I’ve watched a few episodes of this show on Discovery Home. Each show they feature a somewhat inexperienced person who buys a small beat up house in the LA area for around 350 – 450k. They put 50 – 60k into it and at the end of the show a realtor prices the house for resale. The price is around 600 – 700k, giving them around 200k profit for about 4 – 6 mo. work. They always just do the cosmetic stuff, new kitchen, bath , paint, floors, landscape. Never talk about mechanicals, roof, etc. Is this really possible?
Around here in Chicago, you can find fixer uppers for 350k, but if you update it and don’t add on any space, it will be worth maybe 450k. Maybe I need to move?
Replies
I once saw a road runner that would outsmart a coyote on TV too. It's good entertainment but I'm putting my money on the coyote that's smart enough to order from the ACME catalog.
When we lived in the Bay Area we looked and looked for a fixer with any kind of upside. We never found one. If it were that easy everyone would be doing it.
"When we lived in the Bay Area we looked and looked for a fixer with any kind of upside. We never found one. If it were that easy everyone would be doing it."Exactly,
People in these situations often succede despite themselves. Often it's a matter of a number of variables that happen to fall into their favor. Rarely is the person who actually understands what's going on and how fortunate or lucky they are.
For the last few years you could have sat on any piece of RE in the LA area and made $100K doing nothing.
House I sold in Costa Mesa CA has gone up $200K since I sold it less than 2 years ago. And we walked away smiling then.
My
Joe H
Sitting on it 2 years and flipping it are two different things. I've known people to buy, fix, and sell without ever having to make the first payment. The day of closing they bring in the floor sanders, the carpetlayers, the painters, the cheap cabinets, the roofers, and the guy to build a little deck and throw in some landscaping. 15 days later it's back on the market.
If there's a gas leak in the crawl space, a sewer lateral about to fail, massive dryrot under the toilet and tub, old gav pipe that's 75% clogged, an electrical panel with (4) 15 amp fuses, buried j-boxes, and no insulation... that stuff's still there for the new owner.
These shows really bug me. There's a right way to do things, and a wrong way... sometimes you can do it the wrong way and still get lucky. But if they really wanted to do reality, let's see an episode where someone mortgages all of the equity out of their existing home to buy a fixer, buys without an inspection due to the "hot" market and competition from other potential flippers, starts in on the improvements, only to discover hidden foundation problems and significant structural damage from recurring roof leaks... it finally gets done 80k over budget and four months late, and they can't get the pricing they need to pay off the huge mortgage they took out to finance the flip.... and all of a sudden it's bankruptcy time. I'd watch that.
that same house here is 70 k but you can buy it, built brand new with property for 110k.. 2+3=7
Edited 12/24/2005 3:43 pm by brownbagg
"If there's a gas leak in the crawl space, a sewer lateral about to fail, massive dryrot under the toilet and tub, old gav pipe that's 75% clogged, an electrical panel with (4) 15 amp fuses, buried j-boxes, and no insulation... that stuff's still there for the new owner."How do they get away with reselling it with code compliance issues? Same as the first seller, by escrowing money to fix them? Some places won't allow the sale to commence with code issues.
"I cut this piece four times and it's still too short."
Hey, where in Southern Utah you at? I've spent quite a bit of time in the Escalante area hiking, and riding in Moab.
Dave, I'm south of Cedar City looking out at a valley that is slowly sprouting houses.
Joe H
How do you like Cedar City?
We swung thru the Colorado Plateau country this autumn and loved it. Did not recognize St. George from years back. Moab - like the setting, but it is not there yet in real estate. Too many single and double wides. Found the gentry down in Spanish Valley, S. of town.
Did not get to Cedar City. Went cross-lots via Zion and Escalante. Love to sell this condo and get out of CA with $$$, but the winter here is so fine. Shorts, 5 hours of heating for the season, etc.The ToolBear
"Never met a man who couldn't teach me something." Anon.
Cedar City is a nice town, growing though.
Moab - like the setting, but it is not there yet in real estate. Too many single and double wides. Found the gentry down in Spanish Valley, S. of town.
I bought out of town, I left the gentry in Southern Cal. That was the whole point.
Joe H
I there there is a different mechanism going on in Atlanta. Unless it is in the Buckhead area of Atlanta, they do not renovate to flip, they simply buy the 1/2 acre and put two or three homes on it after knocking down the original house. Land is worth a lot more than buildings, including renovated buildings.
