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Updated almost 14 years ago, 02/02/2011
Flipping Now vs the Bubble times
For people who are flipping today. Mainly Californians do you think it is easier today or back in the 2003-2006 days.
Would love to hear your reasons why as well.
Thank you
hey mike, i think the number of responses says it all....everyone was a flipper or a real estate agent a couple years ago it seems, and as you can see, most are not around anymore..
Definitely agree with Bryan...
In general, it's much easier to buy these days and much more difficult to sell. Back then, it was much easier to sell, but much more difficult to buy (or at least much more risky, as you never knew when the bubble would burst).
Also, the profits were likely much higher back then, but I believe the risk is much lower now.
So, it all depends on your perspective...
As a CA resident and investor, I will jump in here. I agree with both Jason and BryanA that you don't see as many flippers here these days because many got wiped out on their gambles in the bubble burst.
That said, I think it is harder to flip now tehn tehn because of only one factor: Any property you purchased back in 2004/2005 could be sold 3-6 months later for a profit of $50k to $100k without doing ANYTHIING to it. It does not get an easier than that. Today, you can't just throw a dart at the board and pick that property to buy and expect to profit from it. You must work to find a great deal at a great discount, perform a quality rehab and have a good team to sell it to make good proits today.
Today, you need to develop great relationships with contacts who can provide inventory for you to purchase that makes financial sense. Before, you could pick any house on the street. Now, we do have many more distressed sales today, but not all of them are good deals for flippers.
You also have many others just like me who flip and they are your competition if you are buying off the MLS.
In conclussion, it is harder to flip today than back then, but today is easier to "control" your investment.
Originally posted by Will Barnard:
That said, I think it is harder to flip now tehn tehn because of only one factor: Any property you purchased back in 2004/2005 could be sold 3-6 months later for a profit of $50k to $100k without doing ANYTHIING to it. It does not get an easier than that. Today, you can't just throw a dart at the board and pick that property to buy and expect to profit from it. You must work to find a great deal at a great discount, perform a quality rehab and have a good team to sell it to make good proits today.
Today, you need to develop great relationships with contacts who can provide inventory for you to purchase that makes financial sense. Before, you could pick any house on the street. Now, we do have many more distressed sales today, but not all of them are good deals for flippers.
You also have many others just like me who flip and they are your competition if you are buying off the MLS.
In conclussion, it is harder to flip today than back then, but today is easier to "control" your investment.
Hey Will do you think we will see those days again?
Well, after checking my crystal ball, it is not certain. It is said that history tends to repeat itself and it is also said that only a fool would make the same mistake twice, so your guess is as good as mine.
If we ever have massive RE appreciation rates in the double digits again, I would venture to guess such a scenario would not take place for at least another 2 decades or more, but I was wrong once before (wink, wink)
Kidding aside, I believe that once we are over this "correction" and get through the massive amount sof lender owned properties, we will encounter a more steady and reasonable price inflation of RE. I would not think that prices will just go back to where they were as those prices were artificially inflated.
Things were easier for flippers back when it was a new thing. It was the way to go and make big, big bucks. Then came the TV shows like "Flip This House" where the behind the scene "secrets" were exposed. Gave flippers and flipping a bad name. You got guys like Armondo who was doing it to make millions at all costs, even to the extent that cheap materials were used and short cuts taken.
Flipping just isn't good business period. Its one thing to buy a house, live in it and lovingly restore it and resell in a few years. Its quite a different thing all together to flip it in 30 days and stage it to make it look good on the surface.
john, what you said is ridiculous...there's plenty of ethical flippers on this board and in the business world...saying a blanket statement like that is naiive to say the least...while i've only flipped a few houses, the homeowners were grateful i turned over such a beautiful house to them...not only that, but it was always the lowest priced house in the neighborhood..in the end, ya, i made a few bucks, but i also saved them money as well
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While I agree with Bryan about making absolute blanket statements like that, John, I do know that there are many flippers who do a crap job and hide it well for unsuspecting buyers. These guys give a bad name to business.
