[IMGCAP(1)] “The ‘buy-and-flip’ model is a sucker’s bet. It’s about building real, generational wealth.”
I recently read this quote from Greg Rand, a 20-year real estate veteran and author of Crash-Boom. At first glance, I am not so sure I agree, but I guess it must depend on what you are buying and you are flipping. Perhaps my vision is skewed.
My husband and I recently bought a home in North Orange County, CA from a group of investors that had acquired the property from foreclosure for SIGNIFICANTLY less money only three months before. They put in a few dollars and flipped it, and it was their 100th flipped home in 2010. (Way to finish up a year!)
There are so many get-rich-quick schemes out there that it makes your head spin, but I see what these investors did as a practical way to achieve millionaire status, so I guess my question to Rand is, how in the world are these guys’ suckers?
And on that note, how long do you have to hold a property to sell before it is not a case of “flipping?” Before the downturn, lots of investors made money by buying commercial properties, holding them for a few years and then selling them. That’s not exactly flipping, but it’s not holding them for the long-term either.
My thought is that maybe it’s not so much a question of whether you are flipping or holding for the long term, it’s more a question of whether you know what you are doing or not. If you pay far too much for something and then prices plunge, isn’t it just as likely to go belly-up regardless of whether your intention was to flip it or to hold it for the long term?
Most likely, lots of people who were hoping to flip properties lost a lot of money when housing prices plunged. But that’s not because flipping is inherently unwise. (I think it’s because they foolishly believed that prices would continue to rise above their already inflated levels).
Perhaps I am the sucker. I quickly realized the true condition of the home after the first rain storm, and am learning that fancy-looking granite and cabinet upgrades don’t necessarily translate to good material use. I would flip this house if I could.
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