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Phoenix Real Estate Investor as a Four-Letter Word? Maybe Not …

Phoenix Real Estate Investor as a Four-Letter Word? Maybe Not …

avatarthumbnail.jpgIt’s the blanket accusation you here most often these days … those damned investors are swooping in and preventing hard-working people looking for their first home from being able to buy.

While there may be a kernel of truth in some situations, investors also are creating inventory for buyers utilizing either FHA or VA financing. (FHA financing requires a much smaller down payment – usually 3.5 percent of the purchase price and Veterans Administration loans can be had with zero down.)

Many of the properties priced under $100,000 (and quite a few over that mark as well) cannot qualify for FHA or VA financing because of the home’s condition. At a basic level, built-in kitchen appliances such as a stove and dishwasher need to be present, and there are additional requirements – holes in the drywall and peeling paint are two of the no-nos.

While there are some first-time buyers with the cash to buy, for the most part these fix-up type properties have become the domain of the investors. A quick flip on value alone isn’t possible given the lack of appreciation. So investors are fixing up these homes themselves and then turning around and selling the homes in good condition at a higher price. This isn’t an increase in price for the sake of the increase – value is being added and in doing so the home now is being made available to a wider audience than it was at the lower sales price.

This is the fundamental difference between the investor of today and the speculator of 2005 who had no interest of owning a home for more than a handful of weeks.

Two of my clients recently have purchased these rehabbed homes … the first appraised for more than the eventual sales price and we’re awaiting word on the second.

On the surface it seems like a net zero proposition – the home is purchased but put right back on the market a month or two later – but simply by making these homes available to first-time buyers using the financing most common to that group of buyers, investors of today are playing a valuable role in the Phoenix real estate market.

[tags]Phoenix real estate[/tags]

1 Comment

  • Rod Rebello says:

    I have a buyer in contract on one of those investor remodels. Buyers should also be aware of the FHA 90 day flip rule. Must wait 90 days from investor purchase before FHA will fund a loan. The one my client is buying was put back on the market about a month from purchase, so can’t use FHA, fortunately able to do conventional.