Median Sales Prices are Up
While working on our business plan for 2014, I decided to research the median sales prices of the cities that are close to where we live.
I was doing this, so I could identify which cities and areas we want to rehab properties in, and which ones we’re going to avoid in the first part of the New Year.
I found that each of the ten cities have had an increase in median sales prices compared to a year ago.
In fact, that same trend is going on all around the U.S.
What This Means
If you’re thinking about buying, rehabbing, and reselling single family houses, this is a good sign.
The higher the ARV, or after-repair value of a home, the more you’re going to be able to sell it for.
And if you’re trying to buy rental property, you want to buy soon. The lower the price of your rental property, the bigger your cash-on-cash return will be.
And if you’re trying to flip properties, you might want to buy soon as well.
I say that, because the more prices go up, the more you’re going to have to pay for the property you’re going to try to flip.
On top of all that, as home prices go up, they will continue to get more and more out of reach of most people’s budgets.
Prices Are Still Low
Even though they’re going up, the prices are still relatively low, compared to how they used to be back in 2007 or 2008.
If you’re thinking about rehabbing homes, you might want to buy while the acquisition prices are low.
Good Time for Flipping
From our experiences and analysis on the current market, we think it’s a good time to buy and rehab properties.
Note: Again, I’m talking about U.S. real estate as a whole; you will want to take a closer look at your own target markets, as no two markets are exactly the same.
Buy anyways, if you can find a market where there’s growing demand for properties, you might want to consider getting into the rehab market.
I say that, because you want to rehab in areas where you’re going to be able to sell quickly, and for the highest resale prices.
Interest rates have been about as low as we’ll ever see in our lifetime, but they’re going up.
The rising interest rates are scaring people into buying sooner rather than later, so if you’re going to rehab, you might want to start soon.
The lower the interest rates, the more people that are out there that can afford to buy property.
Don’t get me wrong, I’m not trying to scare you into acting before you’re ready; I’m just mentioning some of the different factors that influence people’s decisions when it comes to real estate.
I’m not trying to say that high interest rates spell doom for your flipping business plan.
In fact, I read about a study by Trulia Trends that stated that the national average for interest on 30-year fixed-rate mortgages would need to get to over 10.5% before it would stop making sense to buy a home.
For all I know, you might live in an area where people tend to have financial means where they don’t care as much about interest rates as people in lower-class areas.