It seems like every time I turn on the television there is a new "reality" show about real estate. There are a couple of shows that stand out as shows dealing with buying run-down properties, fixing them up and then selling them for a profit. If you haven't already guessed, I'm talking about Flip This House on A&E or Flip That House on TLC. Both of these are usually excellent entertainment as I find myself anxiously waiting to see if they are going to make the deadline or keep it under budget or how much money they make.
Notice I used the word "entertainment". That is because that's what they are. These shows should NOT be used as guides to investing in real estate. I talk to more and more people who say "I'd like to start investing in real estate". I normally respond with "Great. Real estate can be an excellent investment. Have you put together a plan or strategy yet?". Then I normally get "Plan? Well no, I haven't really thought about it." This is a problem.
Flipping houses is only one of the ways you can invest in real estate. There are numerous others. Flipping can be very rewarding if done correctly. One problem that we face here in Kentuckiana though, is that we don't live in the type of market they portray on TV. The money you put into a house here will not get the same return as it would in California or on the East Coast. I'm not saying opportunities don't exist here, because they do. There just aren't as many and you need to be very careful choosing which properties you're going to flip.
Flipping houses is a business, not a hobby. One thing the shows do portray is that the most of the people doing the flipping do this for a living. Well, the serious ones anyway. The first season of Flip This House featured a businessman in South Carolina, Richard Davis, of Trademark Properties. This is a full-time full service real estate company. Flipping houses is their business. It's what they do. They have a plan and a strategy.
As I said earlier, flipping houses can be very rewarding if done correctly. All I am asking is that you look past all the glitz and glamor (like Richard flying away in his helicopter) and focus on the reality, hard work.
Edit - Kaushik Sirkar wrote another blog that pertains to flipping and how the market has changed. Check it out.
Your Best Move for Southern Indiana Real Estate
Brett Mumaw REALTOR®
Semonin Realtors
3707 Charletown Rd. Suite 1A
New Albany, IN 47150
(812) 542-9057 Office
Hi Brett
Your are soooo right! I've only seen Flip This House Once and it was on a flight, yet from what little I did see, you are correct. And even in beautiful sunny so-cal, things have changed too. Not so sure this is the time to try to make a few bucks flipping, even in Hollywood.
BTW, I'm in the OC, but one of my friends (and colleague) lives right below the Hollywood sign. We see it driving up to her street.
Brett,
I know exactly what you mean. When I watch these shows it reminds me of a gardener who shows up in a liesure suit. I have made fixers flips and rehabs my Entire Real Estate career ( 18 + years ). The work is hard but can be very rewarding, both emotionally and monetarily.
Although most of what you see on these shows are really not all that practicle and they do tend to leave the viewer with visions of granduer. I think they do serve a purpose. Just like many other things that we encouter in our lives they put the seed in the soil and a few grow and sprout while others wither. I know as I meet hundreds of would be rehabbers each and every year that I have to make a quick assesment of will they be the ones or not.
Over the years I have seen a steady pattern. People who work on fixers have a pretty high burn out rate. Consequently I am always searching for people with talent vision who will make great clients.
Thanks to programs like Flip this house or even the old reruns of This Old House with Bob Villa are great breeding grounds for my future reahabbers.
It's a crazy thing. But, I love them. Don't think they paint a particularly positive image of real estate agents--but they are sometimes entertaining. And it's interesting to see other sales people in action.
p.s. How do you like my "Hollywood" style signage below?
Hi Brett:
Years ago I attended an NAR Conference in San Francisco and Ralph Roberts was one of the speakers who spoke about real estate agents who were not really in the business of real estate. He said that to truly be part of the business an agent should invest in properties. Now anyone who knows Ralph knows that he practices what he preaches. So armed with alot of practical knowledge I started to buy houses fix them up and sell them. I really enjoy it, it helps to increase the value of not only my properties but those neighbouring, and sometimes I make money.
Lynda - I think anytime is a good time to flip. I just think you better really know what you are doing or you could get hurt. I personally like the idea of rental properties. I think it is a great long-term investment.
Herb - I agree that it does plant the seed. Unfortunately, too many people go about the wrong way.
Kyle - I too love them. Not all of them. I can't stand House Hunters where everything always works out. THAT'S NOT REAL! - BTW, I do love your sign.
Denise - Great points about helping to improve the neighborhood. We're out to change the world! LOL :)
Elena - We're sick and twisted, that's all there is to it.
Flipping houses can be lucrative but you better be ready to bust some knuckles or shell-out cash to get the job done. Market shifts can damage a prospective flipper (can we call them dolphins) especially ones that are caught with multiple houses and no buyers. In the words of a wise acquaintance "have an exit strategy" ~ and from my view a back plan if all else fails.
