The Santa Clara County real estate market has heated up so much in the last 2 months.
There have been many properties especially at the lower price range in San Jose that are getting 30+ offers. The resulting sales price might not work now for the “rehab and sell” investor.
Some of the reasons why?
1) First time buyers are usually willing to pay the most for these properties as they will live in them and fix over time. First time buyers are out in droves now. In this segment of buyers 1st time buyers) there is a backlogged demand for homes. After all they, as a group, have not been “in the market” for the last 4-5 years while they wait for the bottom to hit. Well, the bottom was yesterday.
2) The “rent-to-hold” investor is just going in and lightly improving the place, getting a tenant and not trying to resell – they will pay more for the home and the rental figures are making it a smart investment.
Until not that long ago if you compared 3 homes that were the same in all respects but one was a short sale, one was an REO (bank owned home) and one was a regular sale, there was a decent difference in sales price between the groups. Now, due to many buyers in the market, the difference is getting less and less.
So that makes it more difficult to get the numbers the rehabber (aka FLIPPER) needs to make a profit.
What can a rehabber do? If you can pare down on profits and also “hope” that the prices will continue to rise, you might be successful in securing a property. But that is “IFFY” and not necessarily a smart business model.
It is an interest problem. Do you have a comment?
Pat Chadwell, broker
Realty World – Residential Specialists
408.927.6565 x 11 (direct)