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You're gonna "Eat It" if you try to flip in SF Bay Area--I thought of the "patrick.net of old today" :)

By bill follow bill   2019 May 21, 5:17pm 739 views   19 comments   watch   nsfw   quote   share    


Dis Guy Who Quit His Job to "Flip" Took a $400K Bloodbath...

https://www.bloomberg.com/news/articles/2019-05-09/young-real-estate-flippers-get-their-first-taste-of-losing

As Yogi Berra would say: "It's like déjà vu all over again." :)
1   Heraclitusstudent   ignore (2)   2019 May 21, 6:19pm     ↓ dislike (0)   quote   flag        

The guy is an aeronautical engineer.
Maybe people should have incentives to, you know, do some work.
Instead of get rich quick schemes.
2   E-man   ignore (0)   2019 May 21, 9:56pm     ↓ dislike (0)   quote   flag        

I happen to know these two young guys in the article. Sean Pan who lost $400k on his 2nd flip in Sunnyvale, and Bryan Pham who estimated to lose between $50k-$100k on his $1.1M flip.

Sean has two partners so the loss is split 3 ways. They made $300k on their first flip so it’s not too bad when the net loss of $100k is split 3 ways.

Sean is going all-in and has put in his resignation. His last day at the job is May 31st. I had lunch with Sean last month and we’ll hang out next month when he has more free time.

The same with Bryan Pham, who has a partner on his flip so the loss will be split 2 ways.

Both of these guys are great kids. I don’t like their flipping formula. It’s too aggressive for my liking, and when the market turned like last fall and winter, they were left holding the bag. They’re smart kids. They’ll figure it out and will make it all back and more. I’m willing to bet on it.

I’m much more conservative and don’t want to go for a home run by flipping million dollar homes during this part of the cycle. Here are my two flips:

1) a 2/2 condo in Union City. Paid $355k, spent just over $30k on rehab and sold for $540k within 3 months. It turned out that last spring was the peak of the market. I got lucky on that one. I thought the exit price would be $475-$500k, but the market carried me. Cleared over $100k net profit.

https://www.google.com/amp/s/www.redfin.com/CA/Union-City/109-Camino-Plz-94587/unit-139/home/1175911/amp

2) a 3/1 in San Leandro. Paid $435k, spent just shy of $50k on rehab and sold for $610k this spring. Cleared $70k net profit.

https://www.google.com/amp/s/www.redfin.com/CA/San-Leandro/15306-Dewey-St-94579/home/1381961/amp

I’ll share my current flip once it’s closed if anyone is interested. Just got into contract last week. Expect to close next month. I’m just an average Joe who is trying to make some spending money on the side. My main gig is in apartment investing in downtown San Jose. That’s a much more profitable gig. We’re looking at making $400-$800k equity per deal. However, we only do one to two deals per year as good deals are hard to come by.

It’s not all gravy, but it’s not all bad. Some make money and some will lose money. It’s just the nature of the biz.
3   bill   ignore (0)   2019 May 22, 1:14am     ↓ dislike (0)   quote   flag        

Thank you for a very well written story about "flipping!" I live in Mountain View, which when I was young, was, according to my Dad, "the most densely packed region in the United States. Packed with what, you ask? Ha! I like keeping people in suspense and sorta dragging things out. OK, if you've read this far--Apartments! By dragging it out, well, I kinda hoped to give emphasis to APARTMENTs! Hmmm, looking back ... maybe I shoulda just used ALL CAPS?!

OK! Next to the Bank of America, within a short walk of where I live, they (the stupiidheads running Mtn. View) are building a HUGE apartment complex, It covers 2 whole blocks and is 3 stories high. Ha! And across the street from Klein Park, they have almost completed 250 chicken coops for (my guess is H1-B visa ppl) Idon'tknowwho! And I guess a "developer" bought the Chevy's Restaurant (which I ate at frequently) and is turning it into more apartments.It is easier for me to walk to the WalMart than to drive, on accounta the parking lot is always full. The traffic around Mtn. View is terrible.

I sense a "Gold Rush" mentality and fear it ain't gonna end well.




Your cautious approach sounds better than swinging for the fences.

Actually, I talked to a Mtn. View govt. person and suggest that they build a HUGE Hong Kong type skyscraper on the Google campus and be done with it.

A friend brags that his house in Mtn. View is worth over 2 million. I keep telling him that he should sell and move to Nevada and invest his profits in either NVDA or GBTC. But he won't listen to me :)

Hey, you sound like a nice guy. I do wish you luck :)

PS: Why do they build all the chicken coops within 3 ft. of the sidewalk. A setback of 10 feet would look so much nicer. OK, it's rhetorical, I know the ans: GREED!
4   clambo   ignore (5)   2019 May 22, 8:28am     ↓ dislike (0)   quote   flag        

House flipping is probably going to work much of the time if you are in a locale where people have well paying jobs.