And while television shows like Flip That House does exist, I doubt its anywhere near as successful in the number of instances for the magnitude to make everyone get off their butts and do it. If it were, human greed would have made that apparent already. I think its easier to buy, sit on, and resell a home in markets like California, D.C., etc. than it is to expect a rapid uber-profit 8-weeks down the road.
Of course, I could be 100% wrong but then I'll leave it up to someone else to prove me wrong with their easily made millions of dollars doing this. Now, the foreclosure aspect is done bigtime in Georgia. Several families have grown from newbies to holding large sums of money on the court steps ready to buy, and outbid, and newbie to the game.
AS a newbie to Atlanta i wa at first really disappointed to see how many homes here are just torn down...but really after looking closely I think that 85% of what is torn down should be torn down. From the 70's ranches with no imagination in Buckhead and Sandy Springs to the in town houses that have been neglected for 50 years, it really is a boom to Atlanta to be building so many new homes in place of old homes.
Chris
The reason for the building "boom" in Atlanta and other hot markets is the availability of cheap financing, and that sop is about to go away for marginal buyers and RE investors. Many of those wacky interest-only and negative amortization loans are coming up for reset starting this Summer, so look for the fireworks to start around the 4th of July. I suspect it will be a big campaign issue in the '06 elections as these fools whine to Congress for help in paying their much higher mortgage bills.
Seems like Atlanta is at a loss for middle class people who want a nice quiet place to live...either drive forever through ungodly traffic OR pay through the nose for an intown house with Marginal schools.
Should be interesting to see how Atlanta changes over the next few years.
Chris
@@ ... the gentry are coming...
Looking at St. George with all those golf courses, I think the gentry are moving up the freeway. Seen this happen in the centeral coast of CA. Paso Robles, which used to be nothing, now is El Paso de Robles and the storage facilities offer wine cooler space.
They tried that name magic in Costa Mesa, CA - "Costa Mesa sur Mer" - but the laughing was so loud... The locals call it Costa Mexico.
Be prepared, start planting your borders and such. Remember one guy in Bellevue, WA. Home backed to a nice patch of woods. One morning the woods went away and a home appeared shortly thereafter.
The ToolBear
"Never met a man who couldn't teach me something." Anon.
i like what they tried to do in west pitsburgh, the suburban community east of san francisco, when the new development started they wanted to get rid of the bad connotations with the name of pitsburgh, so they decided to name the new community "baypoint" but it didn't work cause all the locals just refer to it as "gunpoint"
I enjoyed the show called flip this house when they got caught renovating a home and did not have any permits.Sounds like something I would do..++++++++++++++++
-Do the thing you fear and the death of fear is certain-
It's also known as buying equity. Basically getting more than you paid for simply put. Or at least buying the potential.
Foreclosures are another. It depends on the market.
Hot markets you will be hard pressed to find this goldem goose. Markets where properties like that are available, you are not going to see the phenomonal returns. And from my experience, I'd say the scouting, financing and rehab of these structures will be a full time job.
Quick buck, yeah right. Put on yer pimp hat and stand on the corner.
I hate those stupid "reality" shows.
And, I hate the term "flip". What the hell are you flipping anyway?
Maybe next post I'll tell ya how I really feel.
Eric
[email protected]
It's Never Too Late To Become What You Might Have Been
I hate that term "flip," too. Sounds cavalier and, from what I've seen in practice, a lot of shortcuts and lower line materials, ie., cheap cabinetry, doors, locksets, trim carpet, fixtures, etc.
I've seen some classic old houses, admittedly in need of help, be turned into little more (from a construction aspect) than cheaply appointed tract homes.
Something interesting to me..............I've seen a few older homes, good bones kinda thing, lovinly restored and sold, or rented.
Looks like some top shelf work too, not just a buff and fluff. I can only assume that someone made a profit.
Just can't stand that whole mentality of so called flipping. It's cheap and lacks integrity.[email protected]
It's Never Too Late To Become What You Might Have Been
I've seen some lovely restorations, too, but I doubt the kind of effort and craftsmanship put into them start to finish would inspire the term "flipping" for those invested in the project.
Eric, you're over-reacting to the term "flip". Flipping means that you don't intend to live in it, or rent it out. Some people flip the homes without ever doing anything. Some people do quality reconstructions and then flip them.
