House flipping $$$$

[berettafan]

1- Only buy properties that can be rented for enough to cover the mtg.

2- Only buy structurally sound houses.

3- Accept that there may not be any houses in your area worth buying at the moment.

4- Be willing and ABLE to do most of the work yourself. Or know some Mexicans who work cheap.

5- Understand that auctions are not a guarantee of a good price. Many auctions in my area are NOT foreclosures or estates. They are situations where the owner does not want a prolonged negotiation process (lots of possible reasons for that) to get the highest dollar.

6- Understand that you are putting yourself at risk by owning a home somone else will be looking at/renting. If a ceiling collapses......

[gr8fl4porsche]

1. It's never too late.
2. If you buy a house, put value into it in the form of repairs and improvements and then resell, you are rehabbing not flipping. Flipping something involves buying at below market value and reselling for market value without any improvements. Anytime you have 'value added' it is called business. Rehabbing is hard work and you need cheap dependable help. Good luck finding competent contractors who work cheap.
3. A flip involves buying the property, holding it for an undetermined amount of time and reselling it for a profit. Flips only work when the market is skyrocketing or you come across a great deal that noone else knows about.

[azasadny]

Randy,

Good point. I don't know any "flippers", just "rehabbers" and it is tough work. If you put a dollar value on the time you spend doing the rehab labor, what does that do to your "profit"? We renovated our own home and it was hard as hell to come hoem from work every day to work all evening long on the house project and spend all day on the weekends doing back-breaking work. For 18 months, I never had a day off... How many hours I put in, I'll never know, nor do I want to.

[kwm]

Thanks for pointing out the difference between flipping and rehabbing. I agree with your definition. I see it like this, rehabbing is a much better investment for me than buying and selling stocks or a similar investment ops. for many reasons. One of which is that I know nothing at all about stocks and they can not hold my interest when I do try to learn about them. I am a DIY like many on this BBS. I have good tools, am VERY budget minded (ok a tightass is more exact), I have no children yet so I have free time, a strong back, a helluva work ethic, and since I sit at a desk all day I have energy to burn and like manual labor (as a hobby). I also have a buddy who works for a family owned mortgage/real estate company who is willing to list for me for free, not charge me realtor costs, provide me his home inspector at cost, his handyman at a discount, and help me get the best mortgage all on my first rehab then we strike a business agreement on rehabs going forward. I think many people just like to piss on a guy’s parade. I think it will work out and if it doesn't hey I tried and I at least own another home (I am not going to buy a house whose mortgage is more than I can afford to pay in addition to my present mortgage). To the CA guys on here.... when you live in an area with normal market values you don't have to work just to pay a mortgage and have the luxury of things like a $900 a month mortgage payment.

[turbo6bar]

At the risk of pissing on your parade, dirt I've heard and read from other investors is don't partner up unless you absolutely must. Make sure your goals, needs, and personalities match. This isn't TV. You can't just flip the channel.

Best of luck to you,
jurgen

[kwm]

Very true. I am a loner and if I can do it myself I always do. I am kinda in a rock and a hard place too b/c if I accept his services on the frist project I would then feel very obligated to bring him in if there is a 2nd, 3rd, etc...

[turbo6bar]

Exactly. Pay him for his services and maintain your freedom.

Nevertheless, if you do decide to partner, make a contract.

[Dantilla]

Many friends may think you're doing something dumb. I got some unexpected resistance when I bought my first fixer. This was way before the boom when everybody's uncle and step kids started in. Lots of "what if?" questions, all of them pointing out possible pitfalls.

Wealthy people (or people who will end up wealthy) tend to see opportunity.

Most people tend to see obsticles.

The best way to predict your future is to create it.

[cantdrv55]

Originally posted by Dantilla
Wealthy people (or people who will end up wealthy) tend to see opportunity.

Most people tend to see obsticles.

The best way to predict your future is to create it.

So very true.

[Grezdlitn]

Really interesting thread. I can't speak to the real estate market as a whole but I've been flipping/rehabbing/investing in the Dallas area for 25 + years and feel as though I've been fairly successful.
After all I do own a 81 911 SC ( ).

The proliferation of shows about flipping is amazing and I admit I do watch them, looking for ideas. However they are intended for entertainment and the real guts have been edited out . They make this business look pretty glamorous. It can be a lot of fun but it still involves much hard work.

