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Investors and Speculators Affected by Housing Market Crash

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Published: 13Aug2008
Word count: 514
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While homeowners are facing the crunch of the housing meltdown, investors are also facing serious repercussions as well. There is little doubt about the fact that the market for flipping has slowed. Investors have also begun to lose money as a result of the housing crisis. One of the key strategies of being able to make a profit in the process of flipping is to sell the property fast enough that the investor does not need to make any mortgage payments at all or at least as few as possible. During the heyday of the housing boom this was not a problem.

An investor could easily purchase a property, rehab it in less than a month, slap a for sale sign on it and sell it before the first mortgage payment was due. Even if they sold it before the second mortgage payment was due they were still able to come out of the deal with a massive amount of profit because of rapidly rising housing prices. Today that is no longer the case.

As a result, many investors are finding that they must either live in the homes on their own or rent them out. Investors who had been renting have been forced to move out of their rental properties in some cases and live in the properties they hoped to flip. In other situations investors have been forced to rent out the properties for reduced rates in order to have at least a little money trickling in to cover mortgage payments and other expenses.

Speculators are experiencing even more problems. The main difference between flippers and speculators is that flippers frequently purchase homes, try to infuse it with some increased value through renovations and then sell it. Speculators; however, tend to purchase properties and then resell them without making any improvements at all. At one time this practice often paid off in big profits. That is not the case today. Investors who once engaged in the process of real estate speculation have discovered they must add value to the property if they are to have even a glimmer of a hope of selling it today.

As a result of the glut of homes on the market due to speculation and flipping, there are some markets that are attempting to eliminate the process all together. Some communities have placed restrictions on the abilities of buyers to resell their home within at least one year period following the date they close on their property.

Since most speculators and investors hope to sell within six months or less, this effectively prevents them from doing so. Communities that had the foresight to take this action at the height of the housing boom have been in a much better place than other communities where flipping and speculation ran rampant at the same time.

While the depressed housing market has caused many investors to step out there is little doubt that once the market corrects itself, which many believe will happen by 2010, these investors will return; poised and ready to begin reaping in the profits once again.

Heather Seitz is a national real estate investor, trainer and publisher and has worked with top advisors worldwide. To get current and accurate real estate investment tips and advice, visit http://www.RealEstateRant.net and find out how you can get $852.90 in FREE real estate investing information delivered to your front door.

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