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With tightened housing stock supply, the competition for home buyers is fierce this year. Low rates and increased demand mean prices are soaring on what stock is available \u2013 and what\u2019s available isn\u2019t staying on the market for long.<\/p>\n
One issue is that among the low inventory, there are even fewer homes that are move-in ready, said Keith Lind, executive chairman and president of Acra Lending.<\/p>\n
\u201cWe actually have a lower inventory of homes that people really want to live in turnkey,\u201d Lind said. \u201cThe average home age in the United States is about 40 years old, so there\u2019s a huge stock of homes that need to be renovated.\u201d<\/p>\n
Given the rising price of lumber<\/a> and other construction costs, renovations may sound impractical. However, that\u2019s not necessarily an issue for homes that are simply being updated, according to Lind.<\/p>\n \u201cNew construction is everything \u2013 it\u2019s copper, plastic, plumbing, lumber, roofing \u2013 but in a rehab, you\u2019re not necessarily doing all that, there\u2019s not a big spend on that,\u201d he said. \u201cFrom a monetary standpoint, it\u2019s much cheaper to go in and rehab these homes and get them up to date with living standards of today than knocking them down [and building new homes].\u201d<\/p>\n But not everyone has the time and ability to flip a house themselves, especially given the timing gap between purchasing a fixer-upper and updating it enough to move into full-time.<\/p>\n According to Lind, one way for existing housing stock to be expanded and improved upon is through investors or developers using fix\u2019n\u2019flip loans.<\/p>\n A fix\u2019n\u2019flip loan is designed to cover the costs of purchasing a home and renovating it. The loan is transitional, lasting about nine months to a year, with the end goal of putting that house right back on the market.<\/p>\n \u201cNot everyone can afford a brand-new construction home, given where home prices are,\u201d he said. \u201cIt\u2019s more affordable to go the route of working with someone who\u2019s selling homes that have been renovated. We think this is a more economical decision for homeowners, a much bigger opportunity than new-build construction in the U.S.\u201d<\/p>\n Given the inventory shortage and the increase of renters turning to homeownership, Lind sees an opportunity for Acra Lending to join the fix\u2019n\u2019flip lender space. The company plans to launch its new vertical this summer, with the goal of lending to developers with proven experience in the rehab space.<\/p>\n Lind says fix\u2019n\u2019flip integrates well with Acra\u2019s proven expertise in non-QM products, particularly its DSCR or investment loan offering. The transitional fix\u2019n\u2019flip loan can lead to a debt service coverage ratio (DSCR) loan, which Lind says is about 25% of Acra\u2019s monthly production.<\/p>\n Acra Lending will be launching its fix\u2019n\u2019flip offering in the coming months \u2013 for more information, visit acralending.com<\/a>.<\/p>\n The post How fix’n’flip loans could help expand housing inventory<\/a> appeared first on HousingWire<\/a>.<\/p>\n