Not Again

| May 15, 2018
Share |

I had to do a double take when reading this story in The Wall Street Journal.

Residential Transition Loans

Borrowers of residential transitional loans—or flip loans, as they are better known—use the money to buy a property, renovate it and then try to quickly resell at a profit. They have become a lucrative and growing niche of finance in recent years. Nomura Holdings Inc. estimates that flippers will borrow some $15 billion this year, nearly 25% more than last year.

Reaching For Yield

These loans command juicy interest rates of 8% to 12% and often have maturities of around 12 months, though many borrowers repay earlier. A one-year U.S. Treasury, by comparison, yields, around 2.27%.

There Is Always A Risk

But flip loans come with risks. If a renovated property doesn’t sell for a higher price or the borrower can’t refinance, the lender may wind up owning a house. That can happen if the housing market sours mid-flip, if remodelers misjudge their costs or the tastes of potential buyers, or if appraisals value properties too richly at the onset.

 

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

 

Disclosure
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Meyer Capital Group), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Meyer Capital Group. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Meyer Capital Group is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Meyer Capital Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Share |