[Roosh]

The lead example seems like a big baller troll:

Quote:

Not long ago, John Irvin was selling women’s shoes in the Nordstrom at the Pentagon City mall, pulling down about $20 an hour.

Now he flips houses in Northern Virginia — scooping up short sales, rehabbing them and aiming for a quick sell. He has sold three homes so far and says he netted more than $30,000 in profit each time.

“If I do one house every quarter, I’m making $125,000 a year — at 25 years old,” Irwin said. “All my other friends, they have a 9-to-5 job. They make probably half of what I’m making right now. It’s kind of like hitting the lottery.”

http://www.washingtonpost.com/business/e...story.html

[megatron]

Good find, Roosh. I might get into this one day.

[Drazen]

This wont end well once again. You have maybe a 3 year window until they raise rates until it collapses.

[WestIndianArchie]

I wonder how he's getting the financing and more importantly how his end customer is getting the financing.

But it's been really big in Vegas, Florida, Cali, Arizona - the very states where the bust was the biggest.

I'm just wondering as the inflated loans go to foreclosure, I wonder what is happening to bank balance sheets, in particular the derivatives that overlay the mortgages..

[Bad Hussar]

Shit, it is true. Humans are incapable of learning from others experiences. Hell, even their own experiences. People don't understand financial leverage cuts both ways. It's a sweet angel on the way up and the cruelest ice cold bitch imaginable on the way down.

Anyway, why are banks lending money to flippers post housing bust? Have they not learned their lesson either? Or is there a federal agency in the US that now guarantees low equity home loans, even if bought by speculators (this is the situation in Canada, which is heading for the mother of all housing busts).

[WestIndianArchie]

(10-15-2012 08:53 AM)Bad Hussar Wrote:  

Anyway, why are banks lending money to flippers post housing bust?

He's probably using a private lender that evaluates the each deal.

They aren't hard to find at all. All sorts of Hard Money Lenders infest your local Real Estate Investment Club.

[Caligula]

A friend of mine packages up mortgages and sells them on. He was around in the same business pre-2008. He's convinced there's another big bubble underway since there's a huge divergence in how the people who buy the packaged mortgages are evaluating risk / are willing to pay. Just one data point.

[Drazen]

(10-15-2012 08:53 AM)Bad Hussar Wrote:  

Anyway, why are banks lending money to flippers post housing bust? Have they not learned their lesson either? Or is there a federal agency in the US that now guarantees low equity home loans, even if bought by speculators (this is the situation in Canada, which is heading for the mother of all housing busts).

well, the FED is buying up $40billion per month in toxic mortgages for one thanks to QE3.

[HiFlo]

it's all location dependent. location, location location.

[ColSpanker]

It seems like these fools never learn.

[uncle]

they are not the ones who are fools. taxpayer is the fool because he ends up paying for all of this.

[cat_a_clysm]

In DC, where the RE market basically never crashed and is only going up still

[Teddykgb]

I used to be addicted to watching all the "flip this house" tv shows even though half of them were staged.

[worldwidetraveler]

(10-15-2012 08:26 AM)WestIndianArchie Wrote:  

I wonder how he's getting the financing and more importantly how his end customer is getting the financing.

That is the key, especially when dealing with foreclosures. A lot of banks won't touch financing on a previously foreclosed houses in a flipping transaction.

It is easier with rehabs since they can document all the improvements to show how they increased the value of the property.

[Sanblz33]

(10-15-2012 11:19 AM)Caligula Wrote:  

there's a huge divergence in how the people who buy the packaged mortgages are evaluating risk / are willing to pay. Just one data point.

LOL. How is that possible? I thought the point of TARP & the other programs was to allow the banks to hold the assets on their b/s @ 100 cents to the $.

[Bad Hussar]

(10-15-2012 04:56 PM)cat_a_clysm Wrote:  

In DC, where the RE market basically never crashed and is only going up still

Just wait until an administration that really does dramatically cut government spending is installed. I'm guessing lots of lobbyists, lawyers and federal employees jobs would be on the line.

[kosko]

North Virginia is not the USA. It's in tge DC/Gubmit heartland with all those swelled up Govt jobs and related support services keep that region one of the wealthiest in the nation. Wait till Romney/Obama comes in with the hacksaw cuts then we will see how well this guy is doing. Hell be flipping burgers in due time not houses.

Anytime I hear any economic news with NOVA/DMV I have to take it with a big grain of salt.

[WestCoast]

Every business is "booming" if you find the right niche.

I don't doubt he makes $125, the issue is for how long. If he flips one that doesn't pop he's out 100% of that year's earnings.

