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My buddy is good friends with a pro home flipper/landlord and he nearly always makes money.
But to do it right is expensive and time consuming. He had 5-10 guys usually on payroll, meaning they get paid regardless of any work. And he works them a full day. Like from 8am to 7pm Monday to Friday and Saturday is catch up work usually 8 hours each.
He never buys houses in incorporated areas or HOAs and no houses that require permits.
After Sandy my house was devastated had like five feet of water inside the house. And no flood insurance. I hired these guys and as I had no money for hotels I wanted it done as quick as possible.
The flippers OMG, they show up a day or two before drop off all tools, they order all material delivered to house. We gutted garage of all stuff since ruined anyhow and stacked building material as it came in.
They showed up in an unmarked van, parked up the block dressed in business casual, kakis, etc and got to work. 7 Days a week sunrise to sunset. These guys flew, most did not even speak a word of english. Ripe out, Plumbing, electrical, tiles, it was crazy speed.
December 2012 I got back into house and project was done by New Years. I threw a birthday party for Daughter in January 2013 and when it got dark you could see my house from blocks away as I was the only occupied house.
The regular contractors, waiting on electricians, plumbers, tile guys, inspectors, adjusters, taking days off running multiple jobs it took forever, in the end my project was done for 35k. My neighbor paid 125k same project and what I did in two months took him six months.
One sunday they even ripped out my main sewer line as it rusted out replaced it all PVC and added a sumpump in a few house. My neighbor had a licensed GC who was a nice guy and not busting my chops as he knew I had no insurance. But he fell off his chair when Saturday I had the issue of no water in house do to sewer line closure do to salt water which was going to stop work and when he showed up to my neighbors house Monday morning it was all changed. It actually told me it motivated his guys big time as we had identical houses and identical damage and the flipper crew was flying so quick they started moving a lot faster.
...They showed up in an unmarked van, parked up the block dressed in business casual, kakis, etc and got to work. 7 Days a week sunrise to sunset. These guys flew, most did not even speak a word of english. Ripe out, Plumbing, electrical, tiles, it was crazy speed.
The regular contractors, waiting on electricians, plumbers, tile guys, inspectors, adjusters, taking days off running multiple jobs it took forever, in the end my project was done for 35k. My neighbor paid 125k same project and what I did in two months took him six months.
So the moral of the story is: everybody should employ unlicensed & undocumented workers, & pay them in cash, under the table, & disregard minimum wage standards & working hours, & dispense with workmans' comp & liability insurance coverage, & avoid pesky state & federal payroll taxes, & intrusive building permits, license fees, & inspections?
I can't stand watching HGTV anymore... its 99.999999% reruns.... and they are not anymore realistic about price... they are trying to "entice" people to remodel by quoting absurdly low prices and when buying property, who buys asking price? Not me or anyone I know...
I'd agree that a lot of their labor and material costs seem a bit underestimated, but they certainly must make a profit on most of their flips. They've already sold around 20 flips this year and have about another dozen pending. The show only shows the properties that are more dramatic -- or made dramatic with fake or real break-ins, etc.
Since they take on double the liability by both being the seller and the listing agent, I don't think they would take the risk of not fixing structural or serious non-cosmetic issues that were discovered in the updating process.
I'm just tired of investors getting the all cash jump on properties. Plus they are no more than the remnants of the flippers from the mid 2000's; using the same tired materials with no real design sense.
Lastly, even though I only have a surface understanding of reno cost estimates, I know that they absurdly underestimate the cost of all their reno and restoration. Either that, or they are using the absolute cheapest finishes, which would make sense.
A livable flip, with mid-to-high end finishes, due to my estimates, would cost around 100k+ everytime.
I can't hate on them too much for being successful, but I'm thinking this well is going to dry up pretty soon, and people like them will have to pivot on to something else...and I hope soon.
I'll watch because I don't mind seeing the areas in the show because they are familiar to us.
I can't stand watching HGTV anymore... its 99.999999% reruns.... and they are not anymore realistic about price... they are trying to "entice" people to remodel by quoting absurdly low prices and when buying property, who buys asking price? Not me or anyone I know...
I stopped watching them about 3+ years ago as the started dumping all their garden shows. I vividly recall (I was pretty ticked) when they canceled one last garden show, I wrote them and told them they needed to take "garden" off their network name because they sold out. Haven't tuned in since.
Haven't seen the show, sorry. With renovations it can be done well for less if you know what you are doing. On some of those shows I can't believe how much money they waste.
In order to make money flipping, you must purchase the property for seriously under market. Best purchases are properties that just need cosmetic fixes. Structural fixes can add up to a lot of unanticipated expense.
