House flipping $$$$

[speeder]

A guy that I know here in LA makes a lot of $$ buying 4-6 unit apt. buildings that are semi-distressed merchandise, does quicky rehabs on them and flips 'em for a nice profit. He told me that he does 4 or 5 a year and makes ~$100k on each one. He also has a day job that pays well.

What is really interesting, to me, is that he and his wife RENT the place they live in. It's a good deal, ($2600 for a beautiful duplex), and he agrees w/ me that buying RE to live in is a terrible investment in L.A. right now. Way overpriced.

[cool_chick]

How do you find foreclosures and are they usually dumps?

I'm in the market for a new place (for me) and this is a possible way to go....

[cool_chick]

Originally posted by Wayne at Pelican Parts
Kind of like that time you showed up to that party, and the only ones there were the hosts, collecting all of the empty bottles...

-Wayne

I was figuring that might be the case.....

I suppose if they're going to take your house (due to your own fault, I agree), you're not going to treat it too well.....

It would be fun to get one and rehab it.....that's always fun too....but not for me this time around......

[kwm]

Wow. While I was away from work we have some very constructive comments and some truly asinine ones too. First off to all of the comments that I should have gotten into this game 7 or some years ago, I was 25 years old and in college 7 years ago. Secondly, regarding the similar comments that I am too late to jump aboard this boat you know nothing about my region. Charlotte NC is one of the most rapidly growing cities in America for both young people out of college starting a career and their parents from Central NY State and Jersey who despite the southern are moving here to retire in literal droves. Also (and since I grew up in CA. and my family still lives there) I can tell you with allot of certainty the NO PLACE else in the US can you buy the kind of cheap ocean front and ocean view property as you can in SC and even NC. Condos on the SC coast start in the 150s in move in condition. Stand alone single family homes facing the water can be had for 380 and up. So don't tell me that flipping is a dead endeavor. CA has NOTHING on the Carolinas. I will never go back to CA. even if I were paid to. CA residents would barf In-n-Out burgers all over their shoes if they saw the property values here. Plus we have all the mountain access you do and twice the coastal access because all the beaches are public here. I live in a 2200sqft. house with a 2+ car garage on a 1/2 acre lot in a lake community that was purchased 2 years ago in move in ready condition for 154 so the liberal left coast has nothing on Carolina as far as I am concerned. I will keep my day job and come out ahead on this flip business with my partner who is a realtor and when I do I will post a thread for the naysayers with a copy of my bank statement. Wow, this is the last time I post on the Off Topic thread you guys are clueless over here. Sorry I interrupted you from your Bush bashing please have back at it. Later

[Jims5543]

How do you make a lot of money in real estate? To get in when its right, sometimes a good time is when everyone else is jaded by it.

Most of the country is in a huge downturn right now. So a RE investment is killing a lot of late comers.

kwm - you know your region better than anyone I know what you know and I am not living there. I know what is happening down here in Florida and everyone I meet is moving to North Carolina and Tennessee. Some are heading to the NC coast other to the mountains. Then throw in the vultures you know the ones that treat houses like peices of stock and all trade them for increasing prices not caring that they are screwing up the market and the prospects for anyone local to be able to afford a home as property value doubles and triples in the span of 2-4 years. You are in a win win situation.

Your timing could not be better and if I were you I would act fast because the property value up there is already climbing.

I, for one am not a naysyer and I am contemplating moving to my vacation home in NC to live full time and doing something too.

[ben parrish]

KWM, go for it. People do it every day and make a nice living doing it. Buy the right house, at the right price and fix it up. Keep it two years and sell it with no tax liability (unless you make more than 500k or so)

I have flipped two houses and will do it again. The last one put 180K in my pocket; tax free!! If you are handy and can do most of the work yourself, you can make more but your time is worth something. I personally enjoy the work so it is no big deal for me.
Big pay backs are from renovating kitchens and baths. Paint, ceramic tile, wood floors, etc. are all do it yourself projects. Light fixtures are a quick, easy upgrade.
By the way, both houses I purchased were on the market for over 18 months. No one could see past the green shag carpet and avacado appliances.

