Lets start of with a quote by your very own and favorite Dingo:
“Real estate isn’t supposed to be pretty. It’s supposed to be profitable.” — Engelo Rumora
And with that little-but-important fact out of the way, I want to arrive at the point of my article today: Reality TV flipping shows suck. It’s one of those things that really grinds my gears. They show a world that’s too pretty, too good to be true, and too much like a fairy tale’s world. True, it does lead to people getting interested in the business and lots of viewership, but imagine when a prospective real estate investor starts to believe that a home that looks like a dump can be converted into something that looks like the average Disney castle — all for low costs and great profits and, of course, delivered within unbelievable timeframes.
I’m sure you get my drift. So, the next time you turn on the TV and stumble across a flipping show, I suggest that you replace those rose tinted glasses with real ones and consider these two points I’m about to make.
This advice is especially for those new wannabe real estate investors, who use these shows as educational material and the reason they invest their savings and start off. Let me warn you that over time, I’ve heard of many people like that who have actually left the comfort of their good-paying jobs to venture into real estate with terrible consequences. So, this post is for those who take shows like that seriously and for those who want to get into real estate based on the beautiful world presented by them.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
Smoke and Mirrors
To investors like me, most reality TV flipping shows are downright scary. And that’s because they make the average viewer think that they too could invest just a little money, turn a house around, and sell it for sky-high profits. These shows often make the investors look like knights in shining armor, but those who’ve worked in real estate can tell you that most of the figures they show on TV are bogus. Look closely at any of the shows, and you’ll notice. You have to trust me on this, as I have already been approached by 7+ production companies and refuse to “act” unless I know I can be myself and that everything filmed will be the real deal.
1. Math Missing
Most of the numbers are fake and have been created for the show. For one, notice how the rehab costs are always undervalued. They don’t take many costs into account. Things like fees, holding costs, commissions, closing costs, etc. are all left out. In fact, the next time you watch a show like that, I recommend that you take a look at the actual market rates for the region and do your own math. You’ll figure it out, too. The numbers seldom add up, and that alone reveals how scripted the shows are. In some instances, even the end sales price is manipulated. What a bloody joke.
2. Buyers Galore
The shows portray that there are always plenty of buyers lined up just to buy the house. (In fact, you’d also feel that houses suited to flip are easily found in the market. But in reality, it requires a decent understanding about the market and takes plenty of research, too.) Well, a real investor has to work really hard, not just to find houses to flip, but also to find buyers who’d be interested in picking up the property.
3. Too Quick
Real estate is a time-consuming process. It takes some time to find a house and buy it. And it takes even longer to renovate it and finally sell it off. However, these episodes show quick turnaround times with massive renovations as well. The program makes real estate appear as a get-rich-quick platform, luring in unsuspecting people.
4. Know-it-All Investors
These real estate investors seem to be of the know-it-all kind. They’re seldom involved in doing any research. In fact, most of them just know the costs, repairs needed, market information and have all the data inside their head. They’re never found researching, comparing and learning, which is rather unusual for a dynamic market like real estate.
5. Too Dramatic
They have too much drama, and the investors are seen shouting at each other, commanding people to get work done. In a real life scenario, treating colleagues and workers like that would never keep the real estate investor in the market for long (unless you have an Aussie accent like me, and everyone thinks it’s funny when you curse).
Their personalities! It is hard to see real estate investors wearing expensive suits and accessories, driving huge cars, and then bargaining on small costs. A real estate investor is always a people’s person because that’s the community where he buys and sells, but these shows make real estate investors seem like pompous and rich people — which most are not, in case you were wondering. This is a “Bloody Joke #2.” I can’t tell you how much it pisses me off seeing someone wearing a $10,000 Rolex and sanding floorboards.
7. Clearly Scripted
You can really make out how scripted the show is when you look at it closely. For example, in one of the shows, the real estate investor proudly announces at the start that he’s made a deal without even seeing a property. He also announces with pride that he’s sure to make a profit out of it. And then he approaches the property saying that he has to do something about the water problem.
Which brings us to, how did he know about the problem without seeing the house at all? Also, no real estate investor in their right frame of mind would buy a property and make announcements like that without ever even seeing it! The scenes and dialogues are always scripted, and any real estate investor will tell you exactly that.
Money Making Schemes
If there’s one way to over-glorify real estate, it is to create a TV real estate flipping show. This is where the down to earth real estate investor becomes the suited hero of the show, where issues become challenges, and where there’s always a happy ending, no matter what.
The hard reality of real estate is much different, and these programs are often money minting schemes. They are made for pure entertainment and have zero educational value. Which brings us to the question: If there’s very little profit to be made through reality flipping shows, then what’s in it for the makers of those shows? Why are they making a show that will not generate house sales at all? Well, there is profit for them, and it comes from other sources.
1. Rags to Riches Stories
A few episodes of shows like this, and you’re convinced that you too can dump your savings into a business and make a fortune flipping houses without any experience. In fact, scour the internet, and you’ll come across many cases where people have dumped their savings to make fortunes in real estate. It really isn’t that simple and requires a lot of learning, preparing, and smart investing techniques. Most importantly, it needs plenty of financial investment along with the experience.
2. Promoting Boot Camps
Notice how some of the episodes actually promote their boot camps. Many wannabe real estate investors have put in money to learn from the so-called television experts so that they too can get rich quickly. In fact, if you really check the profiles of online real estate investors, you’ll be surprised at how under-qualified and inexperienced some of them are. The Ripoff Report and the first three pages of Google are your best friends. There are too many scammers, so BE WARNED.
3. Build Star Appeal
These shows are about building star appeal. A person who features in one of the seasons of any such show has made himself/herself noticeable to a wide audience. This can help them charge more for their services because television has made them a star. In fact, most real estate investors use this platform to build their credibility, something they can easily cash out on.
4. Sell Courses
Their popularity makes it easier for them to sell their courses, seminars, and other material for subscribers. In fact, that’s the primary reason why they’re out there. And this, my friends, is “Bloody Joke #3.” Don’t do it. Find a local mentor who is already making it happen with their real estate investing and brush shoulder with him or her as much as possible.
5. Investors Left High & Dry
In some cases, money is made through a house sale, and the mastermind behind the show keeps it all while unsuspecting investors end up spending too much and are left high and dry.
6. Ad Revenue
Advertisements and free promotions for the people who star on the show are perhaps the most common revenue generators for the show. And so, I insist time and again that people shouldn’t watch these shows for educational value but only for their entertainment value. Please don’t hate me if I one day do an ad for the Outback Steakhouse. They have pretty decent steaks. 🙂
It may be called reality TV, but really, there’s nothing real about it. They’re tempting enough to make you want to invest, but very few of those who’ve tried this form of investing have actually succeeded.
All that being said, while current television is guilty of misrepresenting how real estate transactions take place in the real world, it definitely is a great medium for educating people about real estate. However, real real estate investors need to take center stage — no more actors. Shows like this should be cautious of the kind of cast they choose. They should also promote real estate practices that are believable and show the hard facts of real estate over its glory. Only when the right people show the right way that real estate works will these shows will have meaning. If you really want to learn about real estate, get out there and work with the right experts who have real experience — not the televised versions.
Investors: What do YOU think? Do any of these shows portray anything close to reality?
Leave your comments below!