Someone’s Making Money In The House Flipping Industry

Fixer-Upper. Flip or Flop. Desert Flipper. Beach Flip. Masters of Flip.  There is a long list of TV shows dedicated to the practice of buying a distressed property, pouring in energy and resources to improve the house, and hopefully selling it at a profit.  That’s a house flip.

This probably sounds familiar—and not in a good way.  At the height of the financial collapse ten years ago, getting stuck with any number of properties was a quick way to financial hardship, even ruin.

So why are we hearing radio commercials for seminars where—in only a couple of hours—we can be taught the “secrets” of successful house flipping?

It’s back.  In fact, it’s at an 11-year high.  As opposed to the past, home values aren’t leaping 40 or 50% but that’s not stopping the hype.  To be sure, lending scrutiny is tighter. Appraisals aren’t easily manipulated. Back in the day, subprime, easy-to-obtain, loans beckoned and bit hard. Now, borrowers aren’t obtaining non-standard loans with higher interest rates. There are fewer people buying and riding a bubble for a quick resell.

According to real estate brokerage Redfin, the median price of a home sold in March climbed almost 9 percent compared with March 2017. That’s the biggest annual increase in four years.

Helping higher prices are low inventories of homes for sale. The supply was down 11.9 percent in March. As a result, sales fell 3.7 percent. The number of new listings in March dropped 5.6 percent, although part of that may have been due to the Easter holiday falling early this year.

So, house prices are up. Money to be made, right?  Here come the flippers amplified by cable channels and get-rich-quick seminars. With an increase in the popularity of flipping, it might be tempting to want to stick a toe in the water.  Who doesn’t want to be the next Chip and Joanna Gaines?

It is human nature to watch a TV show and ask, “why can’t I do that?”  Being bombarded with radio commercials about life-changing seminars can produce the dreaded FOMO—or Fear of Missing Out.

Another part of human nature is our tendency to forget.  Depending on your age, the crisis of ten years ago might have been something you barely paid attention to –you might have been in high school or college and it just wasn’t something that affected you personally.  Ancient history, right?

A solid financial plan might have a place for real estate investment—but that’s a question for a financial advisor who has both experience and your best interest at heart. You know who’s making money? The crews of out-of-towners that blow into our neighborhoods, charge attendees for their over-hyped presentations, and leave town in a cloud of dust.

For now, keep the flipping confined to TV channels.