House flipping finds favor among young investors
At 28, Rob Lananna wants to make real estate investing a full-time gig.
Lananna is part of a group of professionals in their 20s and 30s trying to capitalize on the recovering housing market through buying and reselling homes.
“I really like what I do,” he said. “I like taking something that's ugly and dirty and turning it into something that's beautiful.”
Lananna recently completed his first deal, buying a bank-owned home in Boynton Beach, Fla., for $68,000, renovating it for $30,000 and reselling it within six months for $135,000.
He bought another house in West Palm Beach, Fla., for $60,000, put in $15,000 of work and listed it for $125,000.
David Dweck, founder of the Boca Real Estate Investment Club, said he's seeing more young people join the group because of concerns about pursuing traditional careers in a still-lackluster economy.
“The same-old, same-old working 40 hours a week for 40 years is no longer the American way,” Dweck said. “People are starting to realize that real estate investment is viable.”
While rampant investor-led speculation fueled the housing bust of 2006 to 2011, today's investors take a more cautious approach and add value to the properties before turning around and selling them, Dweck said. He encourages club members to “buy low, sell low” and not pay more than 65 percent of the value of the home after repairs.
But this buy-fix-sell model does require cash in hand, which disqualifies many young investors, Dweck said.
An investor should have enough money to buy the home, renovate it and carry it until it sells. Lananna, an entrepreneur with a background in sales and recycling, recommends having at least $40,000 to $50,000.
One of the biggest challenges in today's market is finding homes to buy, amid a lack of inventory and strong competition from large investment companies. “In a seller's market, there's only so many ways to acquire homes,” Benton said. “If we bid on 10 houses, we may get one.”