Flip or Flop show really that accurate?

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Flip or Flop show really that accurate?

Jordan Williams
Norman, OK · Member since 2015 · 5 posts · 3 votes

Just watched this show with my wife last night. It made me think of the quote the rich get richer but I'm still pretty skeptical. The show basically went as follows:

If you have 300k cash to spare go buy a foreclosure/auction house that needs work

Higher a contractor to fix it up for 40k

Sell it for 400k 30 days later

I'm super skeptical about this process. Does anyone have any thoughts on the validity of this process? 

What are some things to look out for/red flags that they are making it seem easier than it actually is. 

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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
11y

Everything you see on TV is 100% accurate with no added fluff for entertainment factor. Everyone on BP makes 60k a month flipping houses. 

#sarcasm

It's a TV show Jordan. Its value is on par with Jersey Shore, and Honey Boo Boo. 

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  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    11y

    Everything you see on TV is 100% accurate with no added fluff for entertainment factor. Everyone on BP makes 60k a month flipping houses. 

    #sarcasm

    It's a TV show Jordan. Its value is on par with Jersey Shore, and Honey Boo Boo. 

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    16Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    I can't say whether that show fudges numbers or not, but assuming all the numbers are true, and assuming it is as "easy" for them as it appears on television, you should consider this.

    1) Both husband and wife were/are real estate agents in the general area where they now invest, which means they both are extremely familiar with the prices, trends, rental rates, and everything else real estate related in that area.

    2) The couple has access to hard money lenders, their parents (on both sides) have stepped in to loan tens of thousands of dollars when they go over budget, and they also max out their credit cards for tens of thousands of dollars.

    There are other factors, but hopefully you get the point.  Saying it looks easy for them on television is like saying it looks easy for professional hockey players on television.  They have spent a long time honing very specific skills to make it look that easy.  If you haven't put in the time, don't expect it to be easy for you.  And don't expect it to be completed in 30 minutes.

    Also, regarding my second point, make sure you have the capital to see a job through before you jump in the deep end.  I don't recommend your first flip be a $300,000 purchase needing significant renovation.

    5Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jordan Williams

      the shows usually leave out a few salient points that have to do with actual NET profit

    1. Cost of capital

    2. Sales commish

    3. holding cost   taxs insurance utls.

    4. seller paid credits

    5. closing cost paid at the sale.

    what they give you is 3 gross numbers which achieve a gross profit..   so 300k + 40K = 340k  sold for 400k- 340k =  60k  that could very well be... now take out all the actual expenses and your 60k is 30k  :)

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  • Samuel Coicou
    Investor · Midland, MI · Member since 2015 · 37 posts · 13 votes
    11y

    ----My wife and I watch marathons of the show when it comes on and we believe it's about 60-65% accurate. The thing is, California is an expensive state and they live in an expensive area. They can do their expensive renovations because they know that the people buying in their area will pay for it. Ex. If they buy a house for $400k add $50k and try to flip it for $520k, in their area there is a market for $500-$600k so they may do fine. In other areas of California they may not succeed even if they tried to sell that same house for $410k after the $50k renovation. 

    ----Don't trust all of the costs associated with renovations as the two people on the show generally have cheaper costs then everyone else because of their relationships with contractors or reputation in the area because of repeat business. 

    ----The show is definitely great for several things though.

    1) It shows the good and the bad. Sometimes flips do not work out

    2) It shows the many ways of doing business (cash, finance, hard money lender, auctions, short sales, co-flip, buying from other flippers, etc...)

    3) It shows how to renovate a high-end house. (We will take notes on color/material combinations and kitchen arranges any time we see something outstanding)

    4) It shows what type of houses to pass on (bad neighborhoods, busying streets, tiny bathrooms/kitchens, behind highways, railroad tracks, etc... 

    ----In conclusion, the show has good and bad, just don't use it as a bible for flipping house.