I had a roofing guy come to me last year and we talked about fixing some rotting soffit that had water damage. While talking about what needed to be done he was telling me stories of many different flippers who would simply hire him to paint over the rotting wood to cover it up temporarily instead of replacing it and then painting.
Not only is this unethical, IMO, on the part of the flipper, but I thought is was also improper for him to do.
If you're going to do that kind of thing as an investor, it will catch up with you eventually.
Originally posted by Joshua Dorkin:
In any business where there is the opportunity to bilk people out of a lot of money quickly and without much recourse, there is going to be unethical people who give the industry a bad name.
What do you think of when you hear the term, "Used car salesman?" What do you think of when you see some random guy selling watches or jewelry on the street?
But, that doesn't mean that the majority of car salesmen and the majority of jewelry and watch dealers are crooks and thieves. They are the minority, but unfortunately, their stereotype gets associated with the industry as a whole, and suddenly, people start making blanket statements like, "xxxx just isn't good business period."
As someone who hands their business card to every buyer at closing and say, "Give me a call directly if you have any issues with the house..." I can promise you that there are plenty of good flippers out there (and yes, I have regretted handing out my card before, but the good outweighs the bad).
Sorry, fellers, but I stand by my post. Flipping has become big business. You guys do it for the money. No other reason than big bucks. Investors buy up all the cheap properties that should be bought by lower income folks who can't afford a $100,000 property. You gobble up the under $100,000 properties and turn around it sell it to the rich. This leaves the lower income buyer out of the picture. This is a large segment of the population that you cut out of the home buying picture.
I know this will elicit some angry responses, but the truth is evident.
Josh, If I'm out of line here, please let me know.
John, why are you being so negative here? I've seen your posts this morning, and all you seem to be doing is bashing everything. If you don't have anything substantive to say, please don't post.
This forum is here to help, advise, promote, and communicate in a positive light.
Originally posted by John Johnson:
Originally posted by Joshua Dorkin:
I had a roofing guy come to me last year and we talked about fixing some rotting soffit that had water damage. While talking about what needed to be done he was telling me stories of many different flippers who would simply hire him to paint over the rotting wood to cover it up temporarily instead of replacing it and then painting.
Not only is this unethical, IMO, on the part of the flipper, but I thought is was also improper for him to do.
If you're going to do that kind of thing as an investor, it will catch up with you eventually.
Joshua, Instead of sending me a PM, please use the public forum.
thanks
He can do whatever he wants. It's his board he owns it :roll:
And do me a favor. Educate yourself on rehabbing instead of making off the wall blanket statements. Spewing nonsensical statements without true knowledge of what you are going against just makes you look ignorant in the eyes of other people.
And FYI those flip shows are not a good way to compare real life flips. They misrepresent actual rehabbing and are not a good way to compare side by side.
Get to know flippers like J Scott and Will Barnard and they'll tell you the true meaning of flipping.
You are coming off as quite ignorant, John.
I would say it always has been a big business.
Yes and no. For the money, yes. No other reason? How about improving neighborhoods?
If they can't afford it, how are they supposed to buy it? Government subsidized 3% down programs?
I don't sell to the rich. I sell to the qualified. Qualified usually means living within their means, having a job, and having good credit.
Not everyone is meant to be a homeowner. That's what apartments are for. I want to live on the beach. But I don't, because the beach is beyond my means.
I hear that Cuba, China & North Korea are taking applications for citizenship.
Originally posted by John Johnson:
I know this will elicit some angry responses, but the truth is evident.
How is the truth evident?
If a house has enough equity in it for an investor to buy it, chances are a low income homeowner can't afford to do the repairs necessary.
Only do it for the money? Possibly. I'd say most people who flip houses do it because they enjoy it. I love my job. Flippers often provide like-new housing to people who can not afford new houses. As has been said, it also improves neighborhoods, and brings life back communities that have been pounded by the foreclosures.
I know many more people that work a regular job solely for the money that I know flippers who do it solely for the money.
Since you're on an investment website, how do you prefer to invest your money in real estate?
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Guys, lets not let some troll take us off course . . . lets try to get back to Flipping Now vs the Bubble times and move on.
Thanks!
