Some of the biggest players in the housing bubble were house flippers, people who’d buy a house, fix it up and sell it – sometimes at a huge profit. When the bubble burst, the flippers fled. But now they’re back, even in areas that have been overlooked by the big hedge funds and foreign investors.
For example, take Prince George’s County, Md., which doesn’t have the glitzy condos of Miami Beach or new housing developments of Vegas that big investors like. But it does have lots of housing for middle and low-income families.
That’s just fine for Rich Minor, who’s been flipping houses for about 30 years. I meet him at his latest acquisition – a house in Bowie, Md.
As he shows me around, Minor explains that he laid low during the housing crisis. He was on one of the first flippers to come back to Prince George’s County in 2009, when you could buy foreclosures cheap. Now, there’s actually a lot of competition, because flipping is back, he says.
“It’s back, and it’s back with a vengeance now, because the deals are much harder to come by,” Minor says.
And even if you get a deal in Prince George’s County, it may be in a neighborhood that’s a little dilapidated. That’s one reason the big hedge funds and international investors aren’t that common here.
“We’re not getting the big boys here, we’re getting the small fries,” says Anthony Sanders, a professor of real estate finance at George Mason University.
The small-fry flippers know they’re going to spend a lot to fix these houses up and that they can’t sell them for too much, because they’re still not in great neighborhoods. But that doesn’t mean there isn’t a lot of competition for fixer uppers, even if rough areas.
“On the open market, we don’t really have a ghost of a chance of acquiring any of these homes,” says Maryann Dillon, executive director of Housing initiative Partnership, a non-profit which buys rundown houses, fixes them up, and sells them to low income buyers. “We cannot compete with investors who are all cash offers, who can close in a week or two weeks.”
Dillon’s organization is able to buy some houses through a federal program that gives them first dibs over private investors. But there are no such protections for the low-income buyers Dillon tries to help. She’s seen people who’ve clawed back from foreclosure trying to buy a new house, but losing out to the flippers.
Percentage of total home sales to flippers
“They lost their nest egg during the recession. And now that things are coming back and there’s an opportunity to rebuild their wealth, they’re losing out yet again,” Dillon says.
But at least they’re just competing with the small flippers.
“These are not the big operations you find in Las Vegas or Phoenix,” says Sanders, “where they’re going to the courthouse and buying up 20 properties, 30 properties and flipping them over the course of a couple months.”
Sanders says, if you live in a place dominated by small-fry flippers, be thankful – it could be worse.