Flipping property in the Boulder Real Estate Market

photo_091107_009.jpgWhile there are still opportunities for flipping real estate, Boulder isn’t as easy as it used to be. How about this Holden Lewis article from Bankrate?

You come home from a long day at work and, while channel surfing, you come across a show in which guys are buying run-down houses, fixing them up and reselling them for huge profits before the first mortgage payment is due.
Wow. What’s more, they claim they make as much money on this one house as you have in the last year.
They don’t look or sound any smarter than you are and they’re raking in the cash. You start crunching numbers and, before you know it, you’re thinking about a career change.
Before you quit you day job, can we talk?
It’s not as easy as it looks on TV. The price run-up of the past few years led thousands of people to reach the same conclusion you have. There is a boatload of competition out there, which means that the obvious deals are gone in a heartbeat. The pros will tell you they make their money on the front end by buying properties for at least 30 percent below market value. Finding those houses takes time and once you find them, you’ll need to move fast. And no matter what the late-night gurus say about doing this with no money down, it hardly ever works that way. That means you’ll need access to cash to do the deal, not to mention the rehab.
“The masses believe in the dream that’s been promised to them, that they’ll be making a fortune in the next six months,” says Manuel Iraola, president of Miami-based Homekeys.net, an online real estate company. “They don’t have the basic know–how. If it were as easy as they make it seem, 286 million people would be flipping real estate.”
Richard c. Davis, owner of Trademark Properties and creator and star of A&E’s reality show. “Flip This House,” says no one can watch his show and get the impression that this is an easy way to make a living.
“In our original video, we had a warning,” Davis says. “Do not try this at home. It’s for trained professionals. You will lose money.’ I got two guys following me around with a camera. There are no scripts. If I lose $100,000, you see it.”
While he understands the desire of people to get in on the action, he doesn’t have a lot of sympathy for people who don’t want to invest the time that’s needed to learn the business.
“Right now, you have people jumping in on frenzy and it will bankrupt a lot of Joes and Susies who have no business doing this,” he says. “I mean, my wife is a doctor; you don’t see me going out doing heart surgery.”
What’s there to learn? Atlanta-based financial adviser Bill Kring wishes people understood that they need to have adequate savings in place to pay the bills while money is flying out the door for cabinetry, plumbers and plants.
“In a business with zero income until liquidation, what are your resources?” Kring says. “What are your abilities to borrow? Without that, you’ll never make it.”
Access to large amounts of cash is the hardest part – and one of the biggest misconceptions – of the business, says Raphael Isaac, who has been rehabbing and reselling houses in the metro New York market for 14 years. For most of his deals, he puts at least 10 percent down and then has a month to close.
“If you don’t close in 30 days, they keep your money,” he says. “Then you need more cash to carry the house, the insurance, the utilities and the maintenance. You won’t get a contractor to renovate a house for no money.”
To Joseph Patton, getting cash is the easy part. The hard part is finding the properties to buy.
“These properties are not for sale through Realtors and they’re barely available through auctions,” says Patton, who buys primarily in Philadelphia. “(Finding them) is very time-intensive. You have to be out there on the street. It’s almost banging on doors…It’s not an insider’s game, but you need to put in time to build the network.”
So, does it make any sense at all to do this? For the right people and the right reasons, sure. Detroit-based real estate broker and investor Ralph R. Roberts tells people to learn everything they can about the industry and don’t consider making it a fulltime career until they’ve made double the amount of money in a year that they do in their current job.
For more information, visit www.bankrate.com/housingbubble.

By Holden Lewis, bankrate.com

Check out this renovated condo to see what it takes to compete in the Boulder market.

Comments

One Response to “Flipping property in the Boulder Real Estate Market”

  1. Boston Condo Guy on October 25th, 2007 3:17 pm

    Richard Davis is really fun to watch. To piggy-back on some of the warnings that came up in this blog post, you can look at some of the unfortunate issues that A&E’s San Antonio team have been experiencing lately regarding foreclosures (www.flipthislawsuit.com has the details).

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