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.
this has already happened there was another thread asking about their student program
we just need to remember its not the guru doing the student program its a fulfillment company and most are based in Utah.. with rich dad in FLA.. its huge money business can't blame these folks. if it takes off they will make 5 to 10 million a year in the student business... Just like Armando...Although I still do business with Armando students. just to be fully transparent
Investor · Grayslake, IL · Member since 2015 · 1 post · 0 votes
11y
Flip or Flop does show holding and selling costs. My problem with all these shows is the rehab costs (using contractors) is unrealistically low. The only possible way to keep costs that low is to have your own captive crew and keep them busy nonstop.
In fairness, though, Flip or Flop has 20+ projects going on at a time. And I think that's why they have to go to mom/dad/credit cards sometimes.
this has already happened there was another thread asking about their student program
we just need to remember its not the guru doing the student program its a fulfillment company and most are based in Utah.. with rich dad in FLA.. its huge money business can't blame these folks. if it takes off they will make 5 to 10 million a year in the student business... Just like Armando...Although I still do business with Armando students. just to be fully transparent
Jay I have no problem with making money, that is what our capitalistic system is all about. I just have a problem that many of these "fulfillment" companies that charge ridiculous amounts of money selling the promise of quick and easy financial freedom and target people that are the least able to truly afford the costs they charge. And it is their name regardless who is the perpetrator of the robbery (in my opinion). Because there are so many of these types of firms, I am a HUGE fan of BP and a lot of admiration of Joshua Dorkin for not selling out on the BP family. And it would not be so bad if the gurus just paid if forward for some of the less fortunate people that could use help just like these gurus claimed that they were helped out... just saying
I hear ya.. I have been at them all rich dad ,,, Armando ,, etc etc.. my dealings with the students is on actual homes they bought.. nothing to do with student training.. that's a separate deal from what I do... but regardless its huge money for the Guru no doubt..
Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
11y
From what I have seen, they don't know how to estimate repair costs...
It seems like they budget $40k for repairs, but the repairs actually end up being $80k and then they just increase their ARV by $40k and all is peachy....
Investor · Phoenix, AZ · Member since 2014 · 230 posts · 122 votes
11y
They've said on FB that they buy in bulk because they usually have dozens of flips going on simultaneously. That cuts their costs tremendously, in terms of both goods and labor. In addition, they also have their own company.
While I've never flipped, I think what is accurate is that you never know what's behind a wall, and you'll always go over budget.
Investor · Austin, TX · Member since 2011 · 155 posts · 23 votes
11y
Joshua,
you make some good point, I think that people can use these shows as a baseline but you don't want to over analysis it. Do your due diligence and then jump in every education is going to cost you something. I think the biggest risk is with finding the right assemble of contractors.
I have had my share of kicking guys off of jobs threatening to keep tools and wasting money by trying to take short cuts. Make sure you have reserves and try to stay loyal to quality contractors. I think developing a team is going to be the biggest challenge because it will effect your cost of rehab. The market will dictate the numbers for the cost of the property those are variables you really cant control.
I actually would take a portion of that 300k and start a marketing campaign to find distress properties myself because a lot of foreclosures and auctions in my town don't equate to great deals, because other investors or the banks drive up the price.
Realtor · Las Vegas, NV · Member since 2014 · 993 posts · 1k+ votes
11y
There are a lot of seminars, books and podcasts about how you can get rich flipping properties. Sadly a lot of people believe what they hear and "go for it". I see one or two flips a month where I know the owner is going to lose a lot of money. Unless you really know what you are doing you can lose a lot of money flipping. But, if you are inclined to try, below is a process that I have used and worked for me and I believe will work for anybody.
Once you find a property that you believe has flip potential, take the time to really think the entire process through with a spread sheet. Start with what you conservatively believe the property will sell for if it is brought to market standards (more on market standards later). Do not be optimistic on the eventual sale price or time to sell; be very conservative. Once you are reasonably confident about the sale price and how long it will take to close once the rehab is complete you are ready to work backwards to the maximum you can offer for the property.
Work backwards to make money
As an example, suppose you find a property that looks like a good flip. You carefully study recent sales comps and decide that, remodeled to market standards, the property should go under contract for $200,000 within 60 days after the rehab is complete and it is placed on the market. And, your trusted contractor conservatively estimates it will cost $40,000 and take 2 months to bring it to market standards. Since profitable flippers are pessimists, estimate the total rehab will cost $50,000. Your hold time will be:
As to profit, suppose you will be happy with a 10% return. So, your goals are:
Also during your due diligence you learned that the real estate tax rate is 1%, property insurance is $450/year, purchase (closing) costs are 3% and cost of sales (commissions, closing costs, etc.) will be 8%. I put these numbers in the table below:
Now that we have an (over simplified) estimate of the total cost, we can work backwards from the probable sales price to determine the maximum price we can offer.
Based on the above, you cannot pay more than about $110,000 for this property if you are going to make money. Yes, you can probably reduce cost of sales and perhaps other numbers but you cannot significantly reduce rehab costs and there will always be surprises which will burn you if you do not have sufficient funds set aside.