[Porsche-O-Phile]

And you wonder why nobody wants to live in the Carolinas with an attitude like that. Sheesh.

Most of the Californians I meet still have all their teeth and actually value the fact they made it through high school. More than I can say about a lot of them Carolina boys. And yes, I've been through there a few times. Some folks are nice, a disproportionate number are downright scary. FWIW the Carolinas do have some beautiful scenery and nice land, but the downside is it's on the east coast, there are MANY bass-ackwards areas and the desirability of living there can't hold a candle to the Pacific coast.

As for flipping - it's kind of sad that it works, but if it makes someone money, I guess more power to 'em. It's an endeavour that is akin to gambling - it takes more luck than skill and the downside is it is REALLY screwing up the market for everyone else. Whatever. If/when I buy a property it'll be to actually live in, not participate in this silly "paper profit" game. I can't say I have a lot of respect for someone that makes a lot of money flipping houses - just like I don't have a lot of respect for someone who made their fortune on a lottery ticket or an inheritance from a dead uncle. I'm happy for 'em, but I don't respect 'em. They haven't worked for it, IMO.

Yes, I'm sure there are some people that make money on it but there were a lot of people that made money in the dot-com bubble of the late 1990s. Where are they now?

History repeats. Knowing when to get/stay out is half the game.

[Mr Beau]

Read www.iamfacingforeclosure.com (failure) and http://trishasblogsite.blogspot.com/ (seemingly successful) before proceeding...

[ben parrish]

Porsche-O-phile, Why do you think that flipping is a "dirty" way to make money. There is a tremendous amount of skill involved in taking an unwanted piece of property, refurbishing it, and selling it for a profit. It is not for everyone as it takes hard work and patience. It is nothing like gambling in the stock market and I assure you, it is not dumb luck.

Do you feel the same way about someone buying a beater 911, rebuilding and repainting it and selling it to someone that wants a nice 911 for a profit???

I am not trying to be confrontational, just curious of why you feel this way.

Ben

[Jims5543]

There you go kwm, it ssems you missed the little "fact" that everyone in NC is a toothless uneducated dolt that has no money and cannot possibly be able to buy a home.

Wow! Talk about stereotyping.

POP- you are 100% correct now tell and the weirdo's in Cali about the toothless, ass raping, inbred, freaks in NC and tell them not to ever go there. We would appreciate it greatly.

[on-ramp]

if the market is softening, this is a great time to negotiate some good deals.

a good RE businessman makes money in a down market as well as an up market.

[atlporsche]

Originally posted by kwm
CA has NOTHING on the Carolinas. I will never go back to CA. even if I were paid to. CA residents would barf In-n-Out burgers all over their shoes if they saw the property values here. Plus we have all the mountain access you do and twice the coastal access because all the beaches are public here. I live in a 2200sqft. house with a 2+ car garage on a 1/2 acre lot in a lake community that was purchased 2 years ago in move in ready condition for 154 so the liberal left coast has nothing on Carolina as far as I am concerned. I will keep my day job and come out ahead on this flip business with my partner who is a realtor and when I do I will post a thread for the naysayers with a copy of my bank statement. Wow, this is the last time I post on the Off Topic thread you guys are clueless over here. Sorry I interrupted you from your Bush bashing please have back at it. Later

I hear that. 154...damn. I live in the atlanta area in 3500 sq. feet (including the basement) for under 250. I've done virturally no redecorating, as the house belonged to an interior decorator. it's neutral colors with faux finish parchement walls, venetian plaster in the dining room, granite, marble and travertine master bath, grohe everything. I put a cork floor in my kitchen and painted, it was the only place that needed it. I've got two cars in the regular garage and 3 in the basement.

it'd be 1.5mil+ depending on the CA location.

as for flipping, that one post about having 200 grand to put into a place over 2 years...really, who's got that kind of time/money, not us mortals.

sjd

[turbo6bar]

Originally posted by cool_chick
How do you find foreclosures and are they usually dumps?

