It looks so easy on TV: Someone buys a distressed real estate property, invests in repairs and upgrades, then re-sells it — and quickly! — for a handsome profit.
If only life imitated art.
While the multitude of television shows about house-flipping led to a bevy of that sort of activity in real life — over 200,000 homes were flipped in the United States in 2016, and again in ‘17 — the reality is that it isn’t as easy as it might appear.
Consider, for example, the plight of a woman named Sydney Blumstein, who according to the New York Times bought a one-bedroom apartment in New York City in 2014 with the intent of flipping it. Numerous mistakes followed, including those she made as a result of putting too much stock into what she had seen on TV.
“There are 15 different shows showing you how to go from A to B,” she told the Times. “But I wanted to go from A to Paris.”
She wound up realizing a $90,000 profit on the property, but as she also told the Times, it wasn’t enough “to pay for the mental torture of the experience.”
Justin Pierce, a real estate agent and investor, emphasized in a series of Washington Post columns the importance of entering into flipping with eyes wide open. No one gets rich from the practice, he wrote. Taxes cut into a flipper’s bottom line, as do payments to contractors, lawyers and others. There are closing costs, holding costs and finance costs.
Then there is the time commitment — time spent finding a property, hiring the right contractors (and/or doing the work oneself), filling out paperwork, scheduling inspections and then, finally, finding a buyer.
According to another report, successful flippers are deep-pocketed to begin with, and make sure to buy at the right price, buy in the right neighborhoods, hire the right contractors and remain within their budget.
Even so, those who flip don’t typically do so for long. As Pierce pointed out, they tend to gravitate to something else in real estate, like development or wholesaling.
In other words, it is nothing like it looks on TV. All those shows would do well to display a disclaimer: “Do not try this at home.” Far too many people have learned that lesson the hard way.