Fix and Flip Properties: Navigating the New Normal During the COVID-19 Era

Fix and Flip

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COVID-19 has impacted nearly every facet of the real estate industry, including the fix and flip market. Real estate investors who are looking to purchase, rehab, and subsequently resell properties have been provided an opportunity to continue growing during this pandemic. Alpha Funding Partners has continued lending during this time and has seen some largely unanticipated, yet beneficial effects of the recent health crisis that savvy flippers can leverage to their advantage.

Reduced Inventory

Inventory refers to the overall number of available assets listed on the market. In some sub-markets, the median number of homes decreased by over 44% from the beginning of March. Sellers were prompted to remove listings due to a wide variety of COVID-19 related reasons, including: not wanting their property to linger on the market and grow stale based on a perceived lack of buyer interest; a general lack of desire to go through the moving process during a worldwide viral outbreak; and the impossibility of conducting in-person showings and allowing potentially infected individuals to have access to their homes.

This reduced supply of properties translates to less competition from a seller’s perspective, making it considerably easier to get full or even above asking price when attempting to resell a property after renovations are completed. This is because when you sell your new fix and flip home on the open market, you’re in direct competition with other available properties. For example, you do all your background research and look at comparables (“comps”) and estimate your house should be priced around $300,000. After two or three months of completing the rehab process, you put it on the market. Due to the aforementioned reduction in inventory, properties of similar value are unavailable, and buyers will be more willing to pay at or above the asking price in order to beat competing offers—meaning there’s a greater chance for investors to optimize their return on investment “ROI”.

Although competition is very high with limited supply of entry level housing, there is great opportunity for flippers right now with a strong seller’s market—all the more reason to move quickly and make sure you have your funding and team in place. Getting pre-approved with a hard money lender like Alpha Funding Partners can help you determine your buying power and provide you with proof of funds when making offers to move quickly on the limited but great opportunities that present themselves.

Increased Demand for Houses

With the majority of individuals quarantined inside to mitigate the spread of the virus, the demand for housing has risen dramatically. More than ever families are wanting to have their own home as opposed to living in a cramped apartment building or in a condominium complex. Those who were already considering buying are now much inclined to find the right property as this is where they are spending the majority of their time. Additionally, a big trend that has been well documented and seen is residents living in urban areas no longer have the impetus to be close to work due to the rise in teleworking opportunities. The net result is a higher demand for suburban and rural properties where individuals can get more land and square footage for their money. Even though unemployment has risen, there’s still an overwhelming majority of individuals who have a job and are contemplating buying a house with more room and in a location that is further away from the hustle and bustle—and not to mention a higher cost of living—associated with city living. Accordingly, real estate investors should be on the lookout for deals on houses in suburban markets that will likely be in high demand in the coming months. Additionally, they should look to align themselves with a reliable capital partner with hard money lenders that offer fast, flexible, and competitive funding options.

When evaluating the positives, it’s important to analyze the coronavirus and the impact it’s had on property values. It’s simple economics: When the demand for housing increases and the supply of these properties are limited, values will subsequently rise. This supply and demand effect is an encouraging one for aspiring house flippers. Another barrier of entry aside from limited inventory and increased competition sourcing deals is also that lending requirements have tightened during this pandemic. Lenders are requiring investors to bring more money down or “skin in the game” along with providing added documentation for liquidity and experience to mitigate the uncertainty of our economy and capital markets.

If you are looking for a hard money lender to partner with on your next fix and flip loan, Alpha Funding Partners offers the best combination of rates and leverage. We pride ourselves in our fast turnaround times, quicker closings, customer service, and our experience in the industry. Reach out to Alpha Funding Partners today to learn more about obtaining a hard money loan for your next fix and flip project.

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