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Category Archive: ‘Flips’

Vampire Squid Offers Flip Financing

Add house-flippers to Goldman Sachs’ ever-expanding roster of potential clients as the Wall Street firm hunts for new ways to make money.

Lending has taken an increasingly higher profile at Goldman, where once-prominent trading desks have had their wings clipped by automation and regulation. The bank started out last year with small loans up to $30,000 for regular people with good credit through an online business it calls Marcus.

This summer it opened its doors to investors by giving financial advisors a way to arrange loans of up to $25 million for clients backed by their investment portfolios.

Goldman is even trying to find a way to occupy its traders’ time, exploring possibilities in the realm of bitcoin and other digital currencies after picking up on client interest in the area.

In September, the bank’s president, Harvey Schwartz, said lending activities are projected to shake out $2 billion in additional revenue.  Now Goldman is getting into lending for real estate pros through its acquisition of Genesis Capital.

The deal, for undisclosed terms, gives Goldman a business that makes loans of $100,000 to $10 million at rates of 7 percent to 12 percent. It won’t lend to occupants, so that leaves real estate professionals who are renovating and looking to sell fairly quickly. Genesis made $1 billion of loans last year.

https://www.cnbc.com/2017/10/12/goldman-wants-to-help-flip-that-house.html

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Posted by on Oct 14, 2017 in Flips, Jim's Take on the Market, Mortgage News | 0 comments

Hurricane Flippers

Hat tip to Richard for sending this in:

LINK

An excerpt:

Addressing a real estate conference in flood-ravaged Houston this month, longtime investor Ray Sasser detailed his strategy: buy up to 50 flooded homes at deep discounts, then fix and flip them for a hefty profit.

Sasser first followed that game plan after Tropical Storm Allison flooded the city in 2001. He bought homes for 30 to 40 percent of their pre-storm value, spent another 15 percent on repairs, and sold many a year later – at full value.

The quick recovery surprised him, he said.

“This can’t be true,” he recalled thinking at the time.

The bet that home prices in hard-hit Houston neighborhoods will fully recover after Hurricane Harvey could be riskier, Sasser and local economists said. But a rush of investors eager to snap up flooded homes reflects broader confidence in the resilience of Houston’s unique metropolitan economy.

While the region’s unchecked development has come under fire for exacerbating flooding, it also reflects its core strength: A rare combination of rich job opportunities and low cost of living, driving explosive population growth in America’s energy capital.

The surging demand has sustained home prices through four major floods since 2001 and a historic oil price crash starting in 2014. Though Harvey caused far more damage than previous storms, investors such as Sasser see plenty of opportunity in the region’s estimated 268,000 flooded homes.

Tara Waggoner, the Houston market manager for brokerage and online listings firm Redfin, said the firm’s local agents were getting about four times the number of calls they usually get from investors. They ranged from individuals looking to buy one flooded house to groups of ten or more pooling their money for a home-buying spree, she said.

“You have people with millions of dollars to work with,” she said in an interview days after the storm. “They want to go in, pay cash, get the discount and fix it up to sell.”

Read full article here:

LINK

Posted by on Sep 22, 2017 in Flips, Frenzy, Jim's Take on the Market, Real Estate Investing | 3 comments

Housing Crisis Due to Flippers

We saw this happen in Bressi Ranch when Jenae and Company went on their 100% financing spree. Her victims weren’t deadbeats – instead, they had good credit scores and other assets, and they were just duped into the get-rich-quick scheme.  When it didn’t pan out, they dumped everything.

Hat tip Richard!

LINK

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

Analyzing a huge dataset of anonymous credit scores from Equifax, a credit reporting bureau, the economistsStefania Albanesi of the University of Pittsburgh, the University of Geneva’s Giacomo De Giorgi, and Jaromir Nosal of Boston College—found that the biggest growth of mortgage debt during the housing boom came from those with credit scores in the middle and top of the credit score distribution—and that these borrowers accounted for a disproportionate share of defaults.

As for those with low credit scores—the “subprime” borrowers who supposedly caused the crisis—their borrowing stayed virtually constant throughout the boom. And while it’s true that these types of borrowers usually default at relatively higher rates, they didn’t after the 2007 housing collapse. The lowest quartile in the credit score distribution accounted for 70% of foreclosures during the boom years, falling to just 35% during the crisis.

So why were relatively wealthier folks borrowing so much?

Recall that back then the mantra was that housing prices would keep rising forever. Since owning a home is one of the best ways to build wealth in America, most of those with sterling credit already did. Low rates encouraged some of them to parlay their credit pedigree and growing existing home value into mortgages for additional homes. Some of these were long-term purchases (e.g. vacation homes, homes held for rental income). But as a Federal Reserve Bank of New York report from 2011 reveals (pdf, p.26), an increasing share bought with the aim to “flip” the home a few months or years later for a tidy profit.

Read full article here:

LINK

Posted by on Aug 29, 2017 in Flips, Frenzy, Jim's Take on the Market, Market Buzz, Mortgage News | 9 comments

Fast Money

We’ve touched on the new disrupter OpenDoor, which is currently operating in Phoenix and Dallas (places where home values might be easier to determine):

https://www.opendoor.com/homepage

They are willing to pay cash for your house and close in three days, which sounds enticing for those sellers looking for instant cash.  But they offer to buy your home at a below-market price based on algorithms, and fees range from 6% to 12%.  They are glorified flippers.

