Several readers have sent in stories over the last 2-3 days about the big investment groups.  These two stories mention the same company, Waypoint, but from different angles:



N. Y. Times:


An excerpt:

This year, Waypoint signed a $400 million deal with GI Partners, a private equity firm in Silicon Valley. Gary Beasley, Waypoint’s managing director, says the company plans to buy 10,000 to 15,000 more homes by the end of next year. Other large private equity investors — including Colony Capital, GTIS Partners and Oaktree Capital Management, in partnership with the Carrington Holding Company — have committed millions to this new market, and Lewis Ranieri, often called the inventor of the mortgage bond, is considering it, too.

The investment angle to buying real estate has exploded, and everyone is doing it.  Now flipper groups are having to compete against buy-and-hold companies like Waypoint!

There are more local enterprises involved too.

Fortunebuilders.com runs a flipper education company, charging $1,200 for their basic courses, and up to $30,000 for the mastery coaching.  Or check out mavrixequity.com a company owned by two 28-year old flippers who are also a wholesaling company.  They tie up local deals and then sell them to you to flip – and they take a piece of your end-pie too!

The bigger companies have investment funds – they use your money and promise healthy returns.

How does it affect the regular folks?

1. If you’re an investor hoping to flip or rent-out, good luck.  The flippers have flooded the street searching for the next deal, and are working on thin margins.  They are soliciting property owners directly via mail and email, and working all the usual spots – trustee sales, defaulter lists, FSBOs, short-sales, MLS, etc.  Because sellers get bombarded, the price typically goes up – there won’t be many steals from now on.

2. Primarily, they are looking for fixers.  If you want a house to occupy and thought you’d save some money by purchasing a dog, you won’t save much.  You can avoid the rush by sticking with the turnkey properties, and hope to buy one with all the trimmings for a fair price.

3.  Appreciation – You might think that a wave of flippers selling renovated properties could lead to rising prices.  Maybe, maybe not – buyers usually can find out how much the flippers paid, and would have to be very frustrated to pay a lot more.  With the sophisticated flippers being careful to buy somewhat under market, and able to add cheap Chinese goods to improve them, they can live on thin margins and not count on appreciation. 

I think this will lead to a very active trading range of +/- 10% throughout the county, and for every lucky sale that pops through the range’s ceiling, there will be another flipper buying a lower sale to keep the pricing trend moderated.

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