"Everybody knows somebody whose hairdresser's next-door neighbor's dentist made $60,000 on a flip. There are an enormous number of people in the market, and now it's what I call amateur hour," said Brad Hunter, the South Florida director for Metrostudy, a real estate research firm. "The less sophisticated people will not consider the fact that they're the last ones in, and they may find themselves without a buyer."
That's particularly true for investors who expect profits solely from a market upswing. Many investors buy homes or condominiums before they are complete at pre-construction prices, only to sell them months later when they are finished.
Adam Raizin turns around up to a dozen homes annually in Lake Worth, Fla., and makes $30,000 to $60,000 on each, often splitting the profit with an investor.
(J. Pat Carter -- AP)
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Developers worry that if too many investors scoop up homes before they are complete, they could artificially inflate the market and cause it to collapse. To protect their investment, some are limiting the number of units an individual can buy.
Related Group of Florida tracks buyers by their Social Security numbers to make sure they are signing only one contract at the developer's many condominium projects in south Florida. Buyers who want two properties must sign affidavits saying they're not buying a unit for resale purposes.
"We do not want investors. It is a safer practice for us to make sure that a buyer has one unit, so at the end of the project we can be sure they can close," said Harold Gallo, Related's marketing director.
Developers believe their projects will be more successful with buyers who want to take part in the communities and the lifestyle they're creating. "We want people who want to live in and enjoy their community, so we discourage people coming in to buy and flip, and we train our sales people to look for those buyers," said Joel H. Rassman, chief financial officer for Toll Brothers Inc., a luxury home builder based in Huntingdon Valley, Pa.
Still, nothing has stopped Adam Raizin from keeping an eye out for run-down homes that can be fixed and flipped. He recently bought one garbage-filled, flea-infested house for $145,000, cleaned it out and sold it to another investor for $172,000 less than two months later. That buyer will renovate it and flip it again, likely for a similar gain.
Raizin, 41, made his first real estate purchase, a duplex, in the late 1980s by putting less than 3 percent down and financing the rest. The profit he made from rent alone hooked him into the business. He now turns around up to a dozen homes a year and makes $30,000 to $60,000 on each, often splitting the profit with an investor, and makes time on the side to run a consulting business.
He said he limits mistakes that newcomers might make by sticking to the market he knows in Lake Worth, a coastal town about 70 miles north of Miami and 10 miles south of West Palm Beach. He charms buyers with cheery yellow and green exteriors and white picket fences and props such as antique window frames and shabby chic furniture.
To keep up in such a frenetic field, Raizin rises at 4 a.m. with a sugary coffee and researches listings on the Internet, then drives around with his chocolate Labrador, Handsome, to check them out. He has contracts completed with everything but the numbers in his glove box and enough investors to know he can come up with the cash for any house he wants. He can act more quickly than most buyers because he's willing to skip the appraisal, home inspection and termite report that banks would demand if they were financing the deal.
"You can't steal in slow motion," Raizin said. "If you want a good deal, you have to seize the day and grab it."
