REI INK

AUTHOR DETAILS

Fix and Flip

How to Win in Today’s Fix & Flip Market

What Today’s Buyers and Renters are Looking For By Jamie Rey-Hipolito Fix-and-flip investors have been faced with more than a few challenges over the past year. From the rising cost of materials to the availability of inventory, these compounding stressors on an investor’s bottom line have caused some to scale back or pause operations completely. However, I am in the camp that the fix-and-flip market is ripe for opportunity if investors can get a little creative with their approach. I have been fortunate to work in this industry for more than 20 years, cutting my teeth in real estate operations and asset management in the single-family, multifamily and iBuyer asset management space, and have witnessed a lot of change in that time. I have worked for large investors with thousands of properties in their portfolios and have learned a thing or two about what works and what doesn’t when it comes to maintaining profitability on a fix-and-flip project. While much has changed, one thing that has remained the same is the importance of knowing your customer. Putting yourself in a homebuyer or renter’s shoes, doing your research and understanding their needs is crucial as you make key decisions about your flips, considering what is going to generate the largest return on your investment (hint: it is not extensive landscaping or fancy light fixtures). And, as the younger generations — Gen Z and millennials — reach their peak homebuying age, considering generational differences is not a bad idea either. The market is shifting With mortgage rates increasing, and inventory ticking back up steadily, we can expect that the bidding wars we witnessed in the early days of the pandemic — and homes going for two or three times the asking price — is not going to be as prevalent moving forward. Additionally, waiving inspections and contingencies is another thing that is going to become less and less common. As experts watch the market closely, many feel we are returning to more of a pre-pandemic housing market. That is not to say, however, that the market is not still “hot,” but we must not rest on our laurels and rely solely on the hot market driving purchases any longer. Going “back to basics,” while still keeping-in-mind emerging housing trends and consumer desires, is always a good idea. Evolving desires Investors today must be mindful of just how much consumers’ lives have changed since the onset of the COVID-19 pandemic. How we live, work and play has been forever altered. That means doing your research and knowing what today’s buyers and renters are looking for in a home is more important than ever. Young people have especially strong feelings about what they are looking for in a home, which is driving many of the trends we are seeing today as investors and builders look to adapt. Speaking to some of these desires, my company, ServiceLink, recently surveyed 1,000 recent homebuyers from across the U.S. to get their pulse on the state of homebuying today and gauge how they were adapting to the white-hot real estate market. What we found, particularly among millennial and Gen Z respondents, was that they remain optimistic about purchasing a home this year and are increasingly looking for more space to work and play as they continue to work remotely. For example, 26% of Gen Z/millennial respondents stated they were likely to purchase a new home this year; 42% stated their reason for buying a new home was to upsize from their current one; and 17% stated they bought a new home for more space to work remotely. Speaking to the rental audience, they are looking for much of the same, and still desire amenities like walking paths, on-site pools and clubhouses for SFR communities — all the same things they may have enjoyed with apartment living. Proximity to the office is much less important to consumers as it was three or more years ago — as evidenced by some of the recent migratory trends from city hubs to more rural areas — and while some are returning to the office full-time, a hybrid approach to working is likely here to stay for many. These trends will continue to impact what buyers and renters are looking for in their next home. Making sound decisions that appeal to younger buyers and renters Here are six things today’s buyers and renters are looking for, that every fix-and-flipper should keep-in-mind on their next project: A touch of automation While it is important not to go overboard with tech upgrades — as technology can become obsolete when new products are rolled out — there are smaller upgrades you can make to a property that will be attractive to new buyers or renters. For example, motion sensors for lighting, hands free faucets, automated or smart alarms, door locks and climate control systems are all upgrades to consider that will appeal to consumers today, but will not break the bank. Keep it neutral Choosing a neutral color palette is always a safe bet for any fix-and-flip project. This allows homebuyers or renters to put their own personal touch on a property when they move in — if desired — and helps them better visualize themselves in the space. Keeping it neutral and resisting the urge to lean into your own design preferences can help your property appeal to the masses instead of a small handful who appreciate your artistic flare. Think twice before opening up a floor plan While open floor plans have been all the rage for the past few years, the appeal may be waning for buyers and renters who are working from home and need dedicated sections of their home to double as offices. There is another bright side to this waning interest in open concept living, too: it is a cost saver, and investors and builders are not having to deal with the permitting issues that knocking down walls may bring either. Win/win. Be open to alternatives Because materials are