John, yes, flipping is a business. It is not a surprise or a secret that people do it to make money. And the reason it exists as a business is because there is a need. Businesses that flip properties generally do not take properties away from low end buyers who would otherwise buy distressed homes and rehab them themselves. If a low end buyer has the means to purchase a distressed property, they can easily outbid a flipper because they do not have to calculate a buffer into their offer for making a profit.
Also, many of the house that flippers buy are not even habitable. So, if the flipping business did not exist, the homes would just sit and continue to rot, dragging down the home values of the neighborhood. Very few people are willing to buy a home and do major renovations to it. Flippers but houses that are in really bad condition and in many cases turn them into nice houses again, improving the value of homes in the neighborhood. Also, even after the houses are renovated, many of these homes are still affordable to new first-time buyers, and they are happy to get a house that they don't have to work on.
Sorry, Josh, I was writing my response for a while and didn't see your post until after I submitted mine.
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NP Mike. Lets just all move on...
Okay, with respect to the original question, I wasn't flipping back in the rising bubble days, but I can't imagine flipping would be much easier than it was then. I bought my first house (to live in) in that time period and sold it three years later for 70% more than I paid for it. I did do some work to it, but relative to the price of the house, a small amount. Like Will said, you really didn't have to do anything to a property back then other than hold it for a while. This is in California, but I'm sure the same situation existed in other areas of the US, especially Florida, Las Vegas, and Arizona.
I've even heard from another investor who started in the booming days and, not knowing better, bought a beat-up house at market value, put a lot into its rehab, and still made profit on it. Not going to happen today.
In response to this:
We flip houses in a working class area. 100% REO flips. For one thing, FNMA properties have a 10 day period where ONLY owner occupants can bid - investors aren't even ALLOWED to submit offers!!! And if a property is priced low and is move-in ready, "lower income people", as you describe, always bid higher than it makes sense for us to bid in order to flip the property. The only properties we get a shot at anymore are ones that have issues that a homeowner would never deal with, such as a missing kitchen, or other very expensive repair. We then acquire the property, intelligently plan a rehab, execute said rehab, and convert the worst house on the block to the best house on the block. The neighbors thank us for it, believe me. And then we do EARN - I know this is an evil word - a reasonable and fair PROFIT. Heaven forbid.
Flipping is work. Do any of you go to work for free?
Hurt feelings aside, let's stick to the topic. Flipping is a risky business. If you do it in a furious upturn, you run the risk of getting caught holding inventory when the market goes in the wrong direction. When you do it in a market like this (I would use the term wallowing), you run the risk of having the slightest increase in inventory negatively affect your comps.
In any market, you run the risk of a resentful appraiser taking umbrage with your profit. The market does what the market does. Predicting the future is always a dangerous game. Due diligence to the point of undue diligence is the best course of action.
For those complaining about low income borrowers being priced out of the market by flippers, please take note that the FNMA Homepath program is the greatest example of taking advantage of low income borrowers in today's marketplace. They put the property on the market at a value 10-15% above retail, then offer the home to owner-occupant exclusively for the first ten days with low down financing and no appraisal requirement. Freddy does the same thing with Homesteps!
Think about that for a minute...a GSE (Government Sponsored Entity) offering what amounts to sub-prime loans on their own assets without the same appraisal requirements that they apply to outside lenders. If anyone thinks that flippers are dirty profit hounds, they need only look at the good folks in Washington to see the true crooks operate with government mandates.
Flipping properties is a business that benefits homeowners. With any business there are risks involved and understanding the risks is important. Business owners must make a profit in order to stay in business and continue to provide turn key properties for homeowners or other businesses.
I'm glad that there are investors out there willing to invest their time, hard earned money and create jobs, so that these properties can be sold and potentially improve the home values in the neighborhood.
Originally posted by Jeremy Colanna:
I missed the firworks from the trolling and am glad. No other comments to make as I will stay on topic and do not feel the need to respond to such foolishness.
@Jeremy - Great post!
@Kevin - Great post, I agree!
Flipping IS hard work and hard works deserves positive results, better known as PROFITS. I don't work for free either. :)