Scott's goal is simple: nail down a strategy that mitigates his risk while ensuring his investments and profits remain unharmed. "In a downturn — typically at the beginning of a downturn — the first parts of the market that start to soften and lose value are those parts of the real estate market that are well-above, or well-below the median house price," Scott said.
Scott says that if you're going to flip during this time, make sure the resale value of your property is near the median home price in your specific market."I'm focused on deals that are going to go quick. I'm focused on those deals that I can be in and out of in 2, 3, 4 months," Scott said. "That way, even if the market starts to turn, we're probably not going to hit the worst part of the downturn before I'm ready to get out of those properties.
"I'm not overly concerned that we're going to see a major 10, 20, 30% crash overnight. Again, I don't know for certain, but I'm willing bet some money on that," Scott said. "I'm not as confident that we're not going to see a downturn — and maybe a major downturn — in six or 12 or 18 months. Given that, I'm trying to keep my projects short.
Scott notes that home prices in Baltimore — a market he frequently flips in — fell about 13% to 14% in 2008. When he flips in Baltimore today, he accounts for at least 13% to 14% of margin before moving forward with a deal. This way, he'll still break even if another worst-case scenario happens to occur.
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