I was an investment/commercial real estate broker from 1972 till I finally retired.
I did many flips. I had a part time crew, to do the work. If you know what you are doing, and you have the right people working for you, you would be surprised at how low the costs can be.
Example: Lets use an example. A home with 6 children that had seen lots of wear. About 8 years old. Took it in exchange as the down payment for 10 acres with the farm buildings, on a 40 acre farm I bought.
Carpet shows lots of wear, and most people would replace it even if the carpet itself is in decent shape, but slightly discolored, etc. showing wear patterns due to slight discoloration. I had my people use fabric dye, and a steam cleaner. They would work as if they were cleaning the carpet, but instead would be dying it. Looked like new again. And I have seen that same house years later, and the dye job always held up as well as new carpet would have. Paint is cheap, so painted the inside. Replaced the switch and electrical plug cover plates (something that improves most homes). Then pulled down the ugly chandelier, with a crystal one I bought real cheap on sale. When that was turned on, it made the home look quite classy. Took out the shower curtain, and replaced it with a set of glass doors that really shined, that I bought on sale. Replaced the sink and and bath fixtures, with new fancy ones that really shined that I bought on sale. Power washed exterior. Painted the front door a dark red to make it stand out. Replaced the address numbers that looked old, with large new ones that were fresh and stood out. Power washed the garage floor, the driveway and sidewalks, along with the patio slab.
When I got done, the house looked almost perfect. A friend that was the HR director for a large electronic factory came to see me. He needed to lease for 2 years, 2 houses for 2 young families coming over from Germany to be trained for 2 years. Needed them furnished with nice furniture. And they were welling to pay premium rent. I took him out to the house above, and showed it to him. Told him what the rent would be, and how much it would cost if furnished. We went over to their office, and worked out the deal. Used his phone to call one of his engineers who lived 2 houses from me, who he and his wife wanted to buy their first rental. He jumped at the opportunity. I called a furniture store owner in a town 15 miles away that I knew, told him how much money that could be spent, and I wanted the engineer to have no money down financing for 2 years, with the electronic company making the payments. He said send him up. He and his wife went up there after work, and picked out very nice furniture. At the end of 2 years, he owned the furniture with never paying anything for it. His daughter got married about that time, and furniture looked brand new the way it had been cared for. He gave the furniture to his daughter as a wedding present, to start married life with. In today's dollars about $20,000 in furniture (as I was in the furniture business for 10 years prior to going into the real estate business I know the current prices then and today). The house was now vacant, and they rented it to them for PITI payment, which was considerable below normal rental rates in the area.
That is an example, of doing a flip. In this case, I made no profit on the house, but used it to get the other 30 acres with owner carry financing. Release 5 acres at a time, to be deeded to the owner of the property. Sold the 30 acres to a developer and walked away with $100,000. My only cost was the cost of prepping the house to make it saleable, which I got back at the closing.
You only buy bargain houses in good structural condition. Buy ones that look sick as this one did, and heal the looks making it shine inside and out.
The man that ran my part time crew, had worked with his wife managing very large apartment complexes for over 25 years until he retired. He did all the maintenance on those big apartment buildings and could do anything needed. He was highly experienced in getting really messed up apartment units back in condition when a tenant messed them up real good. Made him an expert, on fixing up flipper homes. My crew was a couple of young guys, a middle age woman and her daughter, and one disabled young man. I paid them under the table. I got them cheap. They could do 1 or 2 houses a month for me. My foreman had all the tools needed having put them together over the years. The ironic thing is my son stopped to see me as his granddaughter came to see him, and she is the mother of 4 of my granddaughters and we are very happy having her as our daughter in law.
Those flipper shows, and home restoration shows are television, and often not real world real estate life. Everything is overdone for dramatic effect. I could take the same house and make it very desirable to own for a lot less money, and time than they show. In the long run, I would make a lot more money on a flip than the way they do it.
Watch the show on occasion and really like Tarek and Christine. Good team. Tarek has battled thyroid cancer but seems to be doing better or at least I hope so.
Last night there was a special Flip or Flop which sort of went behind the scenes of a couple of shows. It showed you some things that the show did not cover like added expenses and reasons they did some of the things they did. They also visited one of the homes they had done and got a tour. The place looked great and the new owner loved it. It had a pool and she said her grandchildren are always in it. I am not sure if the show will be repeated or if it is available on-demand but if it is I would suggest you check it out. Jay
I saw this, and IMHO, the new owner cluttered up the house -- it was unattractive. But if she's happy, that's all that matters.
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