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Flipper Having a Tough Time

By Kaushik Sirkar

Real Estate Agent with Call Realty, Inc.

February 13, 2007 11:49 PM

Flipper Having a Tough Time
by Kaushik Sirkar, Chandler REALTOR®
Chandler AZ Real Estate

For quite a few years folks have been making a good amount of money (in many cases their entire living) by flipping houses. What exactly is flipping? Well, 'traditionally' I would say that flipping entailed purchasing a home that needed a little bit of work. New paint, new carpet and upgraded landscaping - put the home back on the market and make a nice little profit. During a good part of this decade through 2005, flipping often meant purchasing a home and relisting shortly thereafter for a quick sale and profit - all driven by rapid appreciation as opposed 'sweat' equity.

Flipping homes for profit has become a nationwide phenomena. Flip This House and Flip That House are a couple of examples. Alas, with the widespread slowdown in the Real Estate market in numerous locales, flipping homes has become much more difficult. Sure, the buy and re-sell shortly crowd is out of luck. The markets just aren't appreciating so buying a home and selling it for 50k more in 3 months just ain't happening.

What about the folks who put in 'sweat' equity? People have been doing this for YEARS and YEARS. Buy the house with the good bones and fix everything else up to match. Put in your own money, your own time and plenty of your own sweat to fix up the place and hopefully profit a little bit. Well, in a market where very little is selling - a 'sweat flipper' can run into hard times. Take this gentleman for example.

This guy has been flipping houses for 30 years!! I would think he knows about flipping houses. He didn't just start buying in 03' and let appreciation make the money for him. It appears he purchases and puts in a decent amount of effort into these homes. Well - his latest project has been on the market for 10 months! His short term solution appears to be to rent it out - a path numerous want-to-be sellers around the country are following.....

Thanks for Reading :)

Kaushik Sirkar, Chandler Realtor
http://www.homesphx.com

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Flemington, NJ

Flipping is like the stock market when it was going crazy during the tech boom: everyone's a "guru" in a huge bull market. The real pros who actually enjoy renovating homes and take pride in their work will make it through a tough market, while those who solely are in it for the money will not.

Feb 14, 2007 11:12 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Rob - This Casey guy...talk about not having a mind or sense of his own...sheesh...

Fred - Great jetliner/train analogy!!

Joan - Hey, great attention to detail! I don't think I pay THAT much attention to the shows to recall what the homes were selling for....

George - I don't think the infomercial guys lie, per se. What they are preaching can be done, and has been done. But the circumstances have to be right and you need a saavy investor. I would love to see the stats on what transpires on the first transaction post-infomercial/class purchase.....

Michael - I think just like Fred said...the people who really know what they are doing have plenty of reserves, and despite a few losses will make it in any market.

Feb 14, 2007 12:29 PM

Ken Spencer

Buckeye, AZ

for Verrado, Buckeye, Sundance

There are so many variables when it comes to the flipping business. Your article indicates a person with 30 plus years working at it and he seems to still have problems with making it, so to speak. I really don't think there's a secret to working the homes and flipping them. Some times I think it's being in the right market at the right time, like everything else.

Feb 14, 2007 03:16 PM

Jennifer Fivelsdal

JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY

Mid Hudson Valley real estate connection

In my market the Flippers are having problems. The Flippers like many others got use to the last few years not keeping in mind that markets adjust. So if you want to make a living this way, you also need to keep an eye on what the industry is doing especially in the local marketplace.

Feb 15, 2007 12:09 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

William - Money will always be made with rehabs, irregardless of the market. It just takes people who know what they are doing with cash reserves!

Ken - For the majority of cases I agree with you. There are, however, people with a 'knack' - they can flip in any market.

Jennifer - Thanks for the insight!

Feb 15, 2007 06:52 AM

Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

Hey Kaushik. I saw that article this morning. I agree that the short-term flipping has cooled off. We never really had it in our market. We have an agent in our office that was previously a builder. He doesn't actually flip, he builds, but he never stays in his house more than three years. No telling how much $$$ he's made off of his "sweat".

BTW - I added a link to here from my blog.

Feb 15, 2007 02:30 PM

Aziz Abdur-Raoof

RE/MAX Rewards - Columbia, MD

Howard Co. Real Estate Scoop

What I love about real estate is that each deal is different and it requires thinking or should I say adjustments. As an investor, I try to make my money going into a deal. I celebrate when I buy and try to hold firm to my criteria going in so that I am not hurt going out.

Feb 15, 2007 03:10 PM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Brett - Thanks for the link. Some folks who really know what they are doing truly do well flipping homes!