What is interesting is person who usually enjoys the fruits of "home equity" is the guy who flips them; the guy who sits in his house bragging "My place is worth a million bucks!" might be clipping coupons before buying groceries at the Dollar store.

I actually know a several people like this in Santa Cruz County; one guy's place is worth $1.2 million or more and he won't put the heat on; he has a roommate too; another rents out a part of her driveway to a guy in an RV and ran an extension cord to it, in addition to having a roommate. Another guy drives an ancient pick up, his wife drives the SUV with the cracked windshield.

I considered doing a flip but my innate inertia to make large financial decisions prevented it. That's probably good.

But you almost can't lose if you have the dough; people desperately want to buy houses regardless of the debt they take on.

Down the street from my friend's place the house is for sale for $1.3 million; the property taxes will be $1300+ per month forever and will go up.

So, the buyer of this house is not only assuming the mortgage debt; he is assuming the pension liabilities of Santa Cruz County workers forever.
5   mell   ignore (3)   2019 May 22, 9:30am     ↓ dislike (0)   quote   flag        

True but compared to the past years the sfba housing market is pretty weak now. Prices are flat or retreating and existing sales are slumping. Still there's enough people who want a starter crap shack by any means so the low end market remains somewhat tight for now. Flipping is only for absolute pros now the majority will lose.
6   Goran_K   ignore (4)   2019 May 22, 9:39am     ↓ dislike (0)   quote   flag        

bill says
Dis Guy Who Quit His Job to "Flip" Took a $400K Bloodbath...

https://www.bloomberg.com/news/articles/2019-05-09/young-real-estate-flippers-get-their-first-taste-of-losing

As Yogi Berra would say: "It's like déjà vu all over again." :)


Damn, $400k bath? I don't feel so bad about the $250 I lost in Vegas last December.
7   Iranian_Oil_Burse   ignore (6)   2019 May 22, 9:52am     ↓ dislike (0)   quote   flag        

What I don't understand is spending the money and time on "renovating" the flip. If market goes up you'll make your money regardless, and if it goes down you shouln't be flipping in the first place.
8   Tenpoundbass   ignore (15)   2019 May 22, 10:07am     ↓ dislike (0)   quote   flag        

Flipping should be illegal in all Cities.
If you buy you must hang on the property for at least 5 years. Unless you fill out a form and show valid proof why you are relocating.
You can lose the house though foreclosure, or you can short sale it for less than you paid. But not flipping up and destroying house prices for the rest of hard working Americans.

And single family homes where the owner, owns multiple of them for the purpose of renting them out. Should have a Federal Homeowner's tax waged on them for every house that is not their primary residence. And any house owned by a corporation gets a federal homeowners tax regardless how many they have. Houses that only need bathroom fixtures and Kitchen fixtures should still be allowed to be financed. Especially if the guy was asking $125K for a house worth $295K or more, what's $20K for a few wet fixtures and cabinets?

Put me in charge, I'll have ample housing supply, and work out the ass, and the median home price would be back to $120K around the country.

A 3 Br rental would be back to $800 - $1200 a month.

Fuck the Greedy Bastards they don't deserve their thievery.

And Banks rigging markets with Ghost inventory would be a fraud scheme that would land the Execs in Federal Prison for up to 25 years.
9   mell   ignore (3)   2019 May 22, 10:23am     ↓ dislike (0)   quote   flag        

Hugolas_Madurez says
What I don't understand is spending the money and time on "renovating" the flip. If market goes up you'll make your money regardless, and if it goes down you shouln't be flipping in the first place.


You slap on some 'European' door handles and marble, custom faucets and shower heads worth 50k and add 200k to the price for luxury remodeling
10   Iranian_Oil_Burse   ignore (6)   2019 May 22, 10:55am     ↓ dislike (0)   quote   flag        

mell says
Hugolas_Madurez says
What I don't understand is spending the money and time on "renovating" the flip. If market goes up you'll make your money regardless, and if it goes down you shouln't be flipping in the first place.


You slap on some 'European' door handles and marble, custom faucets and shower heads worth 50k and add 200k to the price for luxury remodeling


I doubt it works like that IRL.
11   APOCALYPSEFUCKisShostikovitch   ignore (43)   2019 May 22, 12:40pm     ↓ dislike (0)   quote   flag        

Tenpoundbass says
Flipping should be illegal in all Cities.


All you libbies sound alike. Destroy FREE!dom to prosper!
12   Tenpoundbass   ignore (15)   2019 May 22, 12:45pm     ↓ dislike (0)   quote   flag        

Rigging any market is illegal but Real Estate.
13   SunnyvaleCA   ignore (0)   2019 May 22, 1:58pm     ↓ dislike (0)   quote   flag        

Hugolas_Madurez says
What I don't understand is spending the money and time on "renovating" the flip. If market goes up you'll make your money regardless, and if it goes down you shouln't be flipping in the first place.