Of course, the people dealing with junk properties do as little as possible, but not every property is junk and sometimes the flippers are pulling out formica and putting in marble. It all depends on the market.
blue
Just don't like the term; sounds cheap.[email protected]
It's Never Too Late To Become What You Might Have Been
As Dave says in post #3, it happens on TV, especially late night infomercials.
Reality is, fixers sell for market value. The fixer that is half price doesn't exist in those hot market areas for more than a nano-second.
Joe H
there is another set of flip this house on the east coast, trademark properties is the company that buys homes from auctions, re-models them in record time with huge crews of subcontractors, and sells them at profit. very interesting, but i am sceptical.
i recently moved from the west to the east because i thought the real estate bubble was hissing in california, in jan of 05 i read in the bakersfield ca newspaper a story about a couple who had sold their starter home for 275 K and bought in an "upscale neighborhood" (this is a joke to anyone who has ever seen bakersfield)closing in jul 04 for 350 K. by jan 05 the property had appreciated to 450 K, and a local realtor commented that if listed it would probably be gone in a week.
i myself sold a buildable lot in central ca before moving for 90 K. it was on market less than 36 hrs before we had a signed full price offer in hand, and we had purchased the lot 10 months earlier for 35 K.
my point is that during that hot of a market you can make incredible money by not doing anything, and if you upgrade a little then even moreso. i also read some amazing statistics on the amount of interest only loans in cali. everyone is way overextended, getting their name on as many pieces of property as possible. if and when it starts to go south it could get ugly. thats why my family and i decided to trade our equity in california for equity in what i think is still undervalued coastal southeastern north carolina.......hurricane smuricane, at least we get a warning unlike the earthquakes
great move Sequndo...Many moons ago i lived in the lovely city of stockton. What a horror story. Crime, no jobs expensive homes, overextended public sevices..on and on. Brother was a detective and the criminals had the balls to steal his car twice.
Moved to Kentucky(lexington area) We have 1700 modest square feet home, huge shop..safe schools and minimal commute..for 98 grand(1990) No brainer. stinky
Like trading in anything, you make the money on the buy and sell at market.
The awful thing is that beauty is mysterious as well as terrible. God and the devil are fighting there, and the battlefield is the heart of man.- Fyodor Dostoyevski
Howdy neighbor! I am just down the road outside of Richmond. Work almost daily in LEX and nearby area. Drop a line and we'll do a coffee break some time.
[email protected]
Hi Sphere, I believe I have seen your trucks-truck sign...sent you an e-mail but I seem to have these e-mail failures popping up. Nice to see fellow Kentuckians on this board will be in-touch. stinky
My "Truck" is a 90ess GMC Safari KY BLUE...no signage...look for a ladder going sideways off the top, and a lot of front brake dust off the calipers, then ya found me.
OK....you can't come in.....gimme a shot at yer email
?????????????
Edited 1/5/2006 1:03 am ET by Sphere
Try again . I may have mistyped
[email protected]
More drama on the show I watched last night. Someone was stealing tools from the job site. Two of them sat up all night in a pickup truck, drinking beer, with the light on and holding a shotgun. When someone was spotted inside the house, the shotgun was nowhere to be found. This was a made up story just to add drama.You get out of life what you put into it......minus taxes.
Marv
"Flip This House" has had some classic episodes. Like the one last week where they used furniture dollies, a riding lawn mower, and brute force to move a dumpster out of the garage, the dumpster slid down the driveway, totalling one of the contractor's cars.Renaissance Restorations LLCVictorian Home Restoration Serviceshttp://www.renaissancerestorations.com
I saw that one,too. Couldn't believe my eyes.
For a company that's supposed to be flipping as a business, they seem to do a lot of foolish things. I like it when they're surprised about the (various ) termite infestations. Haven't they figured out they're in the South?
Around these parts (at least to me) the term "flipping" has an illegal connotation. Here's the scam in a nut shell: 1. "Invester" #1 buys a run down shack in a slum neighborhood.2. "Invester" #2 is anyone able to get a loan. He buys the house, usually the same day, for a substantial amount more than #1 paid.3. The appraisal from a friendy appraiser assures the bank they are protected.4. #2 never makes a payment and the bank is stuck with a house worth much less than the phoney appraisal.Of course #1 knows #2 and pays them for the services of using them to get the bad loan. Usually #1 gives them the down payment too. The appraiser also is in cahoots with #1.See, that stuff on "The Saprano's" isn't that far fetched!Stu
Maybe it's called flipping because they dont give a flip about the future buyer, just making money.
