A great question was just posted on Trulia Voices. It’s a question that is asked with some frequency, so I thought I’d take a moment to answer it here.
Considering todays market is it possible to “flip” for profit in Phoenix, mesa, tempe, glendale, scottsdale etc. I have heard of some investors lately taking advantage of some great deals on property and then turning them around for a profit in the Metro phoenix area. Anyone care to share their thoughts and experiences on here?
Personally I feel that unless you have nerves of steel (and a stomach to match) “flipping” ”” buying property and quickly reselling it ”” is not a wise move at this time in the Phoenix real estate market.
Much of Phoenix is labeled a “declining market”. That means that generally speaking, property values are still declining across most of the Phoenix metro area. That’s not to say that there are not any amazing deals out there. There are. If you look deep enough, you can often find homes listed below current market value. It would seem logical then that you should be able to purchase such a home and turn around and sell it at market value ”” the difference being your profit.
Here’s the issue. If a home is listed well below the surrounding market value it is likely to fall into one of two categories: 1) the home is in need of repair, maybe substantial repair; or 2) the home is a short sale and is listed at a low price to attract offers ”” offers which the lender may never accept (not to mention that during the weeks on end you are waiting for lender approval the value continues to decline).
Flipping for profit in Phoenix real estate
requires nerves of steel
But let’s say you find a real gem ”” a well maintained home that you won’t need to hire Bob Villa to repair and it’s listed under market value. So you purchase it with visions of dollar signs dancing in your head. You’ve called the CPA and booked flights to Maui.
And now you have to sell it.
What are you in for?
Well, you’re competing with 52,000 other Phoenix homes listed for sale (plus FSBOs). And to pay for that Maui flight it’s probably safe to assume you’re going to list it at market value. So now you have a home on the market ”” a market where depending on where in the Valley you’ve bought, there is anywhere from (roughly) 4.5 months to 50 months worth of available inventory for sale.
Once you do sell, don’t forget that you’ll have closing costs (on both purchase and sale). Unless you want to sell it on your own, you’ll also have to pay commissions. Even if you do decide to go FSBO (For Sale By Owner), unless you offer a buyers agent a commission there is little chance you’ll be able to sell it.
You could try renting it and deal with all that involves ”” and thereby restrict your future buyer pool to investors looking for rented property.
I’m not saying it is impossible to flip for profit in Phoenix. But you had better be a very experienced investor and even then, you better be willing and able to take on considerable risk.
Special thanks to Linsey at the OC Real Estate Voice for the kind words in her answer to this Trulia Voices question!