Flip considerations
• Typically, lenders will only finance properties that are already livable so financing damaged properties can be a challenge. Talk to a knowledgeable lender about 203k loans. Contact me if you need a recommendation. You need to get this nailed down before you even start looking. • You may have noticed that I used the phrase "market standard" multiple times. There is a common erroneous belief that if a property is "really improved" it will sell for more than what similar homes have sold for. This is never true. If similar homes are selling for $200,000, even if you put $100,000 of "improvements" into the property, it will not significantly increase the sales price. One of the biggest challenges for new flippers is the tendency to remodel the property to their taste as opposed to rehabbing to market standards. If similar homes are selling for $200,000 with vinyl floors, travertine tile will not significantly increase the sales price. You need to really know what characteristics made similar properties sell and not go much beyond that. Cost control during the rehab is critical. Of course, there are small things that can make the property much more desirable to potential buyers without spending a fortune. For example, ceiling fans in the master bedroom and family room, improving the curb appeal and the front entrance area, fresh paint, etc.
I hope the above helps. Flipping can be a profitable business but only if:
• You purchase the right property at the right price. • The market makes flipping viable. • You really know what you are doing in terms of the market, construction and you have the needed financial resources. • You have a well thought out plan.
If you can not say "yes" to all the above, don't do it.
Cedar Park, TX · Member since 2015 · 377 posts · 200 votes
11y
It is entertainment. When my wife had a bridal shop, she was approached to be in a show. She was told what to say. She passed as the script would not have been favorable.
Does anyone believe they, as experienced rehabbers, always miss budgets by 20-50%?
I would expect they would be broke if that were the case.
I would bet numbers are embellished during the telling of the story.
One of my employees had a friend who helped produce the San Antonio show. He indicated they made their money from product placement during the shows.
Investor · Fort Benton, MT · Member since 2015 · 3 posts · 0 votes
11y
I do watch these TV dramas. I have to admit that watching these things is one of the reasons I have become interested in the Bigger Pockets thing. I am also realistic and agree with 95% of all of the comments I have read here.
The one thing I take away from the shows is simply the finished product, what design ideas they have shown. I also know that for the most part in taking my baby steps that the makeovers I see, probably are too costly for the type of houses I am involved in, but the ideas are worth looking at the shows.
The one thing I have belief in is the staging they do. In my area seldom is staging done. I am convinced staging can be a positive influence on the buyer. I am trying to figure out how to stage my flipped houses without adding to the cost in such a manner to damage profit potential. I've been kicking this around in my head and have some ideas. Anyone have any experience in this area.
I do agree with one comment about the Fixer Upper show in TX. I think this is more realistic. My one question then about that show is do they include the furnishings in the final sales price. I am led to believe that at least some of it is included, as they have their contractors build tables and such. Any comments?
Investor/Construction Manager · Boston, MA · Member since 2015 · 38 posts · 11 votes
11y
From a contractors standpoint their construction costs are completely unrealistic. It scares me to think that homeowners use this show as a reference for pricing. This is simply a reality TV show thats made for entertaining. $50k for a complete rehab thats done on time, on budget, includes appliances, and looks professional all while pulling permits? In the construction industry theres a saying we use- cheap, fast, correct choose two.
If you want the project to be cheap and fast, it won't be correct.
If you want the project to be cheap and correct, it won't be fast.
If you want the project fast and correct, it won't be cheap.
Investor, Realtor · Decatur, GA · Member since 2015 · 89 posts · 45 votes
11y
What cracks me up the most about the show; They almost always go over budget and need an extra $20,000. After the parents lend them the money they show up to the job site in an $80,000 SUV.
VENICE, FL · Member since 2015 · 113 posts · 36 votes
11y
One pretty funny mistake they made was when they purchased a unit in a PUD and started painting the exterior a color that they liked. The painter just about had it done when the HOA president shows up to tell them that the color was not approved. LOL .... I guess even the "pros" make newbie mistakes every now and then :)
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y
I think all these shows are fun. They're mostly entertainment, though to me they have some value in showing the various finishes they use.
Some of the stuff is obviously scripted. I remember one episode where supposedly in the one night between when they bought the house and when they started work, some "kids" had "a party" and trashed the place. I've never seen such a pathetic effort by set guys to make it look like a bunch of kids had a party and trashed the place. Very, very obviously all faked up.
Another was when Christina was helping do demo (wearing heels if I remember correctly) when she encountered a rat. A white, fluffy, spotlessly clean rat. Maybe that's how Hollywood rats are, looking like they just came from a pet store. Here, they are nasty, gray and won't just stand around looking at the camera.
But they're fun, worth watching for the finishes, and besides, they help set your customer's expectations, so it is good to know what they are up to.
Plus Christina's legs. Worth watching the show for that reason alone.
A white, fluffy, spotlessly clean rat. Maybe that's how Hollywood rats are, looking like they just came from a pet store. Here, they are nasty, gray and won't just stand around looking at the camera.
True story: yesterday I emptied a city rat's carcass into the trash that I had caught in one of my Tomcat "Jaws" traps. Last night that rat episode was on and I had the same thought you did: "that rat on the show looks like it could be a nice pet compared to the rat I just disposed of outside."
Healthcare consultant · Jacksonville, FL · Member since 2015 · 44 posts · 9 votes
10y
I like the show from a renovation perspective but what I dislike is that they are have gone 3 seasons without a Flop. Why not show a Flop or two to show the risk?
I like the show from a renovation perspective but what I dislike is that they are have gone 3 seasons without a Flop. Why not show a Flop or two to show the risk?
Flops don't get people to spend $40K for their guruship.
Investor · Winterville, NC · Member since 2015 · 47 posts · 93 votes
10y
My favorite contractor is Izzie. I sure as heck wished he lived around here so he could totally gut my mid-century modern and re-tile the pool for $40k!
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.
Randy, their parents are very rich? If their parents are rich, I guess they will not need to flip houses..
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