Here’s tonight’s FTH:

Bought for $325,000 956 square feet, $80,000 in renovations. railroad track through the back yard (just kidding, the back yard’s too small for a railroad track, it’s just past the fence 🙂 )

Guy’s a waiter, forgot what wife did.

Trying to sell for $479,000, just fell out of escrow, 137 days on market now.

$479,000 – $405,000 = $74,000. Take out the commissions of maybe 4% – 5% of maybe $20,000, gives $50,000 profit.

So far they have spent over $12,000 in carrying costs, so now they are down to $38,000 profit – all the other little costs they forgot about.

I’d call this a failure, but you don’t see that on TV:

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=C614053&page=18&property_type=SFR&mls=mls_so_cal&cKey=vvk92b47&source=MRMLS

That was a good article. It should be mandatory reading for potential flippers. The author is correct, in that flipping really only works when prices are increasing in a particular market. Real estate has been a great investment long-term – and usually much better when holding properties for at least two years to get preferable capital gains treatment. I think that with the current market, so many thousands of flippers will get burned, that we may never again, (or at least in the next 10 to 20 years), see huge run-ups in prices.

I gotta second PD on that one. I thought the last bust would have positively proven to would-be high rollers that RE can lose. I won’t ever make that assumption again.

We also thought builders had learned their lesson, and would not overbuild, and would stop buying overpriced land at the top of the cycle. Once again, builders who’ve been through several downturns failed to see the slowdown. Why didn’t they see it coming? Don’t they have economists on their staff, are they in denial, what is the explanation? Why did Toll and two other groups buy remote Phoenix desert land for $56K/acre earlier this year? Sheer stupidity. You’d think Toll would have learned from the last cycle not to do such a stupid move.

I’ve noticed on Flip This House they often just take the flippers word for it on how much they can sell it for. Such as “Bought for 375,000, 15,000 invested, expect to sell for 450,000, potential profit: 60,000.”

Now, of course “potential profit” doesn’t really mean anything. If I buy a lottery ticket, my potential profit is in the millions!

Still, the shows are interesting. As a non-flipper you can get ideas of what to look for in a house. You can get ideas on what to pay for and what is pretty much just cosmetic. And often times the conversion of the property can be quite striking.

Of course, you can get the same experience from other “House Porn” like “Extreme Makeover: Home Edition” (as an aside, I’m not surprised, but still amused that the spinoff show has far superceded the original “Extreme Makeover”.)