The length of time it takes to close escrow should have improved by now.  It still takes 30-45 days to process a sale, which might be advantageous for sellers who occupy the home – they usually need time to pack it up.

But for those sellers of vacant homes, or those who want to use their proceeds to purchase another home, a quick escrow might be preferred.

Thankfully, there are new alternatives.

Quicken is offering the Rocket Mortgage, and yesterday Caliber Home Loans rolled out their new product that can close a regular sale in 10 days or less:

http://www.housingwire.com/articles/38710-first-look-caliber-home-loans-new-fully-digital-mortgage-will-close-in-10-days-or-less

These options should stop sellers from getting their head tore off just because they want a fast closing. These mortgage products could also really help the move-up market by alleviating the struggle of making offers contingent upon the sale of your current residence.

The regional VP of Caliber told me that their process is very innovative.  They do not require the buyer to bring in the usual documents.  Instead, they are getting them directly from the institutions themselves, which will help ensure accuracy.  The IRS will furnish Caliber with income documentation, and the funds for closing will be verified directly with the banks themselves.  The appraisals will be computer-generated in areas where you have easier valuations, like in Carmel Valley and Carlsbad where there are newer tract houses that are very similar.

We are close to being able to get a mortgage with the swipe of your ID card!  It could invigorate the move-up market in 2017 – and Trump will get the credit!

Posted by on Dec 9, 2016 in Flips, Jim's Take on the Market, Mortgage News, Thinking of Selling?, Why You Should List With Jim | 12 comments

Mega-Flipper

opendoor

These guys are taking a lot of risks to be only making 6.5% on each sale.  They would be crazy to try it in the higher-end markets!

http://www.bizjournals.com/sanjose/blog/techflash/2016/01/keith-rabois-home-buying-startup-raises-80m.html

Opendoor Labs Inc., the home-buying startup co-founded by former PayPal and Square executive Keith Rabois, quietly raised $80 million in new funding last year as it expands to new parts of the country.

The San Francisco company led by CEO Eric Wu uses data and software to simplify the process of selling a home quickly. It does so at a discount to what a homeowner might get on the open market but promises a much quicker deal.

It started out in Arizona and expanded to the Dallas, Texas, area after raising two rounds of funding last year. Its $80 million Series C round in October followed a $20 million Series B round in February.

Opendoor has now raised about $110 million altogether since I wrote about them in a June 2014 Silicon Valley Business Journal cover story. Backers include Access Industries, GGV Capital and Khosla Ventures (where Rabois is a partner).

The Wall Street Journal reported on Friday that through mid-December, Opendoor had bought and sold just over 200 homes. It also owned about 30 homes at that time that it had failed to resell for at least six months.

The Journal said the company paid an average $230,000 and resold them within 90 days for an average of $245,000.

In addition to Dallas, Opendoor is also targeting Las Vegas, Denver and Portland, Oregon. But it is avoiding expensive markets like Silicon Valley and San Francisco.

Posted by on Jan 22, 2016 in Flips, Jim's Take on the Market | 2 comments

Flipper Crowdfunding

crowd

Remember last time? When you don’t have mortgage underwriters being strict with the money, you are entering bubble territory:

http://www.cnbc.com/id/102537364

Chicago-based Ben Walhood used to sell brain surgery equipment; on the side, he flipped a few houses.

“When I had the W2 and a good income, getting a mortgage was relatively straightforward,” he said.

But when the flipping profits grew, Walhood, 33, decided to go into it full time. Without the sales job, though, he had no W2, and that’s when the money dried up.  “At that point it was essentially impossible to get funding from the big banks,” he said.

Walhood turned to San-Francisco-based RealtyShares, one of a growing breed of crowdfunding platforms. Essentially, it is an online marketplace for real estate investing, where individual investors can open a free account and access investments in properties across the country. They need a minimum of $5,000 to invest and must be accredited, which includes either an annual income exceeding $200,000 or a net worth of over $1 million.

Walhood would get his property purchases funded by this “crowd” of investors, who would lend him the money. As with a mortgage, he pays interest on the loan, and the investors get about a 9 percent return. Once each property is sold, the loan and the investors are paid off.

“This gap has been left by banks that now crowdfunding platforms, like RealtyShares, are able to fill,” said Nav Athwal, CEO of RealtyShares. “They are able to provide quicker, more efficient capital that helps meet the needs of these investors who are looking for speed of execution and the ability to be flexible with their terms as well as with the underwriting standards. Banks just aren’t meeting that need.”

http://www.cnbc.com/id/102537364

Posted by on Mar 26, 2015 in Flips, Market Buzz | 2 comments

Flips Gone Bad

Alternative titles could be, “Be careful when buying a house on a slope”, or “Flippers can be good guys too”.  I saw this at Tom Tarrant’s feed because they used one of his Texas-flip photos in the beginning, though he isn’t featured:

Posted by on Mar 5, 2015 in Flips | 6 comments

Best Flip Yet

This was the former mayor’s house, sold as a short sale in 2010 for $2,400,000.

It was (re)listed for $12,980,000 three weeks ago, and is now marked pending.  It was probably assisted by the two La Jolla oceanfront listings that hit the market this week – both over $20,000,000.  Or by Romney living next door?  Maybe he picked up another piece!

Just Completed! La Jolla, CA. from Urban Green Productions on Vimeo.

Posted by on Feb 25, 2015 in Flips, View | 8 comments