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This Isn't Hollywood

By Brett Mumaw

Real Estate Agent with RE/MAX First AB21301874

February 15, 2007 09:44 AM

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.

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Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

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.

Feb 15, 2007 11:39 AM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

I posted pretty much about the same topic just a couple of days ago. Everything folks see on TV should be considered entertainment first!

Feb 15, 2007 12:19 PM

Rob Marken

Bend River Realty - Bend, OR

25+ years experience in Bend

There seems to be more benefit in buying and keeping. But either way hard work is right in the middle of either method.

Feb 15, 2007 01:57 PM

Marchel Peterson

Results Realty - Spring, TX

Spring TX Real Estate E-Pro

We do not have the market here in Texas to flip houses the way they do on television. Our prices go up maybe 3 to 6% a year. I can't tell you how many of my friends have watched those shows and think that is what they want to do. I have ended up spinning my wheels trying to find homes where they could make a profit and it is just not happening in our area.

Feb 15, 2007 02:04 PM

Glenda Crowell

John L. Scott, Bend - Bend, OR

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.

Feb 15, 2007 02:22 PM

Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

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.

Feb 15, 2007 02:34 PM

Ryan Hukill - Edmond

405home @ ERA Courtyard - Edmond, OK

Realtor, Team Lead

Flip That House has done for Real Estate what American Chopper did for motorcycles. They make it look so easy that everyone decides they're going to make a living building choppers or flipping houses. What they don't see is the real work. They only get a 1-hour glimpse into a multi-month process. Much like the internet, they give people just enough information to be dangerous.

Feb 15, 2007 03:07 PM

Jeff Dowler, CRS

eXp Realty of California, Inc. - Carlsbad, CA

The Southern California Relocation Dude

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

Feb 15, 2007 03:36 PM

Timothy Schwartz

Century 21 Mack Morris Iris Lurie - Marlboro Twp, NJ

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.

Feb 15, 2007 04:00 PM

Chris Griffith

Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL

Bonita Springs Listing Specialist - Agent

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.

Feb 15, 2007 09:15 PM

Steve Dalton

219-465-8352 - Valparaiso, IN

Northwest Indiana Home Builder

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

Feb 15, 2007 11:09 PM

Dale Heck

Sotheby's International realty - Pinehurst, NC

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.

Feb 15, 2007 11:30 PM

Dwayne West

Atlanta Real Estate - Canton, GA

Canton Georgia Real Estate

Alot of people do forget that Flipping is a Business, and should be treated as such.

Feb 16, 2007 12:25 AM

Carole Cohen

Howard Hanna Cleveland City Office - Cleveland, OH

Realtor, ePRO

I love that phrase, this is not Hollywood! Seems like I am always saying, this is not _____ although it's usually about an area that experienced a real bubble in real estate. Here, you can make money rehabbing a house and selling it, but you have to be savvy, not spend too much money, there are not flipping 'killings' to be made here. Can we get that Flip show off the air or what LOL

Feb 16, 2007 12:32 AM

Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

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!

Feb 16, 2007 12:55 AM

Anonymous

Rod Rebello

There is one show called "Property Ladder" that shows a more realistic view of flipping. They follow first time flippers that have very high expectations and unrealistic budgets. The host trys to give them advice that they usually don't follow. they keep digging themselves into a hole. There are some success stories, but typically they barely break even at best.

Feb 16, 2007 01:16 AM

#22

Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

Thanks Rod. I have seen the commercials for that, but never checked it out. I'll have to watch it sometime.

Feb 16, 2007 01:26 AM

Rob Robinson- Lehigh Valley PA

Bertrum Settlements (Title & Abstract) - Allentown, PA

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.

Feb 16, 2007 01:32 AM

1~Judi Barrett

Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK

BS Ed, Integrity Real Estate Services -IDABEL OK

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

Feb 16, 2007 11:50 AM

Brett Mumaw

RE/MAX First - New Albany, IN

Your Indiana Move

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.

Feb 16, 2007 11:55 AM