Speculators Flip Over Commercial Property

The Northwest Arkansas real estate market is so hot, its difficult for a person with some money to lose it on a commercial real estate venture.

Youd have to be a total village idiot not to make a lot of money if you had a couple of million dollars [to invest], said Lee Ward, a real estate broker who owns Realty Concepts of Fayetteville. Its easy to make money if youve got a lot of it. Its really, really easy in our market right now, and its hard to make a mistake This market is so hot, if the word gets out that youre even thinking about selling it, you get swamped. Its a real sellers market.

Ward said 70 percent of the properties he sells never actually go on the market.

I do a lot of selling of properties that dont have signs, he said, because theyre not for sale per se.

Ward said investors often by property to flip, meaning they sell it for a profit soon after buying it. Investors frequently buy large tracts with the intention of dividing the real estate up to resell as smaller parcels.

Most of the time, thats whats happening, he said. Investors are buying this property, and most of the time theyre not the users. Theyre buying it with the intention of selling real quick.

A lot of this property is flipping real fast right now because the market is so hot. In six to eight months, people are doubling their money.

After a sale, the investors must buy other properties to avoid capital gains taxes.

It may seem like theyre raking in the money, but the investors are also taking the risk.

Mitchell Massey of Massey Holdings, a development company in Fayetteville, said he bought 40 acres in Centerton for 50 cents per square foot. Eighteen months later, he had the property under contract to sell for $2 per square foot. In other words, he bought it for about $841,000 and will sell it for $3.5 million.

Sometimes it makes sense to do a flip, to take a profit and put yourself in a better equity position for another deal, Massey said.

But his strategy isnt to buy large tracts to divvy up for sale. Instead, Massey looks for land at a good price.

Land prices in Northwest Arkansas are increasing so quickly, people often dont know how much their land is worth, he said.

I think the key to a flip is finding an undervalued piece, Massey said. Adding value to a piece allows a flip.

Massey said he will purchase agricultural property, then add engineering, zoning and annexation.

All of a sudden, youve taken it from a piece of farm land to a potential development, he said. It creates the opportunity for a land flip. We dont claim to be geniuses in real estate. We just go with our gut, and it has worked well for us so far.

Massey started buying rental property eight years ago. He then built five $70,000 homes in Springdale. Now, he expects to do between $80 million and $100 million in business this year.

Steve Fineberg, a vice president and broker with Lindsey & Associates in Rogers, said three things are happening to cause the boom in Northwest Arkansas real estate: low interest rates, high demand in the region and limited infrastructure.

The limited infrastructure means property with utilities, particularly sewer service, is at a premium in the area, he said.

Ward, who has been in the Northwest Arkansas real estate market for 33 years, said times havent always been so good. In the early 1980s, it was hard to sell real estate here.

It runs in cycles, he said.