House flippers hurt or help (income tax, mortgage, sale, housing)
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The flips in LA are almost universally awful. Plus with the more "minimal" aesthetic that is popular, there isn't even much interior renovation. They just rip everything out, paint the place white, put some fake antlers on the wall and add $200K to the original price.
what we have around here are flippers who lock up properties with options - promote the property as being worth "X" ARV, estimate the repairs to be a certain amount - and then sell the contract without taking ownership of the property. if it was such a good deal they wouldn't try and get rid of it and do the work themselves.
these are the "we'll buy your house in 5 days for cash" artists who are of questionable integrity.
Many homes that are priced that low are in such bad condition they cant qualify for a mortgage, for a number of reasons. Thus, the house must be bought for cash. And who has cash? Investors.
So no one is taking those homes away from low income people.
Low income? Not sure what figures you are considering for that... something between $10K & $45K?
In the circumstances that homes are in such poor condition that it takes more than a few thousand, I then would have to agree. But there are many homes under $150K (the marketable value that I was recently in) that are being snatched up -- some without even needing repair. A few months later they are resold for considerably more. Good investment, yes! But more and more states are giving a period of time for homeowners to have a chance first.
During this time, I learned to look constantly and act quickly. Finally found one in a nice community before investors... not needing any repairs.
what we have around here are flippers who lock up properties with options - promote the property as being worth "X" ARV, estimate the repairs to be a certain amount - and then sell the contract without taking ownership of the property. if it was such a good deal they wouldn't try and get rid of it and do the work themselves.
these are the "we'll buy your house in 5 days for cash" artists who are of questionable integrity.
That is what a true "flipper" is. A flipper is one who buys or takes control of ownership of a property and then sells it, HAVING DONE NOTHING TO THE PROPERTY. One who buys a property and fixes it up and then sells it is a rehabber, or a remodeler, or a contractor, or a builder, but not a "flipper". True "flippers" are selling properties to investors that need a lot of work and don't qualify for mortgages, not to prospective homeowners. Many honest contractors who had purchased dilapidated properties to rebuild and sell to homeowners were the real victims of the great recession when the prices deflated. The remodelers, many of whom borrowed to buy the property, and borrowed more for the repairs, were then foreclosed on while the flippers walked away several months before with their pockets full.
Some posters have noted that selling these properties to tenants who can barely afford them is the fault of the remodelers. I wouldn't blame the remodelers for the loans, though I do blame the remodelers for shoddy work. I blame the banks for making such loans, the lying loan officers and lying realtors who helped the banks make such loans, and most of all the government who has forced the banks to make loans to such unsavory characters.
Well, as noted in a current thread I've got going, I'm in the process of buying a flipped house and I'm confronting the flipper right now with the unpermitted work he's done (the safety defects are precisely in the unpermitted work he did).
I've spoken to the inspector, but I suspect it's just going to come down to a game of chicken: Is the seller is willing to let my sale go or will he do the right thing and get the work done right, then inspected? But for sure, we've made sure the agent knows there are newly discovered defects as well as the unpermitted work that must now be disclosed to future prospects. On our part, we've put close to $3,000 (including the earnest) into the purchase, and we'll have to walk away from that.
Play hardball. Report the code violations to your city or county department of building and safety. By doing this you are ruining the seller's chance to sell the house without inspection and bringing it up to code.
Of course when somebody is slammed with a hardball they can't counter they get pretty pixxed off and the seller may pooch your deal. But you don't really want a house not up to code anyway, do you?
Call building and safety tomorrow. Hand them your paperwork if you think that's wise.
Just had a foreclosure nearby get rehabbed and put back up for sale 30 days after the closing.....200K more than they paid.
Here was the remodel:
1. Paint inside and out
2. New kitchen cabinets/appliances/carpet
3. Turn pool blue (drain/refill)
4. Re-Landscape front of house
Workers:
All day labor types. 80% didn't even drive, never saw a single truck in the driveway with contractors info on the side/signs of any kind. One day they had a uhaul and a home depot truck in the driveway simultaneously removing debris/dropping materials off.
As a architectural designer I guarantee you would run screaming if you saw some of the work (and I use that word loosely) that flippers do. Remember they are NOT a builder ( who has to warranty the house for x amount if time) they do not have to offer a warranty on the quality of the material and/or workmanship.
So yes you get a " new" remodel. The question is how good was the work. Now there are some flips who are done by honest well meaning investors.
If you ever buy a flip ask if the work was permitted and ask to see the permits. If no permits be weary
I saw a typical 3BR '50s house a bit larger than my own 3BR 1BA '50s house a few weeks after moving into my new house ($200K up from the old house) which a flipper had converted the garage into a BR, then walled off part of the small "master" BR and added a SMALL 3/4 bathroom--leaving about enough room for a queen bed and a dresser in the "master" -- and called it a 4BR 2 (or maybe 3) BA with master bedroom suite, and wanted about $35K less than my luxury house in Valencia.
My Northridge house (less than a mile away) sold for about $300K and they wanted something like high $400K area. Odd lot shape, smaller than my old 1/9 acre, no garage, and an appearance that shouted "FLIPPER!!!".
It was an open house and nobody there except me and Realtor. I kidded around with him for a while, then told him what I'd bought in the Santa Clarita Valley and how much, and suggested that only a fool would pay his asking price. I feel bad now, I may have hurt his feelings, but often the truth hurts.
Location (yada, yada). He wanted to sell a high $400K range house surrounded by $300-$325K houses, and a clumsy flipper at that. The house also seemed to make me want to watch "Dragnet" and "Maverick" and "The Art Linkletter Show" again...
Ah, flippers..... This flipper violated a cardinal rule: DO NOT OVERBUILD!!! Any neighborhood will support only so much price over the typical house in the neighborhood. No matter how much expensive lipstick you put on the pig it is still a pig with expensive makeup.
But the neighborhood is centrally located to jobs and shopping in the San Fernando Valley. Maybe the flipper made his price point.
If by flipper you mean someone who buys a house that requires significant work to be desirable, performs that work, and can do the work efficiently enough to make a profit (eg they are a tradesman who does this on the side), then yes they are performing a net good as their profit comes from the extra amount of money people are willing to pay for "move in ready".
If by flipper you mean someone who buys a property, slaps on a few coats of BS and tricks someone into buying, then those guys are not. Their profit comes from people paying more for something than they would if they had complete information.
Only a stupid buyer can be "tricked" into buying a house. There is due diligence, and there is a Realtor, an inspector and an appraiser as a safety net. And there are stupid people who ignore all the good advice they get.
But there are good flippers. Not everybody wants to buy a house and put a lot of repairs in to make it livable. Good flippers satisfy this market by doing the dirty work efficiently (they always have their crew of contractors) and put the house back on the market to be bought by somebody who doesn't want to do the dirty work.
Flipper does not automatically mean shoddy house. There are good and bad flippers, good and bad flipped houses.
Many homes that are priced that low are in such bad condition they cant qualify for a mortgage, for a number of reasons. Thus, the house must be bought for cash. And who has cash? Investors.
So no one is taking those homes away from low income people.
That is my last best chance in real estate. I have already limited out on mortgages. Nobody will lend me any more money. Never mind all my properties will show profits in the coming years. I'm at the limit.
If I want to continue real estate (probably not) then turning to flipping is my only choice.
There, the art will be in knowing what I'm paying for what is probably an "as is" house, how much it will cost me to fix it up to meet neighborhood standards, and prices, and see if there is any profit left after I pay off the contractors.
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