House Flipping…. Is it Right for you? Is the Government is to Blame for High Housing Prices?
-This is a transcript from Go Gaddis Radio to listen to the episode click here-> https://on.soundcloud.com/9ofNc
Welcome back to Go Gatis Real Estate Radio right here on AM nine 20. The answer in this segment could house flipping be right for you, and some seem to think that the government is to blame, believe it or not. For the high housing prices. I'd love to know what you think. Go to go gatis radio.com, G O G A D D I S radio.com.
You can ask questions that we answer on air, off air. You can make comments like, for example, whether or not you believe, uh, like many, many home buyers in the United States, believe that the government is solely responsible for our housing woes that we are experiencing right now. You can also push back or challenge any ideas.
You can share your ideas with us. You can request your neighborhood be featured in our neighborhood spotlight and you can subscribe to our podcast. Again, it's go gatis radio.com, G O G A D D I S radio.com. The reality of house flipping isn't really as fun, uh, or as consistently good as it may seem on television.
There are some ins and outs and. And real estate agents and consumers should know about these ins and outs. And if you're working, if you're a client and you're working with a real estate agent to buy a home to flip, you need to make sure that that agent is absolutely fully aware of all of the pitfalls of flipping houses.
I have flipped many, many houses. I say many, many 20 to 30 would be my guess over the years. And, um, You know, I would say about 25% of the time they are, um, They're big flops 70% of the time, 75% of the time, they're not. 75% of the time they make money, but 25% of the time they are flops. And my experience has been that when you lose money on a rehab, that you lose it pretty big.
I would say we lost between 30 and 40,000 on all of the rehabs where we lost money. And I'll give you a little tip as we close out this segment on how to avoid that happening to you, Matthew in Canton. Submitted a question says, my real estate agent has flipped homes in the past, and it seems easy, but what mistakes might typically, what mistakes might typically be made by first time home flippers?
I have some great information for you, believe it or not, and this is from r i s media in May, late May of 2023, they say there are four risks to what can be a profitable endeavor. The article says 10% of all US houses sold in the first quarter of 2022. Now, I know that's a year ago. Were flipped. That's a big number.
One in 10 homes sold in the United States. Were flipped. My guess is that might be a little bit lower in 2023, but still it's probably. You know, 8% or 7% or something like that. So agents and consumers should know the ins and outs of house flipping for themselves or for agents to educate clients thinking of flipping houses.
The reality isn't as fun and as easy as it seems on TV shows. Here are the four mistakes to know and to avoid. But before we get into those, It was probably 2004, maybe 2003. I do not remember the name of the house flipping show that was flipping houses here in Metro Atlanta, but I had the distinct pleasure and honor of showing one of those homes that was down.
Uh, toward the city not too far from East Point, if I remember correctly. And you walked into the house and the front of the house was amazing, and the right hand side of the house was amazing. You walked in the house, it was really kind of overdone. They had this huge, almost European style kitchen that was just so big for a house like that, but it was beautiful, and the back splashes were beautiful, and the bathrooms were beautiful, and everything was beautiful.
Until I stepped out in the backyard and what I found was that the entire rear of the home had not been rehabbed, and believe it or not, the left hand side of the home, if you're facing it from the street, had not been rehabbed. So the front and the right rehabbed inside, rehabbed. Back and left, not rehabbed.
It was the strangest thing I had seen in quite a while when I was out showing houses because I couldn't believe that that's what a house flipper would do, especially a house flipper that was on tv. So your first risk in terms of flipping a house is not calculating the finances properly after paying for the house and fix up cost, which those are even hard enough to estimate.
Estimate there are still taxes and insurance and utilities and other bills that may pop up. I found the carrying cost for a flip or what we called a rehab property, a repositioning property. I found the carrying cost to be quite significant. In some cases, they were the largest cost. Once you sell the property, for some of you, if you keep it longer than a year and your intention was to rent it long term, you may pay capital gains taxes.
For others who are doing it, uh, you'll be treated like a dealer, which means you'll be paying income tax as if you went out and earned that money at a job around the corner. So certainly these taxes will diminish your profits. So Home Flipper really needs to be extremely liquid in cash ready, and that is so true.
Second downfall is not having the time. Flipping a house is very time sensitive. And organizing and hiring for people who don't, who will do the renovations, then overseeing everything certainly requires a ton of time. And I will tell you that it was not unusual for me to get overwhelmed. Uh, in, uh, doing a rehab, I would just get overwhelmed in the middle of the project.
