Is The Flipping Market Coming Back To Honolulu?

December 8th, 2009 categories: Homes For Sale

Today’s Wall Street Journal on-line had an article regarding a new type of real estate investor that is buying distressed properties and then re-selling them at a profit (thus they are called flippers).

“Now, a different breed of flipper is proliferating: one who seeks bargains at foreclosure auctions. Unlike the boom-time flippers, the latest generation needs cold cash, lots of local-market knowledge and strong nerves.”

CLICK HERE TO READ THE ENTIRE WALL STREET JOURNAL ARTICLE.

Is the Honolulu real estate market poised to see a gaggle of flippers jumping into the market (we saw many playing in the last up cycle)? We may see a few getting into the game, but I don’t think we will see the volume that were playing in 2004, 2005 and 2006. Here is why.

1. Lack of opportunities. Core Honolulu has few foreclosures and those that do come up tend to attract very competitive buyers. They seem to sell close to current market values and therefore there is not a great deal of room for making a quick profit. No pun intended, on the flipside, if you are willing to look in outlying areas or on the neighbor islands, then you may find more home and condo options.

2. Lack of financing, difficulty getting it and larger down payments. Lenders have made qualifying guidelines very onerous and therefore it is difficult to get the necessary investor financing. As an investor, expect to be required to put 25% of the purchase price down with the balance coming from the lender.

3. Cash is king. Not only have down payments increased, but also many REO lenders are requiring quick closes and larger deposits. This means you will need to have your cash on hand. To bid at an auction you are required to have a non-refundable cashiers check for 10% of the price you are willing to pay. If you don’t perform than kiss your money goodbye.

If flipping does begin to take off again, it will be for those experienced investors who have the intestinal fortitude and cash to live with the risks inherent in this sort of purchase.

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If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.

This entry was posted on Tuesday, December 8th, 2009 at 11:08 am and is filed under Homes For Sale. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.