Friday, February 28, 2014

House flipping rises


"Oddly, this sign of real estate madness isn't considered to be a bad thing. But certain observations about the general economy hold true here as well: Upscale is doing well for itself.
More expensive homes were especially popular with home flippers, as sales made up of flip-related sales from homes valued at more than $400,000 were up 36% last year. Sales of less valuable homes bought and sold within six months were up 16% over the same period."
Kitchen Drawer

Ever flipped a house? I think it'd be kind of fun. With the rash of Boomers retiring, I think there's a great market out there for smaller, geriatric friendly houses.

28 comments:

The Dude said...

Some lumberjack friends of mine got drunk, hacked the top off a another friend's car with a splitting maul, set it on fire, then when it was cool enough, flipped it over.

But given a chance, I am sure they would try to do the same with a house.

I'm Full of Soup said...

Good one 60!

I bought a house to fix and rent out or flip. Then the economy tanked in 2008-20009 so I didn't have enough money to fix it up so I let it sit for 3 years while paying the mortgage and utilities for an empty house and then I got enough money [I thought] to fix it up. Turned out I should have known one needs to DOUBLE the fix-it-up budget. So yes Deb I have learned an expensive lesson. The good news is it is now rented and it breaks even cashflow-wise but I will never get my 100% of my investment back. The bad news is I am itching to try it again on another property cause it was fun doing it!

john said...

Deborah - you need to talk to the older, wiser and broker generation of flippers. Those who were diligently improving their houses in 2006 - 2008. Those who if they were lucky are still able to live in one of them.

You gotta buy the distressed undervalued property and count on sweat equity turning into resale value. And you gotta sweat. And you gotta hope you guessed right.

john said...

Yeah. You need to talk to AJ.

Unknown said...

This house was flipped by my friend who used to work as an election, but has turned himself into an expert builder. He did a mighty fine job, especially on the mechanics of the house.

(excuse my tired writing. My aunt is in the hospital, I went to a viewing last night and a funeral this AM and am heading to wheat ridge for dinner with friends tonight. I'd like to drop. I'd rather just hang here with you guys.)

Anyway, the Volcano House. I tried to look up the history, but I'm afraid it's all word of mouth.
1970-1980s Some eccentric wealthy guy from CA built a house on the hillside of Boulder with 11 levels and an volcano in the living room. Imagine darkened rooms, tacky décor, late night parties with umbrella drinks. It sat vacant for years. My friend Roy bought the place for about 700K with some funds from a rich relative in CA). He flipped it. It is now down to about 5-6 levels with a glass elevator. Sadly, he is unable to sell it because the ultra high end market isn't moving right now. He started at about 8 million.

Here is the finished product.
Me personally - never flipped a house. odd I'm sorta in the biz.

Unknown said...

If you page thru the photos- #11 is where to volcano used to be. imagine the lava flowing down...

Unknown said...

oops - 6 is better

The Dude said...

I spent much of 2012 repairing a house that I owned and used to live in.

It was livable, but the amount of money, labor, blood, sweat and even the occasional tear required to sell it, at what was by then, a depressed price, was something I would not volunteer to go through again.

Did I mention that I spent Christmas 2012 in the crawlspace repairing a plumbing leak?

Yeah, that's the kind of fun one has when one is trying to sell a house.

Misery is too gentle a word to describe what I went through. But at least I spent huge amounts of money and got very little of it back, so there is that.

Unknown said...

House flipping is risky. You must be lucky enough to find something at a true bargain and then have the capital to make the appropriate improvements to sell and sell quickly, so as to not eat up your profit. Don't forget realtor fees. dang. Then also the timing is everything. It's difficult to capture the best market. I suppose that's why I never tried it.

Unknown said...

Volcano house before picture. Erg. - it's only the outside.

Rabel said...

April,

Your buddy seems to have a $16,100.30 half year property tax bill due ... today.

There are many downsides to the flippin' bidness.

Revenant said...

I look forward to the articles in 2019 discussing how the bankrupt house-flippers and empty McMansions are all due to greedy banksters tricking innocent people into borrowing too much.

I'm Full of Soup said...

And Bush Revenant, don't leave him out. :)

deborah said...

April:
"House flipping is risky. You must be lucky enough to find something at a true bargain and then have the capital to make the appropriate improvements to sell and sell quickly, so as to not eat up your profit. Don't forget realtor fees. dang. Then also the timing is everything. It's difficult to capture the best market. I suppose that's why I never tried it."

With what AJ, Sixty, and John say it sounds like a huge hassle.

My sister 'flipped' her own house before selling it. That is, she put in new kitchen counter top, new vanities in the bathrooms, had the wood floors re-sanded. She was utterly exhausted in the end. It was a nice house in a nice section of town, but I never asked her if it was worth it monetarily, or did she just about break even.

Sixty, you just hang with that guy so you look reasonable :)

William said...

No matter how much sweat equity you put into it, your house is never going to appreciate in value more than the neighborhood in which it is located.. Conversely you can win the daily double by fixing up a house in a neighborhood that's trending up.......Never build a house on an active volcano. You can save a few bucks on the heat and hot water, but the downside risks discourage future buyers.

The Dude said...
This comment has been removed by the author.
The Dude said...

Typo correction:

The events related by me in the car flipping story are true. That took place in 1972.

The lumberjacks were my boss and the co-owner of the tree business.

The other participant was a carpenter with whom I worked high rise concrete construction and just plain construction in Vienna, VA, Fort Collins, CO and Los Gatos, CA.

The owner of the car was from a small town in Maryland, and I had known him for a number of years.