Here in kansas there are many older houses that are either outdated or in need of repairs. There are many older houses that have never had a kitchen or bathroom remodel.They leave on an old roof until it leaks and the plaster falls off the ceiling. That's the signal it's time to get the roof repaired.Many people simply could not afford to have their homes professionally repaired over the years and now they are in poor condition.These houses need a lot of work and go up for sale and they sell everyday for about 10 to 20% under retail. An older 3 bedroom home in good condition will sell for 90 to 100 K and the fixer upper will sell for 80$. An investor cannot buy the home for $80, repair it, and then make a profit. The numbers don't work. It's difficult or impossible to buy fixer uppers, completely go through the home and do high quality work, and yet be able to make a profit. The numbers just don't work..++++++++++++++++
-Do the thing you fear and the death of fear is certain-
It's difficult or impossible to buy fixer uppers, completely go through the home and do high quality work, and yet be able to make a profit. The numbers just don't work.
That nails it here . Thatas why looking for them is the key to the business. Sometimes you find a home with nothi9ng wrong with it below market and dont have to do any work. Crazy sometimes.
Tim
Stu - I don't know about your area, but here the banks hire the appraisers - just to protect against that sort of stuff.
One of my friends/clients tried to use his own appraiser on an equity loan - just to avoid the long wait and speed things up. Bank wouldn't touch it until they sent out their own guy.
Don K.
EJG Homes Renovations - New Construction - Rentals
"One of my friends/clients tried to use his own appraiser on an equity loan - just to avoid the long wait and speed things up. Bank wouldn't touch it until they sent out their own guy."
Yea and your friends paid the bill not the banker. Its funny how we have to pay the bankers guy instead of our guy.
Both hold a license in that state so how legally can they discriminate? I dont think they can .
Tim
I supervised the rebuilding of a couple of "slum" houses for Habitat for Humanity that became available from exactly the scheme you described. It is amazing that there are bankers that will make loans on unseen, uninspected properties. The operator involved in the scam in my community did some serious time in the Federal pen.
Thank you for the post. Someone I know from high school is up on charges from this type of scam. I really love the poster that has never heard of this so he tries to blow holes in the story by saying the bank hires the appraiser so this does not happen. Where there is a will (and a lot of money) theres a way!Stu
"Flip This House" has had some classic episodes. Like the one last week where they used furniture dollies, a riding lawn mower, and brute force to move a dumpster out of the garage, the dumpster slid down the driveway, totalling one of the contractor's cars.
That one is on right now. But, no matter how bad it gets, we'll keep watching so long as the Office manager type woman keeps wearing those low cut blouses
the dumpster slid down the driveway, totalling one of the contractor's cars.
75% of these shows are just for the drama. You don't think they would really park a junker at the end of the driveway and put a dumpster in a steep incline by accident .....do you?
They make situations up just so the show won't be boaring.....like setting a 2 week deadline. Give me a break. The deal isn't going to go south just because they take a couple of extra days to complete a job.You get out of life what you put into it......minus taxes.
Marv
I think you all are missing something important here, becuase of being building pros. Most people are terrified of having to fix anything and will turn down a good deal on a house because of it. Also most people, and women in particular, have no confidence in their ability to decorate so if they don't like the wall color or don't like the rug, they'll pass the house by unless it's a desperate to buy situation. If you watch the
recorate type house shows like 'Sell This House(A&E)' or 'Design to Sell(HGTV)' you'll see that a good part of any profit is NOT in the 'fixing' or 'renovating' areas that you are used to, but in new faux finishes, great looking tile, rearranging the bathroom or kitchen to look better, taking down walls, and all the other things that make a house LOOK special. Notice that "flip xx ' is big on landscaping. redoing kits, and removing walls. Also they don't alway make money, don't forget the multimillion house on the water that they are still using as a vacation place because they can't sell it at a profit.
One of the mistakes I see investors make is not understanding that each and every house has a top end or max out price. A brick three bedroom one bath one car no basement 1250 sq feet home will only sell for so much. In my area these homes top out at 90 to 100 K.I've watched investors wrongly assume that if they go a step beyond and spend a fortune on a total remodel, new electrical, new heat and air, new driveway, new roof, and a gorgeous bathroom and kitchen with granite countertops, stainless steel appliances, etc and they think they can sell the above described home for say $125.Everyone looks at the house, it's beautiful, it could be featured in a magazine but the reality is at that price the buyer can purchase an average home with two car garage and a basement. Just an opinion..++++++++++++++++
-Do the thing you fear and the death of fear is certain-
I think you all are missing something important here,
I think you are missing my point.....Many of the things that happen in these shows are staged.....they make up this stuff to add drama.You get out of life what you put into it......minus taxes.
