It’s no secret that many houses for sale in NELA in recent years have been flipped by investors who buy, remodel and quickly re-sell them for big profits. What is (somewhat) surprising is that investor buying remains strong even at today’s high prices – and that homebuyers are still paying up for recently rehabbed homes.
Six of the 23 houses that sold in Highland Park in January were bought, remodeled and resold within the past two years, some at huge markups to the original sale price. One renovated house on Granada St. that sold 18 months ago for $539,000 was resold in January for $1.06 million. Even accounting for the cost of renovations, that’s bound to be a tidy profit. Another house on West Avenue 44 in Mount Washington that sold barely over a year ago for $580,000 was re-sold in January for $824,500.
Many of the higher-end home deals throughout the region fit the same general description – which has been great for investors. But there’s a downside. Investor buying makes it harder for home-seekers, especially first-time buyers, to get a toehold in today’s market.
More than half of all investor purchases last year were paid for with all cash, according to the California Association of Realtors. This cash advantage means that investors can act quickly to seal a deal. They can also snap up fixer-uppers that may not meet the qualifying standards of most lenders.
Marissa Solis, CEO of NELA Homes, a real estate investment firm in Highland Park, acknowledged today’s tough conditions for homebuyers. NELA Homes deals in all cash and currently has 20 renovation projects underway. That’s 20 affordable homes that have been taken off the market in an area where the inventory of homes – particularly lower-priced homes – is already low.
However, Ms. Solis also pointed out that FHA government-backed loans are available to qualifying borrowers who want to buy a fixer-upper. And she noted that by restoring homes, her firm adds value. “A lot of work goes into improving these properties and it improves the neighborhood, too,” she said.
Investors and home-seekers are bound to see things differently – and the competition between them is not going to weaken anytime soon. “I get calls from investors every other day looking for off-market deals,” said Sara Skelton, a realtor who specializes in NELA at Keller Williams in Los Feliz. “It’s really tough out there for ordinary homebuyers right now.”