I'm in the market for a new place (for me) and this is a possible way to go....

If the foreclosure is not a dump, it's usually very hard to get a good deal. You can approach it two ways.
1) buy a junker, rehab and resell. Create instant equity, but you'll have to put more money down up front. If the house is really rough (I see $$$, then), then you may even have to pay cash for the property.

2) buy a foreclosure that needs little work, get a small discount, live in it or rent it until appreciation gives you a gain. If you choose option 2, I would advise getting a discount of at least 10-15% for the perfect property. You're taking risk buying these properties. You should get a better price for doing so.

A realtor can help you find the foreclosures listed in MLS. If you have an online source for listings, realtor.com or other, preferably better web site, you can tell tell the property is a foreclosure when the remarks read like "As-Is. Buyer must provide mortgage letter or proof of funds."

[azasadny]

I've seen successful "flippers" and my next-door neighbor is one. From one I've gathered the most important points are:

- Buy the "right" house in the "right" neighborhood at the "right" price (most important factors)

- Make the "right" improvements yourself or hire the "right" contractor

- Sell the house at the "right" time

Obviously, it takes alot of knowledge and experience to know what these "rights" are, but I've seen people make alot of $ doing it successfully. Factor in the value of your time and labor, nothing is "free" and it takes much work to make "flipping" profitable and enjoyable.

[turbo6bar]

kwm, you might want to do some research on the market in coastal SC. Articles I've read indicate sales volume is through the floor. Higher insurance rates and falling speculator demand are putting risk back into the equation.

I prefer rehab & resell to the term flipping, but that's just me. I believe dirty, trashy houses are where the money is. It requires a little more gut, but can be less risky if you buy right. Buying property purely for appreciation can lead to spectacular profits, but is inherently more risky, particularly if that property is not generating sufficient cash flow, or worse, no cash flow.

When talking about landlording with others, I regularly relay the statement, "When it's good, it's good. When it's bad, it's really bad." Same goes for flipping.

Here's flipper hell:

http://forum.freeadvice.com/showthread.php?t=351785

I’m from FL.
I’ve read a lot of the posts here and respect the advice of the forum. I have a couple of questions about Chapter 13. I make over 50K, so I think Chapter 7 is out. I had a real estate deal gone bad. I bought a house and construction was slowed down because of the hurricanes so I had to buy another in the mean time, when it came time to close my wife didn’t want to move, so we tried to rent or sell it. A year later no luck. Now the bank is going to foreclose on it, and to top it all off my mortgage payment on my primary now went up $500 and month because they didn’t calculate the taxes correctly. They used the value of the land only to get me to qualify for the payment knowing that they wouldn’t hear about it until a year or more later. There is also no way I will ever be able to sell my primary no because with the taxes and insurance having gone up so much, and the properly values have gone down ( my neighbors house is better and they had to sell it for 150K less than I paid) I will never get close to what I owe. I’ve had some good real estate deals in the past, and was able to cover my mortgage for year, but have put everything I had into it. I do have some unsecured debt, but could pay all of it if I had to. Can I get out of my primary, and what happens to the primary if you are behind and want out, or stay? With my investment house, I don’t know weather to let it go into foreclosure. I can’t catch up with the payment and I’m concerned about get a judgment that I will have to pay for the rest of my life, because that will never sell for what I paid for it, and at a foreclosure sale that will never get ½ of what I own. I’m really ready to go back to renting until the market stabilizes, but who will rent to me if I have a foreclosure and a bankruptcy? Thanks, Richard

In years past, you wouldn't see stories like this. Now, you do. Risk is returning. Investing in RE is not fire-and-forget as it has been in the past half decade. When in doubt, cash and cash flow are your only friends.

