Has 'Flip This House' jumped the shark?
Last night on A&E I watched the latest episode of 'Flip This House' which was focused on a 50-year-old house in the Atlanta area. The tore out the entire kitchen (which had just been redone), well, actually after they found massive termite damage, they literally rebuilt one end of the house from the ground up. They redid a lot of other items as well (I'll have to give them credit for doing an excellent job on repairing all of the hidden termite damage, as many shady flippers would not have even bothered to check for that). All I can say is they have some really inexpensive contractors down there, given the prices they were showing (such as in $2K for a new roof, when I paid $8K for basically the same roof here).
At any rate, after five weeks of rehab on this place, the projected profit to the flippers, after all costs & RE commissions, was a paltry $2K+. Heck, the selling agent was going to make three times that--$6K.
So basically, these guys aren't going to make any profit at all on this latest flip and will most likely lose money on the deal if they have to reduce their asking price at all.
I think the flipping reality show concept is now officially dead. The desperate homeseller reality shows, on the other hand, will continue to flourish, I predict.
At any rate, after five weeks of rehab on this place, the projected profit to the flippers, after all costs & RE commissions, was a paltry $2K+. Heck, the selling agent was going to make three times that--$6K.
So basically, these guys aren't going to make any profit at all on this latest flip and will most likely lose money on the deal if they have to reduce their asking price at all.
I think the flipping reality show concept is now officially dead. The desperate homeseller reality shows, on the other hand, will continue to flourish, I predict.
Comments
Wheel of Foreclosures spin spin spin, mail in your keys if you want to win.
1) First off, the work that they put into the house may have proved profitable, and they'd walk away with some money
2) Second, the work that they put into the house may have proved UNprofitable, but the loss of profit was offset by the increase in home value. For instance, let's say they invested $10,000 in the home, but only netted $5000 of their investment. If the home cost $300,000 and homes were going up by 10% a year, and they spent 6 months doing the work, then they could sell the house at a $20,000 "profit". (IE, 100% of their $5000 loss was offset by the 5% increase in home value.)
3) The cynical among us would note that they could simply do nothing, and walk away with a $15,000 profit in six months.
But when property values began to decline, the tables turned completely. For instance, if property values declines by 5% in six months, and their renovation netted a $5000 return on a $10,000 investment, than the 'flippers' would be out a whopping $20,000! (Most of the loss is due to the fundamental decline in home value.)
Basically 'flippers' in 2008 were battling against the tide. No matter how much work they put into a house, declining property values were likely to destroy any profit.