G
Kaushik - It is hard for some people to understand that.
Rob - I'm a big fan of holding onto the properties, letting tenants pay your mortgage and then sell 15 or 20 years from now and have a nice little retirement package.
Marchel - We have pretty much identical markets and I have those same friends.
Glenda - Anyone that goes in with no plan is in a lot of trouble IMO.
Agree with you in these shows, Brett. I watched them one time and decided it was not worth my time. The Holloywood spin, unfortunately like so many things, makes it sound glamourous rather than the reality. If someone doesn;t have a plan, and money to deal with unforeseen issues, etc. then they are in for a big surpirse. and certainly in our market here in Southern California it probably ain't going to happen.
Jeff
There was a story on the 11:00 news tonight of a real estate broker buying his clients house in a different name and coercing the sellers to sign the contract. The price was $325,000 for a house in Queens, NY. The real estate agent was looking to flip it for a quick buck, house appraised for $410,000 Sellers were not desparate or were in no rush, they were just uninformed by a shuyster. Did I spell that right?
Just what we need, the NY news showing an agent doing dirty. Then again, it makes it that much easier for the ethical brokers to shine.
Brett,
Boy, did you hit the nail on the head. Flipping is protrayed as a "no brainer" on those shows.
You notice they never show how long it takes to locate a suitable property, negotiate, and close. They only show the rehab...that's the easy part. They also don't factor the time involved. As John C. Reed says, the average real estate investor who makes $20K on a flip after they divide that by the number of hours put in would make more money per hour working at McDonalds....
Sad but true in many cases...
Rob K Blake
I saw an episode of a show (don't remember the name) of a home with hidden cameras in an open house. This way the sellers would know what the buyers were saying when nobody was watching. The host sits the homeowners down, cues up the video and says, "Now, let's see how bad your REALTOR was lying to you."
It makes my blood boil just typing it. Like we, the REALTORS, enjoy peddling someone's DATED, DIRTY or OVERPRICED home. They seem to forget that while it is NOT SELLING we are still writing checks for MARKETING.
The best thing that the "flipping" craze has done is improve our housing stock. Without rehabs, housing slowly falls apart from lack of maintenance especially in urban areas. Flipping has caused thousands of would be investors to donate their sweat equity to improving America's housing stock.
Sure they could make a profit. And sure they could lose money too like any investment in the real world.
I say keep the flippers coming
I have been thinking about flipping houses but the only problem I have seen is that the one that generall gets rich is the repairman. It's tough to find a good repairman who will work hard and do the work you contracting him to do. It seems like there are always unexpected bills that eat awy at your profits.
Wow - Great responses everybody.
Ryan - You nailed it. 1 hour. Think about that. And it's not even an hour with all the commercials and then they also have a section of the show that has nothing to do with the flip. So I would say 40 minutes of a process that takes months to accomplish.
Jeff - Anyone without a plan or a strategy is just asking for trouble.
Timothy - Sounds like someone needs some time to think about it behind bars.
Rob - You brought up another excellent point. The guys at Trademark have been doing this for years and probably have it down to a science. Why don't they do a show with the "average" flippers and show the frustrations they go through.
Chris - I think that one is "Sell This House". I crack up every time I watch it. #1) They always portray the Realtor as the bad guy who has to come in and tell them how bad their house is. #2) Everything ALWAYS works out so nicely for the sellers. Of course, I guess they wouldn't show the properties that it didn't work out. I'd like to know what they tell those people.
Steve - That is an interesting point. I'm sure the inventory has improved...assuming they put in quality work.
Dale - Your best bet is to learn to do as much of the work yourself as you can. When first starting out, you probably won't have the money needed to hire contractors for everything.
Dwayne - I don't know if a lot of people forget. I think a lot of them didn't know in the first place.
Carole - That is pretty much the same as here. I personally like the shows. I think they are very "entertaining"! LOL!
I'm in total agreement with Steve. If a house is getting a 'rehab' and someone buys it and now has THEIR dream....it can only be a good thing.
As to this blog's premise....yip, it should be treated like a business, some people should NOT be 'investing' because they are so blind.
I have had several potnetial buyers lately that want me to call them if I have a house come on the market that they can spend "a little money and work" and "make a lot of money". I think it comes from watching too much tv.
Judi
Rob - I wish everyone would buy a run down house and fix it up. Not only would it improve our market, but they would be extremely happy 5 to 10 years from now when they find out how much their work paid off.
Judi - That's how you weed out the ones who aren't serious. The "if you ever see a really good deal, let me know" people. Sure I will.