One of the biggest challenges in today’s market is finding homes to buy.
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.
Banks typically won’t lend money to investors looking to flip homes, so club members often turn to one of Dweck’s companies to provide financing. It offers short-term loans to investors, who make monthly payments and pay off the balances when the homes sell.
Mike Benton, 34, recently bought a house in Pompano Beach, Fla., for $165,000. After $35,000 in renovations, he sold it for $249,000. He said he and his business partner split about $22,000 profit.
Benton said they also bought and resold a Margate, Fla., house, netting about $12,000.
“I’m putting in surround sound, tiki huts — something that will stand out to clients,” Benton said.
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. Individual investors bid at online foreclosure auctions and also use relationships with real estate agents and other industry professionals to find properties for sale.
“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.”
Lananna said he spends about 15 hours a week looking at properties to buy.
“I just try to be the first one out there and beat everyone to the punch,” he said. “I’d like to think [the investment firms] don’t have the same hunger and desire as I do because it’s not their own money.”