Fortunately, we had some very good people working with us. In fact, we have a contractor now that works with us on all of our rehab and refresh programs that we do for our listings, and they do a great job. They take all the headaches off of us. The third potential issue is not having the patience unless it's a white hot market with low mortgage rates.
Selling a house may take time. And certainly time is money due to having to cover the cost of the house before it sells. So you need to plan. Instead of maybe it taking two months to sell, it'll take four instead of three months, it'll take six months to sell. I would give myself a cushion as I was working through the numbers to figure out whether or not the flip or the rehab project made sense.
And then the last issue is not knowing the market. If you're planning to resell a house shortly after buying it, it takes really a lot of courage. It takes a lot of guts. You're, you're, you're a speculator, and more importantly, someone buying to sell. You know, must know that local market really as well as an experienced realtor, and certainly they can get that education with the help of an experienced realtor.
But understanding what renovations to make, what the tax and zoning laws are, what the competition is, can determine. Really, whether you make a big profit or take a substantial loss house, flipping really can be a tough business, no doubt. I told you at the beginning of the segment that I would give you a tip that would help you avoid losing money when you're flipping houses, and this tip is so important.
And every time we lost money on a. Flip property or rehab property, it was because we didn't pay attention to this rule. And that rule is if you have to tell yourself a story about how the flip property makes sense, then you should not be buying the flip property. I'll give you an example. We bought a condo in Norcross, not too far from Oak Brook Parkway off of I 85, and it was a step less condo.
No steps into the condo, no steps inside the condo. We knew that this property. Was gonna be amazing for someone who wanted a step less property. Turns out at that time, me and my business partner were the only two people in metro Atlanta who wanted a step less property. So we had to tell ourselves a story on how the property would be worth more money than we thought it would be, and because of that, we missed the market.
We totally missed the market. If you're interested in flipping a home and want to chat about it, my number 7 7 0 4 9 7 0 0 0 0 or you can go to go gatis radio.com. Got an article which talks about the housing market in 2023, believe it or not, nearly half. Nearly half of millennials and Gen Z blame the government for high pricing.
It's a time honored tradition to blame the government for society's ills, and the trend continues as long Amer young Americans condemn their municipal and state governments for the current housing affordability problems. I'm sure some of them are blaming the federal government as well, and according to, uh, emphasis digital research.
45% of people less than 46 years old and younger, blame the government for the bloated prices that have forced many potential home buyers out of the market. Over the past couple of years, 90% of the 1,386 people surveyed said that it's too costly to buy a home today, and 70% feel that the government hasn't done its job to make housing affordable for Americans.
One of the things I'd like to point out from this article is that. The average first time home buyer needed to make $70,000 in 2009 in order to buy the average price home. Today, the average first time home buyer needs to make $90,000 in order to afford the average price of a home for a first time buyer in metro Atlanta.
That's a 28% difference, almost 30% difference just in a couple of years. So there are many, many people out there that blame the government for our housing woes. This segment is brought to you by the law firm of o' Kelly and Sohan. They're a full service law firm with 26 offices throughout Metro Atlanta.
They specialize in residential real estate closings, including home purchases and refinance closings, and corporate relocation and real estate. Contract review and title insurance matters. They can be reached by calling 7 7 0 4 9 7 1 8 8 0. If you're thinking about selling your time, your metro, if you're thinking about selling your Metro Atlanta home anytime in the next six months, we believe we can sell your house for $28,000 more than your neighbor sold his or house for his or her house.
For. If you don't believe me, I say try me and it is real easy. Just go to go gatis radio.com. That's G O G A D D I S radio.com or. Simply dial 7 7 0 4 9 7 0 0 0 0 and uh, put me to the test. If you go to our website, you just click on sell for $28,000 more. Put in a little bit of information about your home.
You'll be on and off the website in 20 seconds, maybe 30 seconds max, we will do a customized maximum value plan, which is the plan for selling your home for the most money and. You will receive up to a $15,000 rehab and refresh budget, meaning we will advance you up to $15,000 collected back at closing.
And the fees are so small that you will make so much more money. As a result, we need to take, take a quick break. When we come back in our neighborhood spotlight Highland Point in Marietta will be featured should you even bother making a low ball offer on a home in today's market, and Atlanta's build to rent.
Boom, we've got those subjects and more. Stick with us. We'll be back.
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