Regardless of the market there are still deals around every corner.
Just like barn finds you have to be in the right place at the right time having done your homework and be capable of buying when that deal presents itself. For every project I purchase I figure I have chased down at least twenty others.

Some of the largest effects to the bottom line are how hard your willing to work at it. I do most of the repair and rehab myself with
a few key subs that I have come to rely on over the years. You have to work fast and the property must be perfect in every respect or the potential buyers will pick it to death.

I could write a book on this subject but my coffee has gotten cold!
Gotta get a refill.

[john70t]

In the long term, housing will continue to follow the rules of supply and demand: as long as there are people looking for a bed to rest their heads there will be tenants and purchasers.
Another attraction is that a property may lose a quarter of it's value over a decade, but a stock can lose all overnight.

This "dip" is a natural following of the inflated prices (read: pyrimid-scheme) propped up by the allowance of falsified loans, risky ARMs structures, changing loan-transfering, and the consumers' "buy now, pay later" mentality of HELOCs/etc. All of this was created with the blessing of the Fed and Fannie Mae and seems very short sighted, but then again mabye that's the only way the economy works. We'll see.


O.k. Worst-case senario: 10 years into the future, jobs are all overseas, gas is $10/gal, unemployment at 15%, big time inflation.
Does the price of property continue to rise as housing follows the value of the dollar?

[Dantilla]

Originally posted by Grezdlitn
Just like barn finds you have to be in the right place at the right time having done your homework and be capable of buying when that deal presents itself. For every project I purchase I figure I have chased down at least twenty others.

+1. Every house I look at is good market research. It has never been a waste of time to drop what I'm doing and run across town to check out something that just came on the market, even though the 1:20 ratio is spot on.

Time for coffee.......

[Dantilla]

I think the difference is that real estate became the latest fad with the speculators that buy Ferraris, gold coins, stocks, whatever the flavor of the month is. Now the real estate fad is over, and the speculators are looking for the next "hot" thing.

The guys who are real estate professionals stick with the one thing they know, and do it well, no matter what the present market conditions.

[turbo6bar]

As I said before, now is not a good time to be rehabbing and flipping, but it doesn't mean now is not a good time to start an education. kwm seems to have the right mix to make it work.

The data indicates the number of distressed properties will grow over the next few years, and that's about the time kwm gets his ducktails in a row.

[kwm]

Has anyone ever read any of the books on this topic? I have read the book from the Dummies series about it and I am getting Kristen Kemp's book shortly. The Flipping for Dummies seemed very thorough to me. If you have read any of them what did you think and can you recommend a title for me? My biggest fear in this is that since I am a Workout Officer for a bank is that I have created so much bad karma and worked so many foreclosure accounts that through some twisted form of fait I will end up running this project into foreclosure myself. Man that would suck!

[RoninLB]

Vacant Homes
For Sale Cloud
Economic Hopes

Data Pointing to Glut
Are Worst in Decades;
Impact of Speculators



By MICHAEL CORKERY
WSJ, February 5, 2007; Page A1

Amid brightening hopes that the U.S. housing market is stabilizing, some economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate.

That figure, an often-overlooked measure of how many homes for sale in the country are empty, has climbed to its highest level since the Census Bureau began tracking it four decades ago. Last week, the bureau said that in the final three months of 2006 there were about 2.1 million vacant homes for sale.

That brought the national homeowner vacancy rate to 2.7%, up from 2.0% a year earlier. Before 2006, the number had never risen above 2.0%. Like the housing economy more broadly, the measure varies by region: The South had a homeowner vacancy rate of 3.0%, the Midwest had a rate of 2.9%, the West had a 2.4% rate and the Northeast had a rate of 2.0%.


The report, which usually gets little attention, sparked fresh concerns about the housing market. Goldman Sachs economist Jan Hatzius concluded in a report last Monday that rising vacancies signal that excess housing supply continues to grow -- and that new construction has to decline further this year, even after a 13% decline in new home starts in 2006.

Meantime, J.P. Morgan economist Haseeb Ahmed said the overhang of vacant housing stock could erode existing home values as sellers slash prices to move their vacant properties. Economists fear that many vacant homes are owned by speculators who are stuck with investment properties that they can't sell and may be under increasing pressure to drop their prices. "We are concerned that there could be downward pressure on prices for awhile," Mr. Ahmed says.

