As the broker for a large real estate company (VM Group), I get many calls from investors wanting to start flipping houses. After 5 minutes in the phone call they always reference a show they saw on TV such as "Flip That House", Flip This House" or "Flipping Out" or the dozen other similar shows like this. The investors (or potential investors) see these shows and the huge profits and think its not out of their realm. In many cases its not, but please understand those profit prices are inflated. Never once did I see them mention closing fees, carrying costs, mortgage interest, Realtor fees, insurance, taxes or a dozen other fees that cut into the profit. What you are seeing is GROSS profit calculated on FULL ASKING PRICE. I guarantee if you go to 99% of those individuals you see on the show and ask them what their actual profit was, it would be about 35-45% of what was shown on the TV.

So, lets take a typical example. A claim of profit of $100,000 really equals about $35,000. This flipper risked about $50,000 (down payment) and about 6 months of time, headaches and huge liability just getting to the part where they can put it on the market. Then, they split it with their partner, or partners. So, $35,000 divided by 2 equals $17,500. Would you risk all of that and 6 months of work for that little amount of money? I would rather invest it elsewhere especially in this market.

 Am I,  a real estate broker, discouraging you from flipping houses? No! There is excellent money to be made, but I dont want you to think you are walking away with a years salary on one house. Plus, you have to know a fair share about construction, permitting, etc.

There are great deals out there, but please do your research first.

Mike Volkin

VMGroupOnline.com