I saw this article a few weeks ago. Most of you probably saw it also. But this is the main reason I never call what I do flipping. I always say buy fix up and sell. Because flipping is speculation and what I do is investing. When you invest you know there is equity in the house when you buy it because of distress of some kind. You alleviate that distress (for less money than the equity in it) and you make money. I don’t like using the greater fool theory. The greater fool theory is what has been going on in California where you will buy it in hopes that a greater fool will buy it from you at a higher price and that is flipping. At best it gets you a bubble and at worst what this guy got.
http://www.usatoday.com/money/economy/housing/2006-10-22-young-flipper-usat_x.htm
I saw his website about a month back. In my opinion he got what he deserved. Its so called investors like this who mess it up for all of us. Good article for people to read. Exit strategy should have been number one in my opinion or at least top 3.
Realcon
Excellent article! This is a very good article about the real world of REI. Make stupid mistakes and you’re out of business! That is exactly why the vast majority of newbies fail. They believe the hype and are not willing to put in the time and work that is required to succeed. With many gurus, work is a taboo word. We all know that you make your money on AUTOPILOT!
Mike
same, i found his blog thru another blog and I’ve actually been reading it ever since. Lots of what NOT to do!!!
This is the biggest lesson to learn here, a lot of people on this site think there is no recourse if they lie on a loan doc:
"Lying on a mortgage application is a federal crime," says Joseph Falk of the National Association of Mortgage Brokers. "It includes bank fraud, wire fraud and mail fraud and potentially a host of state offenses. This can result in jail time."
sounds like this guy needs a subject to investor lol :o ;D
PropertyManager,
I can’t agree more. To many infomercials show the “good life” and it was achieved “quickly” after living in bankruptcy, etc.
This crap sells, but it isn’t practical. It takes time to create the system. If the Gurus were so good at it, how come they aren’t on the wealthiest list?
Yes you replace a JOB, yes it is rewarding, but it is still work.
Sam Walton, worked his butt off to create the systems behind Wal-Mart. Then he hit true wealth after years.
Yes you can make good money here. The deal itself takes just a few days, but getting the deals, creating the marketing. Lining up the money, putting together your teams, etc. That takes time and effort.
So people, stop believing the hype. You have to work. You can work smarted and for yourself, but don’t act foolishly.
You guys hit it on the head! The current media trend attempt to wrap up a “flip” in 20 minutes and never actually shows the difficulty involved. It’s all about how a nice young couple or cute 20-something made 50K in just 4 weeks! It’s all about ratings-not education.
This is not the path this newbie will follow.
Thanks for a great forum.
…
I agree. It was not my intention to blame the media for mistakes people make, but to illustrate that some people assume “Flip That House” is the holy grail of information.
i think that the show is a good show, but for entertainment purposes only. unfortunately they do not give you a disclaimer that says, “don’t do this at home”. in real life times, folks see $ signs, and think that they can make a mint off one deal, buy WRONG, underestimate costs, and get screwed. i think the show sends the wrong message.
The fault for 80% of the flipping lies squarley with the Banks!!
How is it possible for a bank to lend hundreds of thousands of
dollars on a property relting solely on a third party appraisal &
loan broker?? If they wanted to curtail the number of bad loans
-fradulent values, etc, that end up in foreclosure then they should
have their OWN appraisal(s) done independently. Bottom line:
The banks aren’t complaining much at all, wonder why that is???
Blaming the banks for mistakes made by people borrowing money?? ???
My take on why Banks are not complaining yet…
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There are thousands of time more good loans then bed loans.
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They never loose whole loan amont when they foreclose… they sometimes make money and sometimes loose some…
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Tax write-off : Banks write off a lot of these cost on their bottom line profits… less money they will owe to uncle Sam.
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FHA and PMI will protect them most of the time…
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Escrowing money for Tax and Insurance will also protect them if owners do not have equity of 20%
See…where I am going… Yeah… they don’t like foreclosures and they like to see 100% loans to perform… but its never going to happen in tight market like this. It’s all about cost of doing business… they still more more money then any other industry 
DFW
Are u a banker Richct?? I agree that 20% of the fault lies with people that make mistakes and run into
legitimate issues when it comes to foreclosure. Divorce, job loss, illness, etc. These are all legitimate
reasons why a homeowner gets into a distressed situation. My point is that there is sooooooo much
fraud taking place that the Banks should be taking extreme precautions to protect itself from these
type of losses. Maybe they don’t care because they are making soooo much $$$$ interest from the
people who are paying monthly. The Banks need to close the obvious loopholes in their lending system.
Do you disagree??
I agree on what you saying, but there is always limits and cost to these implementation. I think – I am pretty much sure-- they budget for foreclosure and defaults.
One way to avoid completely defaults is to not to land at all… but just defeats the purpose on bankers.
DFW
Not a banker but this is all very much like the cases where people blame gun makers when some idiot shoots another idiot.
This reminds me of a new investor in my market who decided it would be fun to flip a home in the historic distric. He forgot to check on the rules and regulations of the historic district and he decided to put around 50 vinyl windows in the house. The problem was the area requires wood windows which would cost at least $30k not to mention the $12k he dumped into all the vinyl windows. To make a long story short he lost the house to foreclosure because he couldnt afford the new windows and the payments.
Eric Medemar
Personally he went wrong by getting mortgages and using credit cards. He should have waited and saved up his own hard money to finance everything under a LLC. Of course the biggest mistake is underestimating repair costs and doing amateur work. Personally I think California is far over-rated for everything, he should have moved to Ohio. 