Perspective

Competing in a Challenging SFR Market

Acquisition Strategies to Grow Your Portfolio By Jamie Rey-Hipolito The single-family rental market is not for the faint of heart. With the lack of available inventory that has become a hallmark of the pandemic-era housing market, real estate investors are feeling the pinch (with even the most seasoned investors having a difficult time navigating it). As someone who has been in the industry for more than 20 years, I have witnessed a lot of change in the SFR space in that time and while there are a lot of challenges for investors today, there is also ample opportunity. Emerging SFR trends to watch Due to the challenging housing market, investors have had to get creative in order to compete. Several trends have emerged in the SFR space over the past two years, that will continue to make waves for the foreseeable future. Take, for example, the build-to-rent phenomenon. Because inventory has been such a challenge, many investors are opting to build brand new housing that can be immediately rented out instead of sold. As many would-be homebuyers have been priced out of the market or, have opted to pause their home search until the market levels out a bit more, renting has remained an attractive option for them to consider. While the cost of materials and supply chain issues have created obstacles to these new construction efforts, it has still been a bright spot for many investors who are open to doing things a bit differently. Additionally, short term and vacation rentals have been another option that has been top-of-mind for investors looking to grow their portfolios. Today’s youngest buyers, millennials and Gen Z, seem to be the most receptive to this idea. According to my company’s latest State of Homebuying Report, that included findings from a survey of 1,000 homeowners who had purchased a home within the past five years, millennial and Gen Z buyers were most likely to report that their reason for purchasing a home was to leverage it as an investment property or source of rental income (14% compared to 7% of Gen X and 3% of baby boomers). Some investors are open to purchasing a portion of a luxury home with several others and renting out certain weeks to travelers looking to vacation in style. As these new trends continue to influence the SFR market, investors will need to find new ways to work smarter, not harder, in order to be competitive. How to compete in a challenging market Whether you have three SFR properties or 300, the following tips are helpful to keep-in-mind as you continue to grow your portfolio. 1. Prepare to take risks Being risk-averse in today’s housing market is not going to cut it. Investors need to be prepared to jump at SFR investment opportunities at a moments notice. There is no “going home to think about it” anymore — especially with multiple bids on a single-family home becoming the norm and the typical home spending just 38 days on the market according to Realtor.com’s latest Monthly Housing Market Trends Report from March 2022. Therefore, investors should do ample research about desired locations where they are looking to grow their portfolio so they can make their best-informed decision — especially, when they may not have a lot of time to tour the property in-person or may need to waive an inspection altogether to snag the home away from other interested parties. Taking healthy risks is important if investors are looking to grow their portfolio quickly. 2. Have funds fully available As housing affordability worsens, interest rates rise and the amount of available housing on the market remains at dismal levels, investors and everyday consumers alike have a lot stacked against them. According to the National Association of Realtors®’ most recent quarterly report, more metro areas (70% of 185 that were measured) experienced a double-digit price increase in their median single-family existing-home sales price from the previous quarter. To combat rising home prices and more competition for fewer homes on the market, having easily transferrable funds on-hand will improve investors’ ability to remain nimble in a market where homes are being snapped up at a record-setting pace. While this may seem to be challenging, especially for novice investors, it is something that is critical as inventory remains low and competition remains high. 3. Be open to new markets Investors must think beyond historic hot spots like Las Vegas or California and, instead, consider new areas that are not as saturated with other investors and homebuyers with whom they may be competing for inventory. For example, consider up-and-coming suburbs outside of cities as people continue to work from home and seek out more space to rent. Additionally, considering purchasing an SFR investment property in historically college towns could be another route to explore since large SFR investor groups tend to shy away from these areas due to restrictive laws. Speaking of laws: investors should also familiarize themselves with zoning ordinances and municipal laws surrounding the conversion of a single-family home into a SFR property (especially in college towns). 4. Embrace auction and buying sight unseen The auction space continues to be one that is primarily dominated by investors, so it remains a great venue in which to scoop up inventory quickly. However, this “best kept secret” is starting to make waves among everyday consumers too, so it is not without competition. For example, ServiceLink’s State of Homebuying Report revealed that 33% of consumers would consider purchasing a home at auction and 11% had already purchased a home this way. Nevertheless, this option is still viewed as a more nontraditional route, so investors should continue seeking out inventory in this fashion. Additionally, as more online and remote bidding auction opportunities become available, investors can bid on properties from the comfort of their homes instead of standing shoulder-to-shoulder with fellow investors and homebuyers on the courthouse steps, saving them precious travel time and gas money. 5. Do not skimp on maintenance Something a novice

Load More