    7Reply
  • Jordan Williams
    OP
    Norman, OK · Member since 2015 · 5 posts · 3 votes
    11y

    Thanks a lot for your insights everyone. 

    1Reply
  • Joshua Nudell
    Investor · Bellerose, NY · Member since 2014 · 108 posts · 34 votes
    11y

    @Jordan Williams,

    I hate that show, and yet I stop to watch it when it's on.  The numbers are fairly bogus because as @Jay Hinrichs mentions, they don't take into account the vast amount of expenses that a flipper has to deal with (holding costs, fees, closing costs, etc).

    If you were to look at your example from the boiler plate flip analysis: Purchase price = 70% of ARV - Repairs. You would have an ARV of 400 * 70% = 280 - 40 = 240. They should not have paid more than $240K for the house. But it's a TV show. Additionally, they have a LOT of experience, so they can reduce their holding costs. They are licensed realtors, so they can reduce the amount of fees. They are on a TV show, is that really what they pay for repairs?

    I always thought that there were several things going on there; the contractors were not charging normal rates because they're getting free advertising, are they really concerned about making the right flips on that show, or just doing a flip because they get compensation from the show? Somehow they have all those episodes, so they must be running multiple jobs at the same time, they definitely have funding above their "life savings".

    In a nutshell, don't jump into flipping because the show makes it look easy.  Jump into flipping because you did a ton of research, you've put together a team of reliable and responsible people to get the job done, and you have a solid plan how you're going to go about flipping your deals.

    3Reply
  • Jordan Williams
    OP
    Norman, OK · Member since 2015 · 5 posts · 3 votes
    11y

    Thanks Joshua

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Joshua Nudell

      we actually had one of our new builds in the REality show southern Charm. now it was not a fix and flip... one of the stars of the show actually bought it to live in.. so it was a retail deal.. and they did not ask for anything above and beyond just because we were going to be featured on the show...

    I don't see at the end of the show.. a list of subs or anything.. kind of like you saw on game shows in the day were at the end credits the suppliers were listed.

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  • Darrell Shepherd
    Rehabber · Smyrna, GA · Member since 2013 · 864 posts · 510 votes
    11y

    Yeah, first off "Just go buy one" leaves out where plenty of investors fail, you've got to buy right or you will almost surely lose money, there's always unexpected expenses.  Always.  I've been looking for one for 2-3 months and haven't seen anything worth doing.  I wouldn't buy a $400k house that needed $40k in work for $300k.  My strike price would be around $240k, maybe a little more in a hot market.

    Then there's "just go hire a contractor"  hahaha, oh man.   I pretty much want to drink every single day from dealing with those fools.  The good ones price themselves out of my budget and the cheap ones are insanely unreliable.  Plus, if they smell that you don't know what things should cost they'll rape your wallet.  With no lube.

    Don't get me wrong, I love this business, but there's a lot more to it than what you mentioned.  It smooths out some as you get the people and systems in place, and in 2012 you probably could've done a few and made out.  In a competitive market like we have now, you better be ready to swim with the sharks.

    Also, lots of what you see is fake.  It's TV.  The worst one was the Texas one, that Armando dude lost money on the few I saw, those numbers were way off.  $1200 for a new kitchen?  Yeah right.  And like Jay said, they leave out little things like RE commissions ($24k on $400k), money costs (HM would be $15k+ish on that deal)...taxes, insurance, utilities.  They also all seem to sell in day.   That doesn't happen where I live.

    The jobs are real, but they need to create drama and the money is more made selling advertising than flipping houses...

    0Reply
  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    11y

    another thing - One time, they mentioned how they have partners who invest all the money and then they split the profits.

    magically, there was no mention of that when their "profit" was listed at the end of the show.

    there is so much that's not listed on this show that is reality. but the craziness of the business is spot on. that does happen.

