The year is only half-gone but predictions are surfacing that property flipping, which accounted for a lot of money changing hands last year, could approach even bigger volume during 2018.
“A record 207,088 houses were flipped in 2017,” Forbes Magazine reported Friday (June 21, 2018), citing the ATTOM Data Solutions’ House Flipping Report in an article it published about transactional funding. “Even more could be flipped this year, especially with more foreclosure inventory coming online in states like New Jersey and home values reaching new highs,” Forbes suggested.
But a potential barrier looms. “Conventional lenders haven’t significantly eased up on their underwriting requirements,” the magazine noted, and that’s had a shrinking effect on cash purchases of real estate. Investors who want to ramp up their flipping business “need more liquidity,” author Kent Clothier added.
That’s where transactional funding plays a role. It “offers real estate investors a speedy and easy way to qualify for financing for rapid house flips and wholesale deals,” according to the magazine. Money can be made available to investors who hone in on a discounted property deal and expect to profit heavily by flipping it without renovations to another buyer.
Transactional funding isn’t cheap.Lenders may charge between $2,000 and $5,000 per deal for what amounts to a very short-term (usually only one to three days) loan, Clothier wrote, but if the investor anticipates earning a substantially bigger bundle at settlement the financing expense may not matter. It also requires the borrower to have a qualified buyer for the flipped property already under contract.