Flippers in Trouble

Have you considered flipping a couple of houses or condos for some quick bucks?  We hear stories of people doing this all the time, and personal finance and real estate writers make it sound so easy.  You buy a place, put in some new kitchen cabinets, throw up some paint and stick a sign out front.  Before you know it, you're thirty grand richer!  Not bad for a few week's work.

Of course, there are risks.  The purpose of this post is to point out some properties where those risks seem to be reality.  No, I'm not trying to become another Housing Bubble Blog.  Gods know there are too many already.  In fact, in the housing bubble community, there is a new trend, which I am outright copying here.  They post listings of homes where the asking price minus realtor fees, carrying costs, and likely renovations have the owner in the red.  I'm going to run an ongoing series showing specific properties where the flipper seems to be in over his/her head.

Here's the first one:

Address: 1xx0 Ardmore Ave #3xx, Hermosa Beach, CA 90254
Last Sale: 10/26/05, $585,000
Price Reduced: 05/09/06 -- $615,000 to $599,000
Price Reduced: 07/26/06 -- $599,000 to $575,000

Days on Market:  119

Carrying Cost:  $2,348 per month, generously assuming 5% interest only.  Total:  $21,132 (this does not include property taxes, Homeowners Association dues or insurance)

Assuming Realtor Fees of 3% in and 3% out

Notes:  The listing states over $95,000 in upgrades.

Not factoring in the upgrades (perhaps it was done by the prior owner and the current is simply trying to sell up that fact), this flipper is holding looking at a current loss of over $65,000.  If he gets his current asking price.  If it sits on the market any longer, and if he has to reduce the sale price, the losses will continue to mount.

Note:  The information for this post was obtained from ziprealty.com and zillow.com.  The information is deemed reliable, but even if it is not, this is definitely not advice of any kind.  In fact, it is a big fat "Caution" sign.

Comments

[S/100/30]

I'm amazed that people have the stomach for this sort of risk; I can't even bring myself to do the whole use-0%-credit-card-offer-to-put-money-into-savings-account-at-5% plan for fear that I'l accidentally miss a payment and screw the whole thing up.

[freedumb]

Why would you even sell at that point? I don't know what I would choose between $65k in debt with no house or $500k in debt with house (assuming the flipper even paid a down). Then again if I had a couple of houses, I would want to sell ASAP too.

[Max Sats]

They say imitation is the sincerest form of flattery! I must say, this post is truly flattering. Thanks!

flippersintrouble.blogspot.com

Max