Flip this or that house
** Frank **
TV shows. The best I've seen in my local area is around 20% below market
(major fixer-upper) and with the carrying costs, renovation, closing and
sales commissions, I think it's lucky just to break even. I also see couple
of bank own properties (foreclosures) discounted at only 10% (also fixer
uppers) so any profit goes to real estate commissions. I just watch those TV
shows for the entertaining value and scratching my head about how those
flippers buy properties at so much below market value.
Seerialmom
They do have a method to get those houses; it seems that each "team"
does it differently though. And it does come down to location and
timing; there are many speculators out there who bought on the high-
end of the market and will have a hard time selling (and will likely
rent out).
The reason I watch those shows, especially the first time flipper ones
(Property Ladder is one of my favorites) is because I get tickled at
the over-optimistic time and money estimations. "I'm going to gut the
kitchen and bath, reroof and add on a room for $10,000...in 3 weeks
time". So many times I've seen them automatically yank out kitchen
cabinets that could be 1. refinished, 2. painted or 3. refaced. And
also adding high-end appliances and counters in a lower income
neighborhood is never a good idea. But I agree...it's more about the
head-scratching and entertainment; not so much education (except maybe
"what not to do").
Rod Speed
> Flipping works when they purchase at 30 to 50% below market as shown
> on the TV shows. The best I've seen in my local area is around 20%
> below market (major fixer-upper) and with the carrying costs, renovation, closing and sales
> commissions, I think it's lucky just to break even.
It does a lot better than that when the market is booming.
It doesnt work anything like as well when its not.
> I also see couple of bank own properties (foreclosures) discounted at only 10% (also fixer uppers)
Yeah, thats inevitable with such high percentage mortages seen now.
> so any profit goes to real estate commissions.
Those are optional.
> I just watch those TV shows for the entertaining value and scratching my head about how those
> flippers buy properties at so much below market value.
Your problem is that you are assuming that the market
value is a fixed thing. It isnt, particularly in a booming market.
Rick
Because they are usually shot in economically depressed areas with
relatively low overall market value homes. You will never see an episode
like that in the likes Boston or San Francisco.
Rick
Seerialmom
Los Angeles is a low market value region? Hmm...and I do recall one
they did in Sacramento as well not too long ago. I can see what you
mean about SF or Boston; I'm presuming even a major dump is
outrageously priced to begin with so it'd be a very low profit margin.
Rick
They *rarely* get to that point to begin with in those markets. I
couldn't tell you the last time I saw even a condo listed in metro
Boston at under $200,000.00. I have seen a property on my sister's
street "flip" three times in two years when the homeowner's got in way
over their head on the price/mortgage of the house. But it was purely an
"eyes bigger than their stomach" - so to speak - financial matter. (One
"owner" put the house back on the market in under five months when they
got hit with pay and benefit cutbacks at work.) The owner's of the
moment never walked away with a profit. They were just relieved when
they could walk away at all.
But travel all the way across to the other side of the State - where no
one wants to live and the job market sucks - and you can find abandoned
property with mortgage defaults. You just can't find anyone that wants
to purchase it. Those shows make a complicated process and market look a
lot simpler than things really are. Take a look at the repo lists on
some of the Federal mortgage sites like Fannie Mae, HUD, USDA etc. 90%
of the properties repossessed due to mortgage defaults are low priced,
in economically depressed regions, and in "less than desirable" parts of
any State. Repos in Springfield MA? Yes. Repos in metro Boston? No. Etc.
Rick
timeOday
> The reason I watch those shows, especially the first time flipper ones
> (Property Ladder is one of my favorites) is because I get tickled at
> the over-optimistic time and money estimations. "I'm going to gut the
> kitchen and bath, reroof and add on a room for $10,000...in 3 weeks
> time". So many times I've seen them automatically yank out kitchen
> cabinets that could be 1. refinished, 2. painted or 3. refaced. And
> also adding high-end appliances and counters in a lower income
> neighborhood is never a good idea. But I agree...it's more about the
> head-scratching and entertainment; not so much education (except maybe
> "what not to do").
>
What's fun in a different way is "This Old House" and "Home Again with
Bob Vila." It's not DYI; they do outrageous rennovations that look
*much* harder than tearing down and rebuilding from scratch - like
building a new house from an old barn by lifting it up, putting a new
foundation under it, ripping out and rebuilding the first and second
story floors, etc... The owners really take their lumps ("Sorry, we're
not going to be able to save the trees that made this property
attractive to you in the first place... and ripping them out will be
another $8K"). There are many setbacks and it looks like a full-time
job just supervising the contractors.