Marv
'think you are missing my point.....Many of the things that happen in these shows are staged.....they make up this stuff to add drama.'I didn't miss your point Marv I just don't agree with it - after watching the show for a whole season I think these people are more than stupid enough to prvide the great footage without staging. After all these are the same people that gutted a house the boss just wanted painted.
Real estate obsession reflected on the tubeScenes of hunting and flipping flicker across screens
By TERESA WILTZWashington Post
This, people, is how you know the fearsome bubble is finally bursting (as if the moss growing on your neighbor's For Sale sign weren't enough of a clue): We're finally left with nothing to do but watch.
This collective lust for landholding, this national pang for property, has morphed into a strange new obsession. Instead of shopping for a house, we've taken to camping out in front of the telly, watching other people on the prowl for a place: House Hunters and What You Get for the Money on HGTV. Location, Location, Location on BBC America.
For a change of pace, we watch other people trying to get rid of their homes: HGTV's Designed to Sell and A&E's Sell This House and Flip This House (not to be confused with TLC's Flip That House). The Discovery Home Channel's Double Agents pits two Realtors against each other. For the truly desperate, there's Buy Me, HGTV's 30-minute cinéma vérité excursion into the addled brain of the distraught homeowner trying to unload a money pit, and quick.
These shows "are not really for people that are going to buy and sell a home," says Jeffrey Sconce, associate professor at Northwestern University's screen cultures program. "They're for people who have a fantasy of buying and selling a home."
Most Americans — almost 70 percent — are homeowners. "Everybody's bought in," Corcoran says, "everybody's in the parade. ... With so many people bragging at cocktail parties or at church how much their properties have gone up," it was just a matter of time before we'd see our personal obsession played out on the little screen, says Corcoran, who has her own real estate television show in the works. Especially now that we can't brag so much anymore and are praying to hold on to that equity.
Plus, watching others suffer can be so darn compelling. Maybe this isn't destination TV — most shows air during prime time and are repeated during the week — but if you're surfing and happen to settle on one of them, it's hard not to get sucked in.
The brother drove in from California. My guess is he needed a carrot to persuade him to come. It must have gone something like this:East Coast Bro.: Man, I need someone out here I can trust. I just fired my last PM. Come on bro. Help me out. If I don't find someone I might loose this show.West Coast Bro.: Hey man. No can do. Don't even think my car will make it that far.ECB: If you make it here and help me out, I'll figure out a way to get you a new car. I need one too so we'll work out a deal with a friend of mine at the dealership. He loves me!WCB: Are you telling me that you are going to buy me a new car if I come out there AND pay me a salary?ECB: Well no. Not exactly. You'll be on Trademark's payroll because the show pays me a % for every employee I have, but I think I know a way for the show to pay for a car for you. They have an incredible insurance policy. It covers everything.WCB: Cool man. I'll be out there within the week. Say Hi to Mom for me.(Click)ECB: Mary! That house on Shore Dr. is on a hill, right?...Think about it. If the carting company put the container in the garage wouldn't you first call to ask why and let off some steam if you were stupid enough to not know why anyway?Who parks anything with wheels on an incline without brakes?Did you notice that they pushed it out of the garage rather than pull it? The landscape guy even had some difficulty getting behind it.Total theater. The show may have paid for the replacement car out of their budget for the fleet of cars they use on and off the show.Frankie
There he goes—one of God's own prototypes—a high powered mutant of some kind never even considered for mass production. Too weird to live and too rare to die.—Hunter S. Thompson
from Fear And Loathing In Las Vegas
I have family in Santa Barbara.. they decided to sell (nice house) and the realtor put a sign up on their lawn.Ten minutes later there was a knock on the door, and someone who had been looking at a house further down the street walked in, saw their house, and decided to buy it on the spot. sign came right down, too, since the dirt hadn't even set yet.I think that's gotta be some kind of record.-------------------------------------
-=Northeast Radiant Technology=-
Radiant Design, Consultation, Parts Supply
http://www.NRTradiant.com
I've watched a bunch of those shows.
