Who Cares How Much Money the Investor is Making on a Flip?

Buyers are funny aren't they?  The ease of information has created monsters- I have one buyer looking to steal a piece of land and he looks up the tax assessor value and thinks that should be the amount he should pay- mind you, this is ONLY on the properties that have been in the family for generations and have a tax basis from 50 years ago that has been kept down by CA Prop tax bill that caps increases..  I also have run into exactly what you have- One instance was on my listing, my rehabber bought a house that I am sure these potential buyers would not have even walked into, he did a high end gorgeous remodel from the studs up and these people got the place in multi bidding and then, after they looked at public records told their agent that it was priced too high based on what the rehabber paid for it. We let them cancel out and sold it for 10K more a month later.. LOL 

Hi Chris, sometimes you just have to be blunt with them and tell them to compare with others on the market not how they got there!

It's the flips that come back on the market where the buyer has done nothing to improve the home that chap my hide.  Have one now that I've looked at the pictures from when they bought it and now.  Nothing done not even painting of the pink and blue bedrooms.  On the market for 75K more than it was purchased for. 

OK Chris Ann, I actually snorted I laughed so hard!  I also love those buyers that want to know what the sellers owe on the house before making an offer.  Same deal.  What difference does that make? 

We see this "well, what did they pay for it" or "how come I can't find a deal" etc. I just let them know I am not a fortune teller. As for "vocal" lessons, still to what you love doing and be vocal here in the rain!

Hi Chris Ann,

Love your story when you were in third grade taking a spelling test! Markets change, prices go up and down and some take risks and make money, others do not.  What a property is worth will vary with the times and what a willing buyer is willing to pay..what anyone paid for a home or any product is irrelevant when they go to sell!

For many, many years I've wondered about the mentality of people who seem to resent others making a profit from hard work and/or risk-taking. 

Some people just seem to believe that everyone (except them) should work for free.

Hi Chris Ann -

I run into this mental road block too.  As you said if the buyer falls in love with it then it's the right home for them. Suggested.

John

Chris, I had an agent in P'burg, VA get all out of shape over a flip I did a few years ago.  He thought it was awful that I was making a 60% profit on a house I only had a little work done on.  I told him it was none of his business, and if he would like, I could switch agents.  Mercy!

Chris Ann

I just continue to reinforce how much work goes into remodeling the home, the time involved and fact you have to have cash with most of these deals. One other thing I find useful, I tell my buyers there is probably a few deals that didn't work out for these investors and they took a lose. Even though you are correct that many buyers reject all these and still want to make lower offers than they should, they do seem to change somewhat when they lost out on several deals. cheers cvc

Chris-what a sharp point you put on this.  110% right, @ response to Mike-people lack vision. Everything looks easier in hindsight, when someone else does it. Maybe they want to see some investment properties, then?

Chris Ann

I've had buyers who were also focused on how much the investors are making on a flip.

So I tell them how much the investors spends at the outset (yes, he pays closing costs, too). Then if he renovates, I give the buyer access to Cost vs Value so they'll see how much it costs for certain projects. Then when they sell, they will again pay closing costs which include selling.  And if it takes several months from the time of purchase to the next sale, that's another consideration of how much money is tied up in the property over a period of time.

Then I ask the buyers if they'd rather buy a fixer and do what the investor is doing...do they have the cash to pay for renovations, the time and the energy to hire, or BE the contractor...

It's like people complaining about how much doctors are getting paid, but forget how many years doctors studied and trained to do what they do.

It is crazy, isn't it.  I think you are right about the jealousy angle, too.  I really enjoy your posts, Chris Ann.