I’ve been doing real estate in one way or another for about 5 years already. I’m not a seasoned veteran, but I’m also not a newbie. I’ve noticed that since the beginning of the year I have seen, heard, or encountered more people very interesting in the idea of flipping homes, than ever before… I try to give as much information as I can, but I also worry that some of these people will jump into the pool first without getting their feet wet. It could be all the tv shows or talks about foreclosures in the market. The shows on tv really tick me off, because they make the process look fluid and without much risk. They dont show the actual holding costs, interest payments, commissions, etc. This can give people a false impression.
Anyone else seeing this?
For anyone that is interested in getting into real estate for the first time, make sure you read and research first. Dont jump on the first “deal” you encounter.
I have a few horror stories in flipping, if any newbies want to hear.
Guarenteed, when the MASSES get in it’s too late. Not just real estate, stocks, commodities, ANYTHING.
Your observation is correct, everyone wants to flip houses. These people have very short memories because in the late 80’s THE EXACT SAME THING HAPPENED> the result this time won’t be any different, same circus, different clowns.
People forget how FAR things fell then. This boom makes the appreciation curve in the 80’s look like an ant hill.
I am always hearing that the Texas market is about a year behind. Here in Ohio, I think we’re already well past the top of the market (but no-where near the bottom). Those Callifornia investors who bought here have already gone bust. Flipping has all but disappeared because houses are not moving. Prices have dropped and are continuing to drop, even though Ohio never experienced a boom. There is a glut of inventory on the market. People who want to buy a new house are unsuccessful because they can’t sell their existing house. Lending practices have tightened significantly. It’s a mess.
I would agree that tv makes it so glamorous and easy and I also see more people trying to do it. I know a guy that is living in one flip while the other two are still on the market… he bought them last spring! I started real estate because of a hotshot book I read 4 years go. Well it wasnt quite as easy as the book said and I didnt make that million overnight. Fortunately I wasnt completely stupid about it and kept my day job.
I would agree with another post I read recently, buy low, sell low. Thats the only way to do it where I am. Better product for less money, and we wont do a flip unless we purchase it VERY LOW.
in this market you have to be very, very patient and only jump on the tasty deals (know your MARKET!). After waiting and waiting for 4 months, I just got a property under contract at 55% ARV based on very solid comps from the last 2 months of sales in the immediate area. Its needs interior painting and about $1k in handyman type work.
Flipping is not investing anyway it is a job. What I am trying to do is build a real estate business. This is a business that yields monthly realized income. That is why I buy as many houses as I can and rent them out. Each house generates me $150 to $300/month. I would never sell one of my houses. Each of my houses is like a golden egg laying goose. If I sell that goose, yes I can get a pretty good lump of cash, but then I am in that rat race again of finding another house to flip. That is the same as trading time for money. That is a job. I already have a job. I am looking to build a business.
That is also why I am not concerned with any drop in home prices. The lower the better. That will allow me to buy more of them.
every investment has an exit point. with flipping, it just a short time horizon and as such has a different rate of return. with that said, I have a full-time job and doing an occasional flip is nothing more than a diversification of my real estate asset portfolio (I plenty of rentals for medium and long-term holds as well as some raw land). Each investor should pursue an allocation/strategy that works for their objectives.
excellent advice aak5454. Diversification is best. I plan to continue flipping for short term cash flow and when it seems appropriate. Flipping is a good way to build cash for future projects.
My advice on flipping versus renting is to evaluate the home. Personally, when a home is in an area that is appreciating or about to appreciate, I will keep the home as a rental. If its in an area that reached it plateau, flipping is ideal.
I have NO intention of getting into an argument with Bluemoon06, especially since my wife watches all those TV programs too, BUT… You have to consider the “Time-Value” of money. I just sold a SFR on a Lease/Option because it pays me up front the “value” I would otherwise receive over ten (10) years!!! Hey, tax deductions etc are great but cash up front is BETTER. Gotta look at the whole picture, folks.
I don’t want to get into accounting because we will end up losing everybody here but the “Time Value” of money is in the balance sheet and is taken care of in the appreciation category. The income statement is where the rents are accounted for.
BTW I have 4 traditional rentals, and the last 7 have been using land trusts. I have decided to get some of the equity out up front also.