He was not at home when the rowdy bunch showed up, and I understand they were a bit intoxicated upon their arrival. They looked around the remote property for resident but, when they couldn't find him, thought that they would see what his car would look like as a convertible.

It was a '65 Rambler Classic, and having the top roughly removed, glass and all, did not improve its appearance. A Rambler Speedster was just not a good look.

One guy then suggested that perhaps if it was a pickup truck it would be better yet. So, back to cutting metal with a maul.

During that session of bodywork, the gas tank was breached. Did I mention they were drunk? Once the gasoline ran out all over the place, the carpenter decided he needed a smoke.

Out came his trademark Swisher Sweet Cigarillo, he clamped it in his teeth, struck a match, lit the cigar, and in trademark Hollywood fashion, tossed the burning match into the puddle of gasoline.

Time passed, the fire died down, the tires had long since burned up, and the three of them were able to approach the smoldering hulk and flip it over.

Home owner came home, he was greeted with much jocularity, he was pleased that he had company, but was troubled, so he asked a couple of questions.

"Where's my car, and what is that pile of junk in the driveway?", being the first two.

Ah, well, you see, your car and that junk are one and the same.

He was not pleased.

What is the take-away, the moral of this story? Smoking is bad for you and your Rambler.

What became of that crew? The carpenter died in his early 30s of lymphoma. The owner of the tree company inherited well and is rich beyond one's wildest dreams. His co-owner was in and out of mental institutions for years. The Rambler owner moved away, first to California, then Oregon, married, had a family and, I assume, has lived happily ever after, and has sworn off Rambler ownership.

Fin.

deborah said...

A tale of the human condition worthy of Tolstoy :)

deborah said...

"Conversely you can win the daily double by fixing up a house in a neighborhood that's trending up..."

Combine that with living in the house to save paying rent and justify the mortgage, you could work your way up to your dream house.

Christy said...

Great story, 60.

I'm addicted to Rehab Addict on DIY, but know that I could never focus that much of my life on flipping a house. Back in the late 70s I was offered a $1 house in Baltimore City after the person who beat me in the lottery backed out. By that time I'd watched a friend devote months to rehabbing her $1 house and I just wasn't willing. Working long hard hours on my career and then working long hard hours staying on top of a rehab? Nope, wasn't gonna happen.

I'm Full of Soup said...

if anyone is interested, here are some pics of the finished house rehab. It came out nice.

http://fayettestreet.blogspot.com/

deborah said...

Great job, AJ. Now that you know the pitfalls, you'll know what to expect and what to avoid.

And if the market is really going to crash soon, you could find some great deals?

Dust Bunny Queen said...

I had a client who (with my approval) moved a large amount of his bond portfolio into rentals in the Bay Area during the height of the crash and burn. Many foreclosures of homes that were selling at less than 50% of original mortgages. The devaluation of homes was incredibly steep in some areas.

His bonds were maturing and the income stream was going to severely drop because the Fed was (and still is) artificially depressing interest rates. By scooping up foreclosures in the desirable areas of Walnut Creek, Alamo and other nice suburban areas, he could actually increase his income stream. He wasn't actually flipping the houses as there wasn't much upgrading or repairs that needed to be done. He but made sure that he was buying at a really good price, not excessively obscenely large McMansions, but well built homes with nice amenities. He could rent to qualified renters at a much better income stream to himself than I could possibly get him in other income investments. Even with hiring a property management team he was coming out on top. After discussing all the negatives and positives, risks and rewards, I encouraged him to go ahead and invest......about 2 million. I lost a bit of commissions, but it was the right thing to do.

Since then.... I have retired....but spoke to him a few months ago and asked how it was going. Not only does he have good income, ALL of the properties have increased in value from their market price when purchased and he has sold a few of them, carrying the paper himself for an even better increase in income stream. And his income is collateralized.

Happy ex client. :-)

I'm Full of Soup said...

Deb-

Thanks - that is a nice big [1,500 sf) semi-detached home in a hot little town.

I am not looking to do this again right now- I am thinking about finding a place where I could build my last home to live in and maybe have a rental property next door.

As to the housing market, as long as Doofus is president, the economy will continue to stagnate and bad things will happen again and again.

deborah said...

DBQ, the icing on the cake for your client, I imagine, is that when the market crashes and people lose their houses they need to rent! Ergo, rental price go up.

AJ, sounds good :)

Unknown said...

Back in the 1990's I wanted to buy-up old bungalows in the Cherry Creek North area. I didn't have two nickels to rub, so it never happened. I'd be rich now, I tells ya, rich!

btw- election = electrician in above post. (at least I didn't post the word erection)
I'm pretty sure he (they) plunked 3-4 million in upgrades into the place. No short cuts were taken. I had my doubts any of it was a good idea. I've been given two personal tours and the guy is eager to show it off. The high-tech low voltage wiring and the HVAC systems in the house are something to behold. The mechanical rooms are works of art. The photos don't do the view justice.

Unknown said...

Rabel - Your buddy seems to have a $16,100.30 half year property tax bill due ... today.

I saw that. +30K property taxes. They are just waiting for the right buyer and I have no idea how they are able to hang on. It's been on the market for years now.

Unknown said...

I haven't spoken to Roy since last summer. I should give him a call and tell him that some of those photos are not worthy of a house of that caliber.
The hot tub on that back patio is really amazing. It's very private and tucked in between the house and the mountainside rock formations. The cover on the tub should be removed and the water should be bubbling and blue. A cocktail cart and colorful flower pots are needed. Some of the interior photos, like the last one, suck. Terrible. He needs me to help him stage the place and he should find a better photographer.