5 Inaccuracies Perpetuated by House Flipping Shows
There is no such thing as a "Quick Flip."
Are you obsessed with HGTV shows or the DIY network? Like many of us we are addicted to the house-flipping shows and all the money flippers make in 24 minutes!! That's totally real! House flipping shows are where a great many inspired flippers get their information about short-term real estate investment, which can be somewhat dangerous. These shows are often “sexed” up, and only focus on showing the glamorous side of the world, while ignoring the very real number-crunching and technical aspects that make up the true core – and profitable point - of house flipping. This misrepresentation of reality can mess with the average person’s perception of what real estate entails, and can lead to the mistaken belief that house flipping is an easy way to make a quick buck. These viewers believe that all they have to do is invest a little money, beautify a house and then sell it at incredible margins. Actual real estate investors, however, know that there’s nothing farther from the truth. Let’s take a look at some of the inaccuracies and mistakes perpetuated by these shows.
Where’s the Math?
Right off the bat, let’s look at one of the key problems in house flipping shows. There’s too much math missing! In the real world, rehab costs are not as undervalued as they are on these shows. There are actually a lot more costs that have to be taken into account, like commissions, fees, holding costs and closing costs. Reality TV doesn’t even care about selling costs, which include the title fee and realtor commissions. The costs can run up a lot higher than what the shows portray, sometimes easily making up a fourth of the final sales price.
These shows are scripted, and that’s why the numbers don’t really add up. In fact, sometimes even the end sales price is contrived by the producers of the show (because not all those buyers with millions of dollars to burn are real). The point is that these shows only show the sexy parts, when it’s the more mundane aspects of house flipping, like tracking expenses, charting schedules, completing waivers and paying bills, that are what’s really required to pull off a successful sale.
The Market Is Hard to Predict
Reality TV consistently makes out that not only are willing and able buyers a dime a dozen, but also that the perfect buyer is right around the next corner. They also make it look like the market is saturated with houses suited to flip. The unvarnished reality, however, is that investors actually have to do a great deal of research on the houses and surrounding neighborhood, and also have a smart understanding about the marketplace. Neither the perfect buyer, nor the perfect house falls from the sky. Short-term real estate investors have to work extremely hard to find houses to flip, and then to find interested buyers.
The fact is that the real estate market is infamously difficult to predict. Even old hats and experienced veterans will slip up here and there, making mistakes about the sort of décor a targeted buyer might prefer, or the asking price. Reality TV may make it seem like wily investors know the market like the back of their hand, but no one can predict the future.
Reality TV is Filled with Know-It-Alls
But how? How do these investors always know what to do in any given situation when they’re never shown doing any research? The shows will often portray these investors simply showing up to the site, glancing at the house, and rattling off costs, market information, the sort of repairs needed all off the top of their minds.
How is that even possible? The real estate market is incredibly dynamic, and affected by a wide variety of factors on a daily basis. Figures change every single day. It is simply inconceivable that the investors on these shows never engage in any research activities, or bother to even compare relative prices in the neighborhood. Sometimes, investors will even make incredibly silly statements, like proudly talking about making a deal without ever having set eyes on the property, and expecting to make a fabulous profit out of it. That is simply not something even a moderately smart real estate investor would ever do, so don’t follow suit. Do your homework!
Real estate is a business. In real life, very few businesses thrive if everyone involved is screaming and yelling at each other. Problems can’t be efficiently fixed if the flipper just can’t let go of their ego, or if the contractor becomes seemingly unyielding on a deadline. In reality, even if a deadline is bypassed by a few days, it’s usually resolvable by the people in charge. Communication with your contractors, your maintenance crew and your administration is key. There is no way to get ahead in real estate without a cool head, because the industry is simply filled with highs and lows. If you lose your senses about every single thing that goes wrong, you’re never going to get anything done. And you’re going to lose the people who work for you if you treat your colleagues and crew badly.
Incredibly Quick Turnaround
The quick turnaround times portrayed by reality TV shows, even for houses that require a massive amount of renovations, are frankly absurd. Real estate is an exhaustingly time consuming process right from the very beginning. You need to research the potential house, and the surrounding houses in the neighborhood, and then go on to research the right demographic to target once renovations are done. And then it takes an even longer amount of time to renovate and sell the houses to willing buyers after marketing it right. That’s why house flipping can come across as a way to get rich quick, when the reality is that it requires a tremendous amount of groundwork and patience.
To avoid these 5 misconceptions invest in a real estate mentor, one who will walk you through step by step and assist you in overseeing your rehab project so you don’t loose time or your money – ASK ME HOW!!