This article was in this past weekend’s WSJ and now is on the Realestatejournal. Very interesting article that describes situations I know to be prevalent in the Central VA region. The (long) article is worth reading.
This snippet sums up the story on flipping. What makes this get-rich-quick formula more dangerous is that many investors are willing to buy properties on which the rent is too low to pay for financing and other monthly costs. Their bet is that rising property prices eventually will make these deals profitable.
Others invest with no immediate prospect of rental income (bolding mine).
Jaime Nack, an event producer in Santa Monica, Calif., recently used a home-equity line of credit on her one-bedroom condo to come up with a $27,000 deposit on a Miami condo that will soon begin construction. She’s hoping that the Miami condo will be worth more when construction is completed in two years.
When will this frenzy die down? “The way the consumer operates, they usually don’t back away from winners until they become losers,” says Joseph G. Carson, chief economist at Alliance Capital Management LP in New York.
This formula can be either huge success or a recipe for disaster. Only time will tell.
