Every now and then I will watch the program on the A&E channel called "Flip This House". It is one of the most popular programs on that channel.
It showed people buying homes in need of repair, doing renovations with the advise of a Real Estate Agent, and, in a matter of months, putting the homes back on the market and making a tidy profit.
I could never really figure out how they were doing it. In the area in which I work it is very difficult to do a flip like this and in such a short amount of time, make any kind of profit once you include commissions, taxes, labor and materials.
It takes careful planning, and a thorough knowledge of the market and construction costs to even squeeze out a thin margin of profit, especially these days with what the Real Estate Market is doing. I would watch the show, and the participants seemed to be flying by the seat of their pants, and yet they would sell their flippers, and make a profit. How did they do it?
Well, it turns out, at least in one case, the whole thing was a sham. The homes were never truly renovated, and they were never truly sold.
In a Yahoo News Article you can read here, an Atlanta Businessman, Sam Leccima, who appeared on several episodes of "Flip This House" never did the work on the houses he said he was flipping, and in some cases, never even owned the homes he said he sold.
So the lesson is, don't rely on Reality TV to do your financial planning. Who would have thought?
I would love to say that it is simple as pie to find a home in need of just cosmetic fixing, a new bathroom, refinishing the floors, etc. and all it will take is a little sweat equity and in a month and a half, before the second mortgage payment is due, put that little jewel back on the market and watch the offers roll in.
That is the myth that "Flip This House" is trying to perpetuate.
You have to have a plan. You must be aware of the tax ramifications of owning a home and selling it in such a short time. You have to know the area in which the property is in. What is the inventory like? How long are homes on the market? What kind of prices are they bringing in? What are your costs going to be, and what if something goes wrong, because something always goes wrong.
