Rental Property Investor · Bel Air, MD · Member since 2018 · 40 posts · 16 votes
Due to all these fix & flip shows people are convinced that it's just like Real Estate investing in real life outside of a TV show. What key differences and inaccuracies would you point out that show reality vs a tv show?
HGTV is like Instagram. Everyone pretends its so great and fabulous and their life is 5x better than it really is. The reality is REI is not like that. Its a lot of hard work and grind and some blood like Jim said.
First off you can’t purchase, rehab and sell the property in 30 minutes. You need education to decifer reality from reality TV. The rehab numbers are typically less then what it really takes. If you are a seasoned investor with a team in place you are getting your rehab numbers at a discount based on volume. The first time investor is not getting those numbers. Education is required. You need to learn how to evaluate properties yourself. Lastly the total profits on those shows do not account for all cost. They generally do not include holding costs.
First off you can’t purchase, rehab and sell the property in 30 minutes. You need education to decifer reality from reality TV. The rehab numbers are typically less then what it really takes. If you are a seasoned investor with a team in place you are getting your rehab numbers at a discount based on volume. The first time investor is not getting those numbers. Education is required. You need to learn how to evaluate properties yourself. Lastly the total profits on those shows do not account for all cost. They generally do not include holding costs.
Education is the key to being successful.
Yeah I know they didn't include every cost, they do just Sale price - Purchase - Rehab. A lot of people I know watch HGTV and believe that load of crap, so just want to a know a few key differences to point out to them.
A few of those shows are decent and fun to watch, but it's entertainment to me. Most of them are terrible from a REI standpoint. You can't just add 20k to your budget mid project and then get to the end and say "well we spent 20k more than what we thought so we'll just price it 20k higher". Sorry, but it doesn't work that way. Most of the time the "surprises" just seem fabricated for TV to me.
I will say though that watching those shows 10-12 years ago really got me started and developed my passion for REI. I looked at them and thought that I could do that. So I guess they aren't completely terrible.
Reduce their "profit" by 40% to get close to the true net. SE taxes, ordinary income taxes, state taxes, transfer taxes, recording & escrow fees, title insurance, etc all left out....
HGTV is like Instagram. Everyone pretends its so great and fabulous and their life is 5x better than it really is. The reality is REI is not like that. Its a lot of hard work and grind and some blood like Jim said.
Time: It takes more time than you think both to do the rehab, getting trades organized, finding good trades people and your time dealing with the projects, finding good opportunities.
Costs: The true costs include taxes, closing, carrying costs, etc. Better to overestimate your rehab costs and underestimate the after reno value.
Effort: You have to find the deals, do the math and be realistic.
@Nick Murray - Expectations vs. Reality. HGTV shows are all the fun, magical parts without the time, energy, and suffering in-between. From a numbers standpoint though, I guess HGTV is the best REI ever with 100% success rate and never a failed job haha. Maybe we should learn a thing or two from them ha
@Nick Murray I've been featured on HGTV and I'll be honest, there was maybe 30% of the show that was real and the other 70% was scripted or planned as much as possible. A majority of the episodes are 20-21 minutes so you're getting approximately 7 minutes of real material.
These shows are primarily for entertainment purposes and similar to movies or Instagram as @Frank Wong mentioned the reality is REI is not really like this. I would venture to say that today maybe 20% of the shows are factual.
It's okay to take information and ideas from these shows, however, it will require a lot more than a 21 minute HGTV show to be successful in REI.
There was a poster on BP a while ago who was starring in an HGTV show (not sure it was HGTV though) and he posted about it. I watched some episodes and did a quick google search of the house. The numbers on the show did not match with the numbers I found. I asked about it but not sure I ever saw a real answer to that.
My favorite lately is Flip or Flop where every single house they get their budget and halfway into demo talk about moving/opening up walls. These two have flipped hundreds of houses and I'm supposed to believe they didn't plan to open the walls up to begin with? It's every episode.
When people ask if house flipping is like TV, I tell them it is. There will be issues that come up, the house will be nasty when you buy it and it will look nice when done. The people on TV got there by flipping hundreds of houses and have all their team in place, so they can do things faster and sometimes cheaper, it's just the nature of it.
Thanks for all the responses so far, some of the things mentioned I assumed such as majorly scripted or not showing all the major mistakes, and including all costs.
Wouldn't it be so funny if there was a show where the investor calculates the numbers on the spreadsheets and gets anxiety over the decision to make an offer. Lol. The whole show they would be like, I don't know, I don't know, maybe...
Those shows mostly cater to flips. Those shows have fueled the craze for flips during this business cycle. In the end, it is an entertainment show, but you can get a few ideas and inspiration from them.
I mostly renovate to rent. So there is little creativity involved. I use similar materials, finishes and colors for all projects.
They always go over budget, raise the selling price and end up making even more money. In reality, going over budget cuts into profit and often leads to loss.
Like all "reality tv" the flip shows are scripted. They intentionally introduce problems and drama to make it more interesting.
Also just to clarify, that Tarek guy doesn't really tile bathrooms. They film him putting up the last tile... It is all fake. Maybe at one point the stars actually had a flipping business, but now they just have a scripted tv show.
I don't have cable, but I watch HGTV in the hotel room and have to admit I enjoy it, like I enjoy eating junk food.
However, there is nothing like This Old House for old school rehab addicts.
They always go over budget, raise the selling price and end up making even more money. In reality, going over budget cuts into profit and often leads to loss.
Like all "reality tv" the flip shows are scripted. They intentionally introduce problems and drama to make it more interesting.
Also just to clarify, that Tarek guy doesn't really tile bathrooms. They film him putting up the last tile... It is all fake. Maybe at one point the stars actually had a flipping business, but now they just have a scripted tv show.
I don't have cable, but I watch HGTV in the hotel room and have to admit I enjoy it, like I enjoy eating junk food.
However, there is nothing like This Old House for old school rehab addicts.
I always laugh every episode when he is putting up tile. All the tile is clean and then he puts one up and it's covered in thinset and looks a mess. I'm not sure why they even show them doing any work, I don't think people expect millionaires doing hundreds of flips a year to actually be touching the house, do they?
A "real" flipping show wouldn't be interesting. These shows cater more towards the problems, and the final product. I enjoy watching them myself.