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So you think you can flip? Proliferation of house flipping and rehab shows highlight a resurgence for big bucks in real estate and a general amnesia of recent financial history. » Dr. Housing Bubble Blog

August 2, 2014

So you think you can flip? Proliferation of house flipping and rehab shows highlight a resurgence for big bucks in real estate and a general amnesia of recent financial history.

It is amazing to see the resurgence of housing flipping and rehab centered shows on cable TV. The shows glamorize the lifestyle of flipping forgetting how many people got burned in the previous downturn. Of course, many of the juicy flips already went to other investors and now many in the public are itching to get back into the game. Flipping works on a larger scale when the market is appreciating quickly. Why else would you assume the risk? In slow to declining markets, flippers are relegated to finding beaten down places and having to control costs carefully. You need a team and multiple flips per year to make it lucrative. From watching these shows, costs get out of control very fast and many seem to have a poor grasp of short-term gains and the bite taxes will have on their profits. There also seems to be a “mom flipping” trend. God bless cable television and the creative ways to promote real estate!

 

House flipping moms

A few months ago, I caught this piece on ABC Nightline regarding “flipping moms” out in the East Coast. The segment was in a lower cost state so for most California viewers, they must have laughed when they saw how far a dollar could go in other real estate markets. The jokes on them however since the sun only shines on the West Coast (#alwaysbeflipping). No $700,000 stucco crap shacks near freeway pollution on these examples. The segment even highlights how careful you need to be to manage your budget to be successful here. However the undertone of “mom flippers” is that “hey, flipping is so easy you can have a career, raise a family, and flip homes on the side!” Of course, the downside is you can have a flip that goes awry and it starts consuming your personal budget. Then again, that makes for boring TV. Take a look at the segment:

house flipping moms

Source: ABC Nightline

And then a reader mentioned a recent show on HGTV:

“(HGTV) Jen and Barb, two business-savvy moms and longtime best friends, set out to undertake flipping a home in Southern California. From house shopping, to deal making, to decor selecting, and money managing, the two aim to learn every trick of the home flipping trade before this project is done. Pairing their own at-home learnings with a unique perspective through the mom-lens, Jen and Barb hope to, in the end, build the perfect family home AND earn a hefty profit on the resale. Though, as they’ll learn, in the world of the fix and flip, nothing comes without a fight.”

The only reason something like this can occur is that the overall market has a hotness to it. These shows went in the dark after the bust and suddenly were up in Canada yet subtly didn’t mention the location change until viewers realized, “hey, that sure doesn’t sound like SoCal lingo! What kind of money is that?!” I recall watching some of these shows back in 2007 and people started making horrible flips that went down very quickly. Who cares about recent history. Tell me more about how to make money on flips! Ask and you shall receive.

SoCal flip example

When flipping goes mainstream there is a sort of mania permeating in the air. Because after all, what are we really doing here? Adding bells and whistles to a home. This isn’t a new industry adding millions of new jobs or revolutionizing the way we live like the internet. In the end, there will be an end buyer and it is likely to be a family going deep into mortgage debt to purchase a former crap shack with plastic surgery.

Flipping is hot in SoCal. A reader sent over this flip in Del Rey. Let us take a look at it:

del rey flip

12716 Admiral Ave, Los Angeles, CA 90066

5 beds, 5 baths, 2,600 square feet

They went all out on this flip. These are professionals here and went out of their way to make this thing glimmer. You always sell the future and try to erase the past. Have you tried to watch 1950s or 1960s movies? They don’t exactly hold up well. Let us look at the sales history here:

flip sales history

You can see the heat in 2013. It first sold for $575,000 in April of 2013 and then for $872,500 in July of 2013 only a few short months later. It was then listed for $1,695,000 in May of this year. So far, no takers. I love that Google Maps archives street views since it gives you a brief snapshot into the past. Let us look at this place before it was redone:

del rey before

A nice little crap shack right. Not bad and in a prime location. So this was a complete tear down and rebuilt. It’ll be interesting to see what this place sells for eventually. Yet this kind of action is rather common in top notch locations in California.

Flipper mania is back in the mainstream! Next we’ll have “Flipper Tots” and “Flippers in Tiaras” or “Flipping Baby Boomers” but that would simply be stating the obvious. Flipping ain’t easy but someone has got to do it.

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