I keep thinking that if a bunch of idiots like those HOs can do it, then someone with a reasonable amount of construction experience should be able to do better.
So far I haven't succumbed to temptation. Who knows how long I may hold out?
I have the temptation, too - and probably know much less than you.
But the problem is if you have the predisposition to do it the right way, it's not 10% of the purchase price on renovation but 20, 30, 40, 50% - and the total number you need to make a profit can get unobtainable quickly.
The easy way is to find a house that really is solid and well maintained, but completely outdated - the easy renovation. Let me know if you find one.
You have to do the numbers.
I believe there are deals but you have to be on ready to pull the trigger and realize whats a deal in about 30 minutes in some cases.
Endless hours of looking and checking MLS.
We dont have those types of houses but there are motivated sellers everywhere.
Its not easy as it looks . They fail to mention how much time was spent working those deals . Only replays of the touch downs. They also dont mention the losses and if they are as stupid as they appear on tv then you can bet there are plenty. As mentioned they run people on those shows with no talent . BS. Be like saying everyone could build circle stairs.
There are many people that are very skilled that make a living flipping houses. They are pros though.
Tim
I read all the replys and I'd say Dieselpigs just about covers it!
Those shows are such a joke, not funny Ha Ha either.
Doug
In the real estate business in rural Colorado we see some awful "fixed up" houses. Often enough that which really needs attention is simply covered. I've lost several listings by telling the owner that I want them to know up front that I will reveal all shortcomings to every prospect.
Had on lady try to get me excited about the house she "fixed". I asked her if she'd fixed the roof. Answer? Oh, it's completely redone... which meant new cheap shingles over a structure that obviously had at least A FOOT of sag in the ridge. I didn't even take the time to go inside.
The best I've done here on a buy-fix-sell deal was to buy a small house for $35k, put some work and $5k into it, rented it for two years to some good people and sold it for $62k. That our market... low profit, but low risk. No bubble here!
The "fixing" that lots of people do is simply more stuff that needs to be torn out. I look for houses that have never been touched. There aren't many, but it's easier than tearing off four layers of paneling! (which I've also run into)
Life and suffering are inseparable.
I quess I have been flippin since the 80's (but called it remodel) Have purchased and remodel 6 houses sold or kept for rental. I can't say I have made a lot of money because once I start I am real bad about the (while I am here) syndrome. Want to fix every detail and spend to much money. The TV folks just seem to patch and caulk and do a face lift and back on the market she goes. Maybe they are the smart one's but I just can not cover stuff up.
Here in Toronto Canada I have bought ,renovated and sold two houses in the last 3 years and made a few dollars, however the market is now at a all time high and with interest rates rising slowly 1/4% at a time I would not enter the market at this time. It is my thought that there is a direct relationship between interest rates and supply that affect the price of houses. I also agree that I wuld have made the same money at the time had I not touched the house and was just lucky to buy at the right time.
I would wait until interest rates stay flat for a while to help the market settle out , If you are sitting on a property and interest rates continue to rise the chance for a price decrease overall in the market is a real possiblity and increases the risk in the gamble.
George
Like any renovated house out there you look at the work going into it and wonder why anyone would let the contractor build them a dog house... then, occasionally, you find the gem.
I live in LA, we bought in 97 for $350,000, we could sell tomorrow for $1.2 mil - not even considering the work I've put into our house. I've seen these guys "flipping" and there's one with a conscience for every 100...
Wow, that's unbelieveable. Is your area expensive or average for LA?
That's average for LA.
-- J.S.
"at the end of the show a realtor prices the house for resale"
And the lord has spoken?..........
In a market like today's, a realtor's "listing" price is mostly optimisric at best, and DOES NOT REFLECT the actual value.
Notice that they do not update you at the end w/ info on what the house ACTUALLY "FLIPPED" for. Ever wonder why????????
There are many ways you can acquire a home with equity in them. You just have to read up on real estate and the process of flipping homes. Be pro-active and budget time to survey neiborhoods for distressed homes, attend an auction so on and so forth. The key is to get in the game and compete. It’s like all things in life, no matter where you go more than likely someone has already been there. But being persistent puts you in the place where if/or when the opportunity avails itself, you will be ready to respond.