If you want to make money in real estate, and want the risk of owning a single asset in a single location, you better search out the pussies. Sack up in palace where there are a bunch of dead end government jobs and you'll have a line out the door for the property, those guys want nothing more than the "American dream"

So sell it to them.

Shit they were dumb enough to work for the govnt they are dumb enough to dump their life savings into "the dream". You can't fix stupid.

[j r]

Flipping houses isn't necessarily a bad thing. It got out of control during the bubble, because people were basically buying property and riding the wave up. Eventually a bunch of people lost that game of hot potato.

If, however, the strategy is to buy a rundown house, fix it up and then re-sell it, that's slightly different. It's based on making improvements to the asset and not just hoping it magically appreciates. I used to watch a lot of HGTV and there were so many times I'd see a show where someone walks into a house and decides they don't like it beccause the color on the walls or the appliances. People are generally willing to pay a premium for houses that don't need any work, more than the cost of doing the work. If you're willing to do the work, there's an arbitrage opportunity.

[worldwidetraveler]

(10-17-2012 09:05 PM)j r Wrote:  

Flipping houses isn't necessarily a bad thing. It got out of control during the bubble, because people were basically buying property and riding the wave up. Eventually a bunch of people lost that game of hot potato.

If, however, the strategy is to buy a rundown house, fix it up and then re-sell it, that's slightly different. It's based on making improvements to the asset and not just hoping it magically appreciates. I used to watch a lot of HGTV and there were so many times I'd see a show where someone walks into a house and decides they don't like it beccause the color on the walls or the appliances. People are generally willing to pay a premium for houses that don't need any work, more than the cost of doing the work. If you're willing to do the work, there's an arbitrage opportunity.

Exactly. I don't think flipping is a bad business model if you are actually seeking out properties that can be improved. It could be rehab properties or apartment complexes that were managed badly.

I remember telling a guy who bought over ten houses in the Phoenix market he was crazy. He was hoping to sell them in a couple of months for the appreciation. I don't think he realized the appreciation wasn't real since it was partly due to speculators like himself.

This was the end of the bubble and he got destroyed. I told him he would get screwed and he didn't listen.

[Bad Hussar]

(10-17-2012 09:05 PM)j r Wrote:  

Flipping houses isn't necessarily a bad thing. It got out of control during the bubble, because people were basically buying property and riding the wave up. Eventually a bunch of people lost that game of hot potato.

If, however, the strategy is to buy a rundown house, fix it up and then re-sell it, that's slightly different. It's based on making improvements to the asset and not just hoping it magically appreciates. I used to watch a lot of HGTV and there were so many times I'd see a show where someone walks into a house and decides they don't like it beccause the color on the walls or the appliances. People are generally willing to pay a premium for houses that don't need any work, more than the cost of doing the work. If you're willing to do the work, there's an arbitrage opportunity.

I guess transaction costs in the US must be quite low. In many jurisdictions flipping really isn't feasible because government fees for the transfer of the title deed (stamp duty) and monopoly maintained lawyers fees to oversee the transaction are so high that even in a hot market you're not likely to recoup the costs in less than a few years.

[cat_a_clysm]

(10-16-2012 10:07 AM)Bad Hussar Wrote:  

(10-15-2012 04:56 PM)cat_a_clysm Wrote:  

In DC, where the RE market basically never crashed and is only going up still

Just wait until an administration that really does dramatically cut government spending is installed. I'm guessing lots of lobbyists, lawyers and federal employees jobs would be on the line.

That will happen never

[kosko]

SF & NYC Will never go down in price.

[WestIndianArchie]

(10-18-2012 10:04 AM)Bad Hussar Wrote:  

I guess transaction costs in the US must be quite low. In many jurisdictions flipping really isn't feasible because government fees for the transfer of the title deed (stamp duty) and monopoly maintained lawyers fees to oversee the transaction are so high that even in a hot market you're not likely to recoup the costs in less than a few years.

The transactional costs are relatively cheap to the rest of the money.

WIA

[k37]

Entering into oppressive financial contracts on the off-chance of a capital gain is insane. Here in New Zealand house prices are higher than they were during the 2002-2007 boom. Why?
Because there are enormous supply restrictions - it's about $50k-$100k in regulatory costs for each house or apartment built.
All it takes for your "dream" of flipping properties for a quick profit to come to a halt is a slight relaxation in zoning laws or council fees.
But doing that would be political suicide because most baby boomers have their cash tied up in housing and can't afford any decrease in house prices - sucks to be them!