    0Reply
  • Daniel I.
    Investor · Los Angeles, CA · Member since 2014 · 180 posts · 72 votes
    11y

    Man, this show is such a joke. Guy always under-estimates the rehab needed by about $40k, but luckily, comps always increase the ARV right when they finish, so they still make a tidy $40-80k profit. Their profit is never net, despite what they want you to believe. If you're going to watch it, watch it for purely the entertainment value provided by guy in flip-flops being a dope around a construction site. Please note the consistent lack of reality in all reality shows.

    1Reply
  • Chris Soignier
    Real Estate Broker · North Richland Hills, TX · Member since 2013 · 1k+ posts · 607 votes
    11y

    My wife and I enjoy watching those shows for entertainment and to soak in different ideas on design choices like where/when to remove walls, kitchen layouts, etc.

    Their market is different than ours, and the P&L's are drastically oversimplified to the point that I'd never expect to replicate their results. Remember, beyond their numerous advantages (100% private financing, realtors, national TV exposure, etc.), the fees they're paid per show provide a significant buffer against paying too much, cost overruns, and optimistic ARV's.

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    11y

    I watch these shows for mind-numbing take a break value but nothing seriously.

    I just get a laugh for entertainment value.

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  • Account Closed
    Kalamazoo, MI · Member since 2014 · 224 posts · 129 votes
    11y

    Two responses. First I read somewhere, maybe here, that HGTV was shopping experienced flippers for a TV show, but when the flipper showed up he found that he was just an advisor to actors. I get the actor vibe from this show. There is just something out of step with the way things really work. 

    They always have about 30 minutes to check out a hot deal that is coming up on the courthouse steps. And then they make statements that experienced flippers would probably not make. It seems that they are following a script to a target audience. 

    Second if the show is real, there is a whole lot that they leave off. You would go bankrupt in a hurry if you were just running down to the courthouse steps and blindly plopping down a half a million at a time. They buy sometimes in marginal areas and vastly over-improve. If this is anything close to reality it just goes to show how detached the entire California market is from reality

    0Reply
  • Spencer Rossie
    Hammond, LA · Member since 2014 · 41 posts · 7 votes
    11y

    Remove the numbers/dates entirely and in my opinion the show is pretty accurate with some scripted drama. 

    Regardless, you get to see someone purchase a home, diagnose the problems, redesign, repair, then resell the home, with a few missteps or unforeseen problems. Spot on to me. 

    The entertainment and inspiration value is great. Plus you get to see how someone else would execute budget/design/repairs/etc even if it isn't entirely "reality". 

    2Reply
  • Steve B.
    Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
    11y
    if they have to borrow money from their parents and credit cards this far down the road how successful can they be? that's assuming at least this part if the show is accurate.
    0Reply
  • Colin SmithBusiness Member
    Realtor · Colorado Springs, CO · Member since 2013 · 987 posts · 447 votes
    11y

    I meet with a lot of people who want to flip houses and they all say... HGTV make it look so easy so where what is catch? After explaining the challenges with financing, contractors, holding costs, selling costs, and other factors previously mentioned here where they are fudging the numbers or adjusting them for the show, many back out.

    0Reply
  • Lizina GreenPro Member
    Rental Property Investor · Pawleys Island, SC · Member since 2014 · 87 posts · 17 votes
    11y

    I love the show for the dramatic transformations and high-end finishes but I must agree with everyone else that its only partially true. The renovation numbers seem more cost of labor and not materials. Also, they spend on unnecessary upgrades. Lastly, they leave out holding costs, interest payments, closing costs, cost from borrowing from family and at times on some episodes time on market. 

    I watch it almost weekly.

    0Reply
  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    11y

    I think thats exactly what all the shows have become. Some legitimate ways to pick up design ideas. But I wouldn't trust them to be anything but inaccurate. I think they all get talked into coming up with their own "formula" for good flipping tv and just run with it.

    Flip or Flop.  They ALWAYS go over their rehab budget. Every single show they've ever done. And they also almost always list their house above all the comps they pulled at the beginning.  It might be a california thing. But how do they sell so many houses where they're always setting a new comp? 

