“They’re adding value, they’re doing the rehab, and they’re taking a financial risk in order to deliver a finished home that may be in the $150,000 to $160,000 price range that a teacher or nurse could buy. These are local small businesses,” Carlton said.
“Whenever there is an opportunity where their crew is busy, they often call up a friendly local competitor and pass that deal on to them for a small fee. Our investors typically have rehabbed about 10 houses and often assign a couple more each year.”
Unfortunately, when local lawmakers fail to understand how this works and the contribution that investors make to their communities, they shut down the process.
The result is fewer affordable entry-level houses, houses that could have been be listed by a Realtor, and that have been brought up-to-date by today’s market standards by a rehabber. This in turn reduces the amount of inventory available which in turn drives up prices.
A peak at the new Flip-Side Report
Carlton said that they’re just in the process of compiling the data for their next Flip-Side Report, but there’s one statistic in particular that they’re investigating in more detail: Flips done by women sell faster, receive more multiple offers and sell for higher prices.
Carlton noted that during the Great Recession in 2008 when New Western was founded, it was the financial products that caused a property to become distressed. Many of the homes that were foreclosed upon were about five or less years old.
“Today we have millions and millions of homes that no aspiring homeowner is going to purchase because someone aged in place for a long time before dying, the roof damage was never attended to, and there’s black mold and other major issues,” Carlton said.
“If you’re a real estate agent, you certainly wouldn’t want to put these properties on the front page of your website and you probably don’t know what to do with it. It’s not glamorous, the income you will make from it is low, and you’re not only taking on being a listing agent, you’re also taking on the role of being a project manager.”
Final thoughts
The Great Renovation opens up new markets and new inventory, and improves affordability. Carlton is passionate about tackling this issue at the national level.
“Regulation is definitely needed, but it must be well thought out. Local, state and federal lawmakers as well as state real estate commissions, must carefully craft regulations to avoid stemming the flow of available affordable inventory,” Carlton said.
“It’s an interesting time in single-family real estate, especially in our value-added niche, where we’re addressing the entry-level housing shortage that is so crucial to solving the affordability problem. These properties open up an entirely new market that can be built out.”
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