[Porsche-O-Phile]

Originally posted by ben parrish
Porsche-O-phile, Why do you think that flipping is a "dirty" way to make money. There is a tremendous amount of skill involved in taking an unwanted piece of property, refurbishing it, and selling it for a profit. It is not for everyone as it takes hard work and patience. It is nothing like gambling in the stock market and I assure you, it is not dumb luck.

Do you feel the same way about someone buying a beater 911, rebuilding and repainting it and selling it to someone that wants a nice 911 for a profit???

I am not trying to be confrontational, just curious of why you feel this way.

Ben

I've seen too many people with NO skill whatsoever make obscene profits in this game. You can't convince me it takes skill - it doesn't. It takes dumb luck. Skill might help a bit, but all the skill in the world won't offset bad luck and lack of skill is certainly more than offset by good luck.

Look, I'm an architect by trade - I know a thing or two about construction. Here are some of the problems created by the "flipping" craze as I see it:

1. Barriers to entry - the bubble created by this stuff has raised barriers to non-owning people from getting into home ownership in a lot of markets. The choices are either to (1) be extrordinarily lucky or independently wealthy or (2) take a "sucker" mortgage like an I/O, ARM or other time bomb that leaves one vulnerable to unacceptable risk and/or builds no meaningful equity, except if double-digit appreciation continues, which it won't. It's a good time to be in the market if you're lucky enough to already own and have a chunk of equity to re-invest. It totally sucks for everyone else. This is doing nothing less than killing the American Dream for a lot of people.

2. Lack of quality - there are certain things owners can do to improve their properties, but I've seen a lot of harm done as well. For every person that puts reasonable care and skill into their improvements, it seems there are ten that have no clue what they're doing and end up "slapping perfume on a pig" at best or creating bona-fide life-safety issues or code violations at worst. Even more frightening, there are huge rises in instances of non-permitted work and work performed which creates more problems than it solves - I'm betting that there are going to be LOTS of lawsuits in the next few years as a result of non-disclosures or shoddy workmanship that was slapped onto substandard properties in an effort for some "flipper" to do a cheap "turn and burn" on the property. I actually am starting to hear about this somewhat regularly now. Some of it is just head-scratchingly stupid, some of it is actually seriously dangerous. It's only a matter of time before someone gets killed in one of these properties because an unscrupulous "flipper" either hid something or screwed something up. . .

3. Economic Risk - There are a LOT of sub-prime, weird, creative "sucker" loans out there. As I said above, a lot of people have been whipped into a frenzy by the lure of easy money or fear of being eternally priced out of the market, and thus been talked into signing up for VERY stupid financing terms. Look at foreclosure rates now - there are already rumblings of a lot more. As interest rates continue to creep up and wages continue to not keep pace with the huge mortgage payments a lot of these people hold, something's going to give. When the rates of foreclosures rise, it's going to drag a LOT of the economy down with it. I'm not just talking about people in residential construction, contracting, brokerage, appraisal, etc. but many, many other sectors as well. Virtually EVERY fund for the last four or five years has linked itself to "mortgage securities", since that's where the money was being made in the domestic economy. Well, live by the sword, die by the sword. If/when that sector crashes, it's going to pull a lot of other things down with it and it could snowball very quickly into a recession or worse. There's a huge amount of risk out there right now, and most of it is only being staved off by creative incentives and dumb luck that there hasn't either been another terrorist attack or other trigger for an economic downturn.

While things are okay for now, it's a house of cards. This "house of cards" seems largely promulgated by flippers and the banks that finance them. Unfortunately, they won't be the only ones to get burned when it crashes down - it'll be EVERYONE. There's a lot of people out there that have been on spending sprees based on "paper profits" rooted in expected rates of return. Dangerous move.



I've always been fascinated by real estate because it's historically been a way that an average person can better themselves and their situation with a reasonable chance of success. The downside is recently it's been screwed up - it's like a public pool that you like to go enjoy on a hot summer day that you go to one day and realize that 2,000 of your "closest friends" have also discovered. Takes all the joy out of it and ruins it. The residential RE market is quite dead. Yes, there might be some ways to still make money on it if you're dedicated and very lucky, but this party is over and the fallout/hangover is just starting.

