New programs you can take advantage of
If a broker plans to venture into the residential investment field, it is important that they work to become proficient in the field. Like a good salesman, becoming an expert on the product can bring great value to investors. When it comes to fixing and flipping, investors will be looking for properties that are ideally located, have great physical attributes, and are relatively affordable in the local market. Building and developing relationships is also a key element in the real estate field, and while it can lead to repeat business for investors, it is the broker's responsibility to ensure the transaction process goes smoothly to secure that repeat business.
A great example is when an investor is looking to sell a property after completing renovations. What better way to demonstrate value than by helping your client find a buyer for their property? The best way for a fix-and-flip investor to get the most return on their investment is to sell the property as quickly as possible. By making the effort to find a buyer, the broker provides a quick transition from investor to homeowner and also brokers the mortgage for the buyer. Aside from that, there is another case where a broker can make the most of the situation. It is not uncommon for an investor who initially planned to flip a property to eventually decide to hold on to it and refinance it into a long-term rental loan. In such a scenario, the broker stands to profit from the initial fix-and-flip loan and then again when the refinancing occurs.
Current state of the real estate resale industry
Like the housing market as a whole, the remodeling and resale industry has had its challenges over the past decade. As with any trend that gains momentum, those who were in the early stages just before the industry took off took full advantage of these opportunities. According to recent data provided by ATTOM, 308,922 single-family homes and condominiums were resold in 2023, accounting for 8.1% of all home sales. Meanwhile, 2022 was a record year, with approximately 437,000 homes resold, accounting for 8.4% of all home sales. Another notable point is that since 2016, gross profits from resales have consistently been between $60,000 and $70,000. However, over that same period, the average return on investment has also consistently declined, from a return of over 51% in 2017 to almost half that amount in 2023, an average of 27.5%.
It is worth noting that a 25-30% return on investment is still a good rate of return. For example, investing in the S&P 500 typically averages around 8% return per year. Admittedly, the reason these rates of return are declining for investors can be attributed to a few different reasons. There are all valid arguments against the idea, including rising median home prices, rising material costs, and declining interest from potential buyers due to rising interest rates. Maintenance costs while holding the property during renovations can also eat into profits, again highlighting how important it is to sell the property as quickly as possible. The important thing to remember here is that even in the current market, investors are actively searching for properties, and repairs and resales are still happening all over the country.
Location, location, location
Today's investors have a wealth of tools at their disposal to make the most of opportunities across the country, and many investors today are investing in states other than the one in which they live.