Aziz - Agreed that every transacdtion in real estate is potentially brand spanking new! Certainly adds to the excitement....

Feb 15, 2007 05:40 PM

John Cilladi

Keller Williams Real Estate - Exton, PA

REALTOR, EcoBroker, e-PRO

I've done it. It works. It's hard.

I haven't been able to find a good home in our area for three years. A good home is one that will sell cheaply enough that it can be reworked and turned around in a reasonable amount of time.

My wife and I have to agree that we "have a vison" for a particular home before we will make the leap.

Feb 18, 2007 04:21 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

John - It has become harder in lots of markets. Soooo many people are looking at real estate as an investment vehicle now as compared to the past.....lots of potential buyers for a few very 'flippable' properties....

Feb 18, 2007 06:31 PM

Debbie Malone

Londeree's Real Estate & Property Management - Lynchburg, VA

From Lynchburg To The Lake (434) 546-0369

Our market is small and with all of the flipping shows on tv, everyone thinks they can do it. Last week I bid $10,000 below on a HUD home and the successful buyer paid $3,000 more than asking price. We've done this enough to know what it'll take to complete the home, market it and make a profit. I've seen people get started, are not sure what to do, put too much money in and the house is still not finished, not marketed six months later.

Feb 19, 2007 12:06 AM

Derek Guyer

Land Chasers - Indianapolis, IN

I think one of the biggest problems investors have is a lack of exit strategies. They go into a property with one end in mind and as a result, they have no options when they can't sell it back off as they had hoped. If they had approached things with a little more conservative attitude, they might be in better shape and have more options available to them.

Thanks for sharing that link.

Derek

Feb 19, 2007 04:51 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Debbie - HUD homes USED to offer the potential for a bargain. But nowadays, you are right, they often sell for more than the asking price.

Derek - You are right. Many investors don't have exit strategies or even plans in place to begin with...

Feb 19, 2007 10:11 AM

Anonymous

Mark Anderson

There is avery good ebook on this subject. you can get it at http://www.Wholesaling-Realestate.com

Feb 20, 2007 03:15 AM

#31

Debbie Salmon

keller williams - Vancouver, WA

We deal with alot of "flippers" here in Vancouver, WA .. the market is still hot for deals because of the growing number of foreclosures and pre foreclosures that are hitting the market. If an investor buys right they can make some money .. I think the key to flipping is trying not to make a huge amount of money at one time. My investors we work with do multiple houses at a time so if they only make $20-30K a house then it pays off because they have 5 or more projects going at one time .. I have also seen a few flippers go under because they don't stick to the basics in homes ... they try to put to much money into the home... but for the most part if you buy right and sell fast you make it work ..

Mar 28, 2007 04:12 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Mark - thanks for sharing!

Debbie - Putting too much money into a home can easily be the kiss of death for flippers!

Apr 03, 2007 07:02 PM

Matthew Meli

M and T property management LLC - Detroit, MI

Hey you should check out Detroit. The prices are very inexpensive. You can buy a two family home for about $5K to $30K rehab for $30K to $40K. Comps are around $130k to $140K. Detroit offers low purchase price with 40% returns on investment! I will say one has to know what they are doing and have a good staff working for there best interest. The rents are around $600. to $795. a unit! that is $1200. to $1600. a month for one investment.

Check out what I do any time. Hope to hear from you soon.

Apr 03, 2007 07:20 PM

Michael Krotchie

Tierra Antigua Realty, LLC - Tucson, AZ

Tucson Realtor, 520.261.MIKE

If the flipping market is viable in so many markets I wonder why more people don't take advantage. Am I the only one who wonders about this? For example the previous poster (Matthew Meli) mentioned Detroit and the ratio of price to rents. If such conditions exist why hasn't the flipping market been saturated? Simply an unwillingness to commit the time and effort?

Apr 04, 2007 02:08 AM

Charles Parrish

Auction Brokers & Investors United - Baltimore, MD

Flippping in Maryland has gotten a bad name due to negative uninformed press. Flipping products includking properties has been done for years.

We have been involved in over 200 properties that have been controlled (by contdraft) and re-sold before settlement. Is is OK to flip real esstate as long as you all disclosures are made, that you do it honestly and legally.

chalres Parrish

Apr 08, 2007 06:20 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Matthew - Coincidentally enough, I may just be in the Detroit metro around July 4th wknd.

Michael - I theorize that lots of 'flippers' are afraid of sweat labor. Buy a home, watch it appreciate XX % in a couple of years, and sell. But in these markets where appreciation is low or non-existent.....

Rob - Your point in italics is the key!

Chalres - and that you know what you are doing!

Apr 08, 2007 06:53 PM