If anything, I'd look at a residential property to buy and live in/hold and commercial property to invest in. That's just me though.

[Dantilla]

A few thoughts:

-My entire income is derived from real estate. Mostly income producing rentals, but I have successfully bought and sold a few fixers.

-I'm not interested in speculation. I'm not going to sit on a house and hope it goes up in value. No way.

-What I look for: Number one is it must be structurally sound. A house that is a bit scrappy looking, but has the potential for great curb appeal without major modifications. Just adding shutters, painting trim, freshening up the landscaping gets people to come inside and take a look. No gutting out walls. That takes too much time. I want to fix it up and sell. Not have a long construction project. Just new trim, refinishing floors new paint. Electrical and plumbing systems must be top-notch quality. I sleep well at night knowing I sell a high quality house.

About the market- As stated above, I haven't bought any houses the last couple years because the market has been too hot. Too difficult to get a bargain when everything is selling for over asking price before the sign gets stuck in the ground out front.

Now that the armchair quarterbacks are screaming you're too late, that's a good indicator to me that it's time to jump back into it. I can now look for a true bargain, and add value.

Yup. Add value.

Not wait for the market to increrase the value, but I'm going to go over there with my tools and add value. And have fun doing it.

[Nathans_Dad]

My $.02:

1). Don't listen to anyone talk about the real estate market who is from Kalifornia unless you live in Kalifornia. Their market is so wacked it has no bearing on the rest of the country. Talk about the land of haves and have nots... People there are mostly either insanely rich from flipping houses or bitter as hell because the market has gone up so much they have no chance of buying their own home unless they win the super tri-ball lottery.

2). As to the foreclosures. I can speak a little to this since the home I bought 4 years ago was a foreclosure. There are auctions for these I believe, although I bought mine on the standard market. We basically just lucked into ours, our agent took us to the house, which had been on the market for 1 day. The VA had foreclosed on the home about 2 years prior and had put some money into it to make it marketable. They replaced all the carpets, thoroughly cleaned the home, repainted all the walls and did some general repairs. The VA has a policy of a silent auction with their foreclosures, basically you submit your bid and whoever has the highest bid above their minimum price gets the house. We were one of 6 bids on the home after 2 days on the market. We won by $250 over our now next door neighbors who wanted to buy it to flip. We purchased the house for $156k (2500 sq feet) , which was about $20k below market price at the time, and have made a few improvements, minor things like water softener, refinishing the deck, outside landscaping, painting interior, and tiling in our bathroom floor. Our realtor says we should be able to list the house somewhere around $240k when we put it on the market in about 6 weeks.

[turbo6bar]

I'm pretty much a redneck version of Dantilla. While I am actively hunting for the deals, I have yet to find any good candidates for short-term rehab-to-retail action. I think the time is right to start looking for deals, but until ask prices drop, I will sit on my hands.

I'd like to jump into commercial, but the numbers aren't too hot, either.

Basically, I am short-term bearish and long-term bullish.

[kwm]

I agree that Cali is wacked and it needs to break off and float away.

POP where in the hell are you traveling in NC. to get this toothless stereotype you got off of the 70s movie Deliverance is just plain crap. I have lived here for 6 years now and all the toothless, (from meth use) mindless, tweaker, fools I have ever run across in life are in Cali so watch your stone throwing. Just because you set up a few dates on the Inet POP and are now upset b/c when you drove across country to meet them they were all toothless does not mean the whole state is that way or even close to that. I have lived in CA, went to college in IN and NC and now live here so I can speak much more intelligently that you regarding CA and NC. You know what they say that you don't know someone until you have lived with them the same applies to states or areas of the country. So yes please listen to Jim and stay the hell out of NC and spread your babble to everyone you know in CA so that they too believe it and don't move here as well. So like I said earlier, get back to blaming everything on Bush POP and stay off the "house flipping" threads.