We had an investor at our Reia meeting on Monday night who was a very successful house flipper who makes lots of money. I think Jackie suggested we not get into the flipping business. Instead just option the property and sell our contract to a flipper. Thanks for your help.
Don, part of the confusion surrounding the “flipping” business comes from the two different meanings of the term. The mainstream media uses flipping to mean buy-rehab-resell — where here on CFD we use the term flip to mean acquire (preferably with an option contract), do as little or no cleanup as possible to minimize the risk, and resell that contract as quickly as possible. That avoids the many hazards and risks of holding costs, cash outlays or interest on loans, unexpected costs of materials, labor shortages, risks of market drops during the holding period, etc.
I’ve recently seen two big dog players’ presentations in the buy-rehab-resell game who were trying to bring in new players — at significant cost to those players. NEITHER presentation even remotely discussed the risks of the beginnings of the huge recession we’re entering, nor Bloomberg’s news articles about the profitability already going out of the buy-rehab-resell game in many regions of the country. It was as though neither presenter had any knowledge of (or desire to disclose) the roughly decade-long “business” cycle the Federal Reserve creates, and then pricks that balloon, so the insider crowd can make out like bandits picking up the foreclosed properties at bargain prices.
So to have a useful conversation, Don, this audience needs to know if you are using the term “flipping” in the buy-rehab-resell sense, or in CFD’s risk minimizing understanding to acquire the rights to buy, and resell those rights in as little as a few days — with almost no risk and very little cash outlay.
Thank you Dee. I am on board with the CFD definition of flipping. The guy who presented to us makes a lot of money flipping the houses after doing all of the work to rehab. I am not into that. Too much risk for me.
I am looking forward to seeing Pete and Bill Cook at What Box in September. Hope to see you there.
Thanks for your help.