Some have surmised that the reason that the stock market is up is the inflow of dollars from recently former real estate investors. I'm not sure I buy that theory, but it does seem curious that just when the stock market looked so vulverable (this summer) that it raced to new highs just as we started to get national and multi-regional year over year price declines in real estate for the first time since, what the Great Depression? This also appeared to be a stronger investor driven real estate market than we have ever seen, so the investor impact cannot be overlooked. And where do those dollars go when they get out of real estate? Gold? Oil? International markets? They all look pretty volatile lately.
Anyway, in my continuing effort to caution newbies interested in trying their hand at weekend flipping, I bring to you Flippers in Trouble #4, Double Trouble (it's a double feature because there are two houses that are so eerily similar, I'm showing you both).
Address: 2xx2 Vanderbilt Lane #X, Redondo Beach, CA 90278
Last Sale: February 24, 2005 for $670,000
Current Asking Price: $699,000
Price Reduced: 07/26/06 -- $759,000 to $749,900
Price Reduced: 08/10/06 -- $749,900 to $739,900
Price Reduced: 08/26/06 -- $739,900 to $729,900
Price Reduced: 08/30/06 -- $729,900 to $699,900
Days on Market: 112
Carrying Cost: $2792 per month, assuming 5% interest only, plus $57 HOA dues. This does not include insurance or property taxes. After twenty months the total carrying costs would total $56,980.
Current Gain/Loss: This does not include any transaction costs, such as realtor fees. Maybe the guy's a realtor. Maybe he bought and plans to sell FSBO. Maybe he got the seller to pay closing on purchase, and will get the buyer to pay closing on sale. The place looks like there are numerous modern upgrades, which I'm sure the owner spent quite a bit of money on. But we don't know those numbers, so we won't assume anything. Just based on what we do know, this flipper is sitting on a loss of $27,080.
The second in our double header:
Address: 2xx3 Matthews Way #X, Redondo Beach, CA 90278
Last Sale: August 20, 2004 for $650,000
Current Asking Price: $699,000
Price Reduced: 07/17/06 -- $759,000 to $750,000
Price Reduced: 09/16/06 -- $750,000 to $699,000
Days on Market: 112
Carrying Cost: $2,708
assuming Interest Only at 5%, plus $75 per month in HOA dues. This
does not include insurance or property taxes. Total over 26 months:
$72,358. I am hoping this wasn't purchased in August of 2004 for the purpose of flipping and only this summer put on the market. I think three scenarios are likely. 1) It was bought as a rental, and earlier this year the owner decided to fix it up and sell it; 2) It was bought as a flip, and the owner hoped that rising real estate prices would make for easy money, but realized late last year that work needed to be done to turn a profit; 3) It was bought as a flip, but the owner lived in the property in order to take advantage of the 2 year primary residence tax break. The third makes the most sense to me, but it doesn't explain the listing date of 6/20/06.
Current Gain/Loss: Again this assumes zero transaction costs. The current loss, if my carrying cost calculations are fair is $23,358. The pictures show an empty townhouse with all new and modern appliances, cabinets, etc. The losses could very well be much larger.
I showed both today because of their striking similarities. They have both been on the market for 112 days (assuming these aren't relists). They both listed at $759k initially, and are currently at $699k. Either this is the same flipper or they have the same realtor. Also, the two properties are both 4 bed/3 bath, and they are two blocks from each other.
Flipper in Trouble #1
Flipper in Trouble #2
Flipper in Trouble #3
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.
It's so nice to have you do all of the research for us. It makes our decision making so much easier!! Thanks.
Posted by: MBT Shoes | July 23, 2011 at 01:06 AM
nice to have you do all of the research for us. It makes our decision making so much easi
Posted by: mbt shoes clearance | October 08, 2011 at 08:59 PM