Some of the flipper houses are pretty "rough" and in need of serious work. This is especially true of foreclosures, where the previous owner knows they will be losing the house and so takes no care at all and/or actually rips the house to shreds out of spite.

One problem could be financing. Already-completed upgrades to the house can be used as collateral; future repairs require payment and completion before they can be used to back a loan. Cash-strapped buyers might qualify for a loan on a house priced $200k higher if it assess for that higher amount and is habitable. But if they buy a house in need of fixing, they won't necessarily qualify for a $100k home improvement loan (on top of the lower-priced house), especially if they won't be able to live in the house until the fixes are made. They could be stuck paying rent (in their old place) plus paying a mortgage (on the new place) plus paying for repairs on the new place.

Another is risk tolerance. The flipper is taking a risk that the repairs will go as planned. Flippers hire shady contractors and other workers. No permits, no legal work contract, "undocumented" workers, etc. Many prospective buyers don't have the knowledge and/or connections and/or risk tolerance for such shenanigans. There might be all sorts of problems with how the plumbing, electrical, foundation, or roof was fixed, but the flippers will be long gone by then. Buyer is buying a (probably false) sense of security.

People purchasing might be on a tight timeline to move in. For example: move before new job starts or school starts so there's no disruption part way through. Or maybe the buyer's current house is about to be sold and they need to move out soon or lose the offer on the sale. If they buy a house that needs extensive work, that will delay moving in or be a real hassle if they have already moved in.
14   bill   ignore (0)   2019 May 22, 7:07pm     ↓ dislike (0)   quote   flag        

Thanks for all the interesting info! Flippers do take a lot of risks! They have more guts than I do. They say the more the risk, the greater the reward. So go for it :)

I love the comment that Real Estate is largely unregulated. Hard to believe but a great point! It is BUYer Be Careful (the basement may flood and the roof leak).

Ha! I haven't seen any threads about this story in the Mercury News that I totally find hard to believe. So why is this lot empty?!

https://www.mercurynews.com/2019/05/22/its-a-vacant-palo-alto-lot-but-who-can-afford-it/

The darn Merc has a Pay Wall!!! Anyhow, it is a story about a $9 million EMPTY lot near where Steve Jobs used to live in Palo Alto :)

Here's the same story without a PAYWALL https://sanfrancisco.cbslocal.com/2019/05/15/empty-palo-alto-lot-hits-market-for-9-million/

Wonder who first broke the story? Wonder who the buyer will be and will she or he be in a "bidding war?" Stay tuned :)
15   FortWayneIndiana   ignore (4)   2019 May 22, 7:16pm     ↓ dislike (0)   quote   flag        

They add no value. They are the types who basically end up screwing buyers and families by forcing higher pricing. This is pure greed on them.

I think I hate these guys. Fucking assholes. Flippers and realtors should be shot at point blank. Especially any with Realtor(tm) association.
16   FortWayneIndiana   ignore (4)   2019 May 22, 7:22pm     ↓ dislike (0)   quote   flag        

When we decide to sell our CA property here is what listing description will be:

“For sales by owner, to families only, no bidding wars, slightly underpriced to sell fast, first qualified offer will be accepted. investors, bankers, and realtors will be shot on sight.”
17   BayArea   ignore (1)   2019 May 22, 7:45pm     ↓ dislike (0)   quote   flag        

FortWayneIndiana says
When we decide to sell our CA property here is what listing description will be:

“For sales by owner, to families only, no bidding wars, slightly underpriced to sell fast, first qualified offer will be accepted. investors, bankers, and realtors will be shot on sight.”


I like that.
18   APOCALYPSEFUCKisShostikovitch   ignore (43)   2019 May 22, 8:10pm     ↓ dislike (0)   quote   flag        

FortWayneIndiana says
When we decide to sell our CA property here is what listing description will be:

“For sales by owner, to families only, no bidding wars, slightly underpriced to sell fast, first qualified offer will be accepted. investors, bankers, and realtors will be shot on sight.”


Way to go!

But watch out for straws!

Get a killer covenant in the P&S!

And ask to see the kids' report cards for the last 4 years.
19   SunnyvaleCA   ignore (0)   2019 May 22, 10:53pm     ↓ dislike (0)   quote   flag        

FortWayneIndiana says
When we decide to sell our CA property here is what listing description will be:

“For sales by owner, to families only, no bidding wars, slightly underpriced to sell fast, first qualified offer will be accepted. investors, bankers, and realtors will be shot on sight.”

I'd add one more thing: "If you want a buying agent, you pay them out of your own pocket. Figure that into your costs, not mine."

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