Such worries could cloud hopes for a swift housing rebound. Those hopes have been bolstered recently by signs that the market may be stabilizing. Sales, which fell sharply through much of last year, have leveled off in many metropolitan areas and mortgage applications have been rising.


etc etc

[Porsche-O-Phile]

I wonder how much of that is attributable to people buying second, third or fourth homes. . .

It's odd how some (a lot!) of people can somehow afford to do that while so many others can't afford a FIRST! Very odd. The market still seems great only for people that already own, IMO. The situation for first-time buyers is still pretty lousy. Prices are still very high and lending standards are starting to tighten a bit. Maybe I'll just save a couple of grand and go try and buy a foreclosure on the courthouse steps one of these days. . . But I still think the markets have a long way to fall.

[RoninLB]

from above article and snipped



Mr. Ahmed of J.P. Morgan says the homeowner vacancy rate calculates vacant homes that are residential year-round, and is supposed to exclude homes that are used occasionally as vacation homes, which have been growing in number in recent years. He says it's possible the vacancy rate may have captured some of these seasonal properties inadvertently. The high vacancy rate also may have been affected by the active 2005 hurricane season that forced residents to flee the Gulf Coast.......



.........The vacancy indicator may help distinguish between the sellers who have casually listed their house on the market to see what price they can fetch, versus sellers who are under real pressure to sell. The owner of a vacant home -- who may be squeezed by mortgage payments for the vacant home as well as a current residence -- could be more willing to drop the price to minimize the cost, than a homeowner who lives in the home and doesn't have to sell..........



.........Many economists agree, however, that rising vacancies have likely been fueled by a group that is proving to be the wild card of this housing market: speculators. During the boom, they flooded the market and flipped homes for a profit. When sales slowed, speculators were stuck with vacant homes that have lingered on the market.

There's no doubt speculators had a major impact, but their numbers have been difficult to quantify. The recent vacancy data may be a useful measure of speculative activity and its fallout.

"I think a persuasive case can be made that the reason we are seeing such extraordinarily excessive vacancy is because of the heavy investor demand over the past few years," said Richard DeKaser, chief economist at National City Corp.

What's troubling is that speculators may not act like typical home sellers. When they sell their vacant home in a down market, they don't necessarily purchase another home. By contrast, people selling the homes they live in will most often buy another house -- thus fueling a healthy market of buying and selling.

Not surprisingly, buildings with five or more units -- which include condos that were magnets for speculators -- had the highest rate of vacancy. The vacancy rate among these units rose to 11% in the fourth quarter from 7% in the first quarter. For single-family homes, the vacancy rate rose to 2.3% in the fourth quarter from 1.8% in the first quarter.

Mr. Hatzius expects homeowner vacancies will slow, as builders cut back on production and owners convert their units to rentals to take advantage of rising rents. But then again, the housing market has been full of surprises.

"This whole thing has been new," says Mr. Seiders, the National Association of Home Builders' economist. "We've never seen this kind of investor activity and we've never seen this kind of [vacancy] resale. It's an extra complication moving forward."

[turbo6bar]

National Mortgage News creates several newsletters each week. The weekend newsletter, http://www.nationalmortgagenews.com/columns/hearing/ discusses the changing lending market, which has undergone massive changes in the past few weeks.

Just how bad was the loan underwriting at Mortgage Lenders Network? One servicing official who worked there told us the privately held non-depository funded a "a ton of bad loans." He said underwriting was so poor that a 27-year old who claimed to be making $14,000 per month was approved for a $500,000 mortgage on a stated-income loan. The mortgage is now in default. For the full story and an update on MLN's woes read Monday's National Mortgage News.

If stories like this are admitted in public, what type of evil stuff goes on behind locked doors?

You can't possibly compete with this stuff, PoP. Sit back and watch others take the ride.

re: owner-occupied vacancy rate. This last quarter was a record high (records began in 1959), and rental vacancy rate hit a record high about 3 quarters ago and has receded a bit. The combination means we need more household formation and less new construction. Sure, we could hit new record highs, but the underlying, fundamental issue must eventually be resolved.

[RoninLB]