed on property and sell it for more than they paid for it. The rehabilitation of the property is key to its resale and the value the investor brings to the community. Rehabilitation of the house will include doing what it needs to be marketable, such as new carpet/flooring, appliances, structural repairs, landscaping, windows, etc. The house has to look presentable and be very livable to be eligible for a quick sale, so making these improvements is going to be timely and effective.

Home buyers benefit from house flipping too. In this housing market especially, with a shortage of inventory, buyers are looking for decent homes. If investors were not taking an interest in these properties, buyers would have even fewer choices, potentially driving up home prices in bidding wars. Taking foreclosed and distressed properties and making them desirable homes allows for greater inventory and more homes for homeowners in need.

Buying foreclosed homes is also good for the banks that do not benefit from owning all of these properties. It is in their best interest to sell as quickly as possible, homes that they have foreclosed, and recoup some of their losses. Despite the general reputation of the banking industry, it is not good for the health of our national economy for financial institutions to be struggling with the burden of the recent housing boom and bust.

There are many benefits to the service we offer at R & F Commercial & Debt Equity. Loan acquisition for distressed properties is just one of the areas where our work is helping the economy. When money flows and financing is available, companies and individuals can take advantage of a multitude of opportunities. Contact us for more information on what we do and how we may be able to help you.

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