In the current state of the real estate market, it does not seem like there is money to be made by adventuring into that field. Many intrepid home “flippers” would tend to disagree, as their practice of buying houses when the value dips below market price, renovating them, and reselling them is lucrative enough to have a wide following among entrepreneurs. While some would argue that house flipping has negative effects, many investors, as well as popular television shows like “Flip this House,” continue to show positive gains and success in the field.
“Flip This House” is on A&E on Saturdays. It is an hour-long house flipping drama that follows two teams of house flippers in the San Antonio and Atlanta markets.
A similar show (in name and concept) to “Flip This House” is “Flip That House.” This show is a half-hour reality series on TLC. Each episode follows the transformation of a different house, each with it’s own host familiar with real estate, renovations and house flipping.
“The Real Deal” is a sort of a spin-off of “Flip This House.” The Trademark Properties team landed their own show after spending two seasons on “Flip This House.”
“Flipping Out” is a show that features a unlikely team of flippers that flip six houses simultaneously. This show is on Bravo.
Here we will provide a little more insight into house flipping and what these TV shows are all about. At certain points, properties may dip below market value due to a variety of circumstances. This is the time that prospective home flippers look forward to, because it maximizes the possibility of making a sizable profit, taking into account the investment necessary for the renovations and the natural fluctuations in the home market. Renovations may include things like adding a garage, doing landscaping work, making certain rooms bigger by strategically knocking down walls, painting walls, anything with the potential to cause a greater gain than the money used to do it. Once the required changes are made to the house to increase its value to the investor’s desired level, he or she is then free to decide on an asking price, a crucial part of the home flipping process. Ask too much and the house will stay on the market for too long, and ask too little and risk having a low effort-to-profit ratio. All this seems very intuitive, but the inherent risks involved in dealing with real estate make it only appealing to risk takers.
House flipping has gained popularity due to its presence in the media. Television shows like Flip this House allow viewers to have an in-depth look at the risks and rewards that such a venture can bring. This show in particular follows the house flipping adventures of several real estate teams from across the country as they attempt to make a profit in the volatile home buying market. Each episode begins with the acquisition of a property, listing the market value of the house before renovation. The efforts to actually renovate the house are covered in detail