House Flipping (second mortgage, loan, real estate)

[Bently19]

My husband and I live in Michigan and are potentally considering to leave due to the horrible economy right now. My husband is a builder and would like to get into flipping houses in another state. Has anyone done this, what goes into it and is it a viable thing to do to support a family??

If anyone can provide some advice it would be a great help!

[bubbagirl]

If you have the substantial capital to back you on it, yes, it could be a reasonable income. However, this depends on so many factors... for instance, housing market, condition of the house, how much money you can invest, how long you can sit on an investment (if it doesn't sell), and how quickly you can work. I have seen stories all over the news in recent months coming from all over the nation of folks that have lost their butts on this -they didn't research their target area, didn't pick a good house or get a good inspection (ie, attempted to flip a money pit), didn't have enough capital to back the investment, or didn't turn it in time. Very risky business. The biggest rule of thumb... if you have to borrow the money to do it, you'll be lucky to break even.

My aunt and uncle attempted 2 different house flips, one was about 10 years ago and the other just this past year. Both houses turned into money hoards, both houses didn't flip within 30 days, both houses had "unlying" issues (hence, the cheap purchase price initially), and both houses have/are screwing them over financially. The first one took 6 mths to pass final inspection for resale and the broke even on the investment. The second one turned into a HUGE issue, and 9 mths later they JUST got their occupancy permit. It will be another 60-90 days before it will be back on the market, and they will not break even on it. Tread very, very litely.

[TurboState]

House flipping is nearly a dead art in this market nationwide. Especially with sub-prime lending collapsing, as sub-primers were a staple for flippers.

Even shows like Buy me, Flip that house, Flip this House, etc are all running low on episodes because most flippers are exiting the business. Even some of those shows now have horror stories of flips gone bad.

Last nights Buy Me episode had a couple setting up to flip 2 houses worth 750K total in a big area with less than 1000 homes on the market. They took only 3 months to renovate both homes, but by that time the market tanked and there were 7,000 homes for sale. The show ended saying 9 months later they were still paying double mortgages.

My brother in-law is insane, he is trying to flip in Vermont right now. Admittedly, Vermont still has an ok housing market, but the risks of a downturn are knocking on that door every week. His most recent acquisition required a second mortgage on his personal home because the bank wouldn't finance the new house - which is an uninhabitable dump. I think he is in far far over his head on that one.

[magellan]

I would agree that house flipping to make a living is extremely risky, no matter where the market is in the country. Many top financial analysts are pointing at house flipping as the main cause for the greatly increasing market slowdown in much of the country. Many national homebuilders are experiencing their worst financial quarters in decades, and not just "corrections". A lot of people were taking out HELOC's on their current home to buy houses to flip, but when the markets go South, they now are at risk of not only losing the house they wanted to flip, but the house they currently live in. And if you get an interest only loan or some other exotic financing, if you don't sell quickly before your loan "adjusts", you could be looking at a payment double what you are paying.

Just do a search online for "housing bubble" and "house flipping" and you'll see many accounts of the devastation it has taken on fool-hearty flippers, and the havoc it is causing the banking world.

Can money be made in "rehabbing", possibly. But I think much of the speculative buying has hit a lot of markets pretty hard.

[Anu2]

I agree with Turbostate--flipping is dead. In most parts of the nation, the only place real estate prices are going is down. It's possible that you could find a couple of really good deals on houses that need a lot of work, make the renovations, and possibly sell for a higher price but it would be unbelievably risky. And since it doesn't look like you have past experience in this, it would be even worse. The market is so bad right now that even experienced flippers who have made a ton of money in the past five years, are leaving this line of work.

[michiganbob]

While I agree with most here that the recent trend in house flipping is dead in most housing markets in this country, the traditional idea of buying a house that needs work, moving into it and doing the work and then selling it in 3 to 4 years might still be an option. First: you would only have the one mortgage, so you wouldn't be desperate to sell quickly. Second: if the market is slow, you can afford to sit on it and wait until things pick up. Third: if the market does get hot (not likely, but you never know) you could put it up for sale quickly while looking for your next project. I also think if it's a house you would have to live in that you would take more time to get it checked out and check out the neighborhood. Hey, if you wouldn't live there, what makes you think someone else who can afford to would live there, too?

I have a friend in Indianapolis who started years ago with a rundown duplex and ended up trading his way up to a 4000 sq ft mansion in a very nice suburb. He did put in a lot of sweat equity, but he never lost money on a deal and never lacked for a place to live.

Just a thought.

[Bently19]

Thanks everyone for the advice. I thought it to be risky as well. Just was wondering if other people did to.

Thanks!

[cassy1]

I have family that is making a killing in PA doing this. Not just flipping but wholesaling, renting, the whole thing. I think it is possible to still make money out there, but you have to research before beginning. Good luck if you do this.

[samoan_pinoy]

I think house flipping is great when you go in prepared, as long as your chart out your plans than i think It'll be a great assets, I'm also thinking of going into the house flipping buiseness, but before that I'm prepareing myself before i go forward with it.... learn from peoples mistakes and move forward.......

[mjk2210]

It would be insanity to try and get into the house flipping market at this time.