    Still, the fact that they're flipping volume really appears to be growing suggests they're making money.   And they have some great design ideas.  

    I also believe that they are buying houses at the courthouse steps and making money. We've got a couple of investors that use that model and are doing rather well. Takes having access to significant amounts of capital though.   But I believe that model is a numbers game. 

    I'm sure they make money off a higher percentage of houses than the number they lose money on and thats why they're able to build a very successful business doing it. This company down by us did it.

    But other examples of shows: 

    Flipping Las Vegas. Do you really think that couple (scott and ???) really argue like that over every single house? If they did, then they would have been divorced years ago. Some producer somewhere came up with that as their "hook" and now they have to stick to it.

    One of the ones I do think is a little more realistic is that "Fixer Upper" show with Chip and Joanna Gaines. Some interesting design ideas there but they don't bother with the pretense of how much money they're making. Its all about how much they can rehab for the given budget and what options they choose.

    Ultimately, thats what I wish these flipping shows would start to do. Focus on the decision process.

    0Reply
  • Sean Becker
    Investor · Mill Valley, CA · Member since 2015 · 25 posts · 8 votes
    11y

    While the show may not be completely realistic in the day to day operations of flipping, I do think it is a sexy version of what many of us do, even if they do leave out some important information. It is television after all and I give Terek and Christina big props. Their story is classic REI rags to riches material and they are leveraging off their TV success. I heard they started their own development and RE education firms. Good for them. I hope that they don't let greed take over and sell the dream of easy financial freedom via real estate by taking advantage of people like many other gurus who claim to have started with nothing but yet don't ever seem to pay it forward.

    0Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
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    I think I read somewhere that they get paid $10,000 per episode.

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  • David ShortPro Member
    Flipper/Rehabber · Fishers, IN · Member since 2014 · 71 posts · 47 votes
    11y
    I like the show. 60-70% accurate. They do put sales costs in there net. It is a 30 minute show so they have to condense the decisions. My wife is on me all the time on estimated repair costs so it hits home with me. We will do around 36 homes in Indianapolis this year so we love to hear there different ways to purchase and we get and use some of there design ideas. Well worth the time
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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    11y

    As others have said, it's TV. So, take with a block of water softener salt.

    No one who botches estimates as badly as this couple could reasonably expect to survive long in the rehab / fix-and-flip business. So, they likely take their real numbers, modify them for some "nail-biting realism", then pull it off safely in the end "smelling like a rose".

    1Reply
  • Stephen Chittenden
    Rental Property Investor · Gambrills, MD · Member since 2014 · 372 posts · 88 votes
    11y
    Originally posted by @Alexander Felice:

    Everything you see on TV is 100% accurate with no added fluff for entertainment factor. Everyone on BP makes 60k a month flipping houses. 

    #sarcasm

    It's a TV show Jordan. Its value is on par with Jersey Shore, and Honey Boo Boo. 

     You only make 60k per month? ;-)

    0Reply
  • Stephen Chittenden
    Rental Property Investor · Gambrills, MD · Member since 2014 · 372 posts · 88 votes
    11y
    Originally posted by @Jay Hinrichs:

    @Jordan Williams

      the shows usually leave out a few salient points that have to do with actual NET profit

    1. Cost of capital

    2. Sales commish

    3. holding cost   taxs insurance utls.

    4. seller paid credits

    5. closing cost paid at the sale.

    what they give you is 3 gross numbers which achieve a gross profit..   so 300k + 40K = 340k  sold for 400k- 340k =  60k  that could very well be... now take out all the actual expenses and your 60k is 30k  :)

     I don't know if someone else pointed this out (I'm working my way down), but the show actually does account for 1, 2, 4, and 5.  It does not account for holding costs, but most of their flips are usually fairly quick, so those costs are probably not significant.  They usually don't have 1, because they are often using their own money.  When they have used hard money or borrowed from someone, I always have seen the show include an adjustment to account for interest paid or profit shares.

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