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View Full Version : Flippers Beware



pyriel
09-24-2006, 06:57 PM
http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm

If you click on the web address above, you'll see one of the hidden problem with real estate. Now, before anyone start saying "Uh Oh!" Pyriel is changing his tune about real estate." we need to look at what happened to this couple and many others who are hurting due to not paying attention to Economics 101 (Supply vs. Demand).

This couple bought a home in latter 2002, made renovation and would like to flip the house. Right off the bat, i can tell that they stayed in the place for over two years so that they can get the whole profit when they actually sell their house. One thing they didn't anticipate is that supply of new homes and existing home had caught up with the demands. There are now more competition to sell their houses and it is becoming a buyers' market out there again. Now, i've said in the past that you have to know your own market and results from one state is not the same as the other. Guam newspaper here is telling us that we have real estate growth for about 8-10 years. For me, I look at it as 4-6 years. I am not going to wait till it gets closed to the top to sell if i would like to flip a property (I'm not planning on doing that).

This is also the reason why i'm an advocate of buy and hold for real estate and turning them into rental property. There are just so much advantages associated when you turn a property into rental (provided you know what you are doing and you've done your numbers).

Speculating is something that I don't advocate with real estate. You can lose your shirt if something goes wrong. This couple here really is not losing their shirts on their back except for 28k downpayment that they've put in on a new house. They can still stay in the property and try to sell it on a later date. It is a hard lesson and we should all learn from this. Flippers beware...

Pyriel