My wife and I experienced this in 2001 when we thought we would like to flip a home. I was already equipped with a small home remodeling business. We felt that if we could do this, we could profit from the improvements as well as the real estate sale. (Acquire two forms profit at one time) We spent two years reading, studying, talking to friends in the real estate business, attended an auction, attempted to contact owners of distressed homes, as well as owners who's homes were scheduled to be auctioned off, contacted banks to get a list of their REOs, Scanned neighborhoods, etc. We wanted at least a 10% profit on the sale of the home on top of the profit we would normally make if doing improvements for a client. 2001 came and went with no property. 2002 came and went, still no property. By the end of summer 2003 we were at a place where we found that the pursuit was beginning to affect our remodeling business. That we should direct the efforts we would normally put toward finding a home and apply them to strengthening the business. That evening we prayed and affirmed with God that we felt He had wanted us to pursue the home flipping thing. We prayed that we would put it on hold and wait to resume it at a later time. We trusted God that He had something for us. Whether succeed or fail, we new He had a lesson for us. The next day I get a call from my sister who tells me that her mother-in-law is going to sell to some big Real Estate company for well below market because she wants a no-hassle deal so that she can move to Indiana right away. (She had already enough money from her investments, so the money wasn't an issue. She just wanted to get out quick without having to go through the selling process). Well, we matched their offer, of course. (13.8% below market at the time) We closed on the house in January 2004. Because my wife and I were renting before, we decided to stay in this house and let it grow equity during this real estate boom as well as utilize the no taxation on capital gains in a few years. We finished out the basement and currently rent it out. We make improvements from time to time preparing for the day we put it on the market. So, today in January 2006 we have made and increase in equity from 13.8% gain in 2004 to 45.3% in 2006. ($366,000 purchase price to $670,000 current market price) We are in a place where when we sell we won't pay any capital gains tax, and we get rental income of $850 per month from our renters down stairs. This house has been the gift that keeps on giving.
So all this to say, just prepare yourself for when the opportunity comes so that you are able to respond.
we won't pay any capital gains tax, and we get rental income of $850 per month
Just a heads up - you will have to pay 25% on any depreciation taken.You get out of life what you put into it......minus taxes.
Marv
Recapture.
But, since he's living there and only renting the basement, not the whole house, probably hasn't been taking any depreciation.
Good point, though. Lot's of people forget about it.
"All men's miseries derive from not being able to sit in a quiet room alone." Pascal
probably hasn't been taking any depreciation.
Funny thing can happen in this case, since depreciation is allowed or allowable, IRS can step in and say he should have taken it and charge him the tax anyway.You get out of life what you put into it......minus taxes.
Marv
I'll take your word. Just have never encountered that problem.
Course, I always take it whenever I can.
"All men's miseries derive from not being able to sit in a quiet room alone." Pascal
The correct way to do that would be to proportion the expenses between the personal use and the rental. Things like property taxes, mortgage interest, insurance, maintance, etc.That part allocated to the rental would go on sch E along with the depreciation and income.On the personal side only property taxes and mortage interest is deductable.
What really bugs me about this show (and others of its ilk) is that they are completely full of $hit about the amount they actually invest. On one of the episodes that aired over the New Years weekend "Flip That House Marathon" they said they invested about $25,000.00 - the place was swarming with contractors and they were using what appeared to be some pretty high end finishing materials (wood floors all over the house, nice marble/travertine in the master bath, etc.). Either I'm a total chump for what I pay, or their claimed amount invested is total BS.
My guess for the amazing numbers is that they make arrangements with the GC or Sub so that the sub's labor cost/ payment is a % of the net gain. This way, what we are told/ see relates to materials invested. I have never heard of a house being painted - on a rush basis - for $1,800, including materials. Sounds like that is closer to materials cost.Everything on these jobs are for unrealistic schedules too. Any decent contractors (ok, these guys maybe not that good) would never charge bargain prices for restricted timeline work with 18hr days. Turn around time of 10 days for a basic gut. I can't even get kitchen cabinets at that pace let alone install, plumb and electrify the room.The producers are misleading the audience to stroke the developer's ego. Maybe that's the carrot you need to get these guys on camera. It is all about ego.FrankieThere he goes—one of God's own prototypes—a high powered mutant of some kind never even considered for mass production. Too weird to live and too rare to die.—Hunter S. Thompson
from Fear And Loathing In Las Vegas
Wonder what the "show" is paying for the right to film and air these programs?
"All men's miseries derive from not being able to sit in a quiet room alone." Pascal