But that wasn't true. “There's no end to opportunities if you know all the different ways to take advantage of the marketplace,” he said.
“There's never an end to people going into foreclosure, for so many different reasons,” De Meire said.
Other investors bypass foreclosure auctions.
Every home Meltcher buys is distressed — the owners are in default or the residence is in some other stage of foreclosure. He buys the homes on the open market, including properties on the multiple listing service and pocket listings from agents, rather than at the auctions. Meltcher, owner and principal of The Investment Division in Brea, said he's on track to buy at least 80 more properties this year, outpacing last year.
But with housing prices and interest rates rising, he said, fewer buyers have materialized: “I have a lot more property today in my inventory that I'm holding than I ever did.” That means reselling in six to eight weeks, he said, rather than three to five weeks.
Meltcher said the market has attracted amateurs who cut corners, which creates a negative ripple effect.
“I see a lot of armchair investors coming into the market and not taking the time and energy to do things correctly,” he said. “People take a lot of shortcuts. People think it can be done cheaply, that quality doesn't count. They'll put in new carpet and paint and walk away.”
When the restoring of a home isn't up to par, he said, it won't appraise for top dollar, which hurts comparable property sales.
House flipping has its own colorful lingo:
30-60-90 list: A compilation of borrowers 30, 60 or 90 days late on their mortgage payments. Housing data companies sell lists tracking delinquent mortgages.
ARV: After-repair value. The phrase translates to what the value of the property will be after it has been restored.
Bene: Pronounced “benee.” Short for beneficiary, meaning the bank or lender. When a home fails to sell at a foreclosure auction, it's automatically “sold” to the beneficiary.
Crying the sale: What the auctioneer does when a home is sold at a foreclosure auction.
Dollhouse: A home needing just cosmetic improvements.
Hard money loan: A loan made by a person or business with the borrower using real estate as collateral. The loan comes at a much higher rate than a bank loan, but it can be arranged more quickly and for a short term.
Haircut property: These places need less work than a dollhouse, maybe just landscaping.
OPM: Shorthand for “other people's money.”
REO: Real estate-owned. These are properties that reverted to the lender at foreclosure and go back on the open market for resale.
Sweat equity: Whatever value flippers put into a property by doing renovations themselves.
Trustee: Someone who holds the title to property under the terms of a deed of trust. In some states, if a borrower defaults on a home loan, the trustee has the power to foreclose on behalf of the lender.
Trustee's sale: A nonjudicial foreclosure auction, meaning a ruling by a judge is not required to foreclose.
Wholesaler: A flipper who buys a distressed property and immediately resells to an investor willing to rehab it.
SOURCES: TheFirstFlip.com, CountyRecordsResearch.com, ForeclosureForum.com.