Property flipping as neighborhood destablization versus short term real estate investment (STREI) as community reinvestment: A case study of Buffalo, NY
Lindstrom, Holly D.
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Property flipping is the purchase of property for a low price and resale of that property quickly (within a year) for profit. In the past decade these quick real estate transactions have been found to be problematic in Buffalo and across the nation, particularly because of the close relationship between flipping and the illegal practice of predatory lending. Though predatory lending can be an important component to the problem of property flipping, it is not necessarily the only component, nor is it a necessary component of the problem. This distinction needs to be put into perspective, in order to address the full spectrum of the causes and components of property flipping. In order to accomplish this, it is important to first draw a distinction between two different types of short term real estate turnover: one which is a relatively sophisticated and ethically sound practice which will be referred to as short term real estate investment (STREI) and the other which is not sophisticated and/or unscrupulous. The latter instance will be identified as "property flipping" (as this is a term which is more and more becoming associated with unscrupulous activity). I suggest these two types of property turnover are different based on real estate investment decision-making principals. Beyond the inherent problems of predatory lending, property flipping is also related to other problems for communities, such as vacancy, housing stock decay, and artificial appreciation in the real estate market, just to name a few. However, these problems have not been widely studied or published in an academic journal as they relate to property flipping. For this reason, I feel it is necessary to integrate the discussion of property flipping with these other related problems for communities. Essentially this thesis asserts, with (residential) property sales data, census data, and real estate data, that property flipping is occurring in areas of the city with depreciating or stagnant property values and where the demographic profile is that of lower than median income and property value areas. These indicators point to areas that have already experienced neglect and economic downturn. Property flipping, contrary to STREI, contributes to that neglect. In conclusion, this thesis offers the academic and wider community a platform off which to delve more deeply into the causes, effects, remediation or preemptive actions possible for dealing with the divergent real estate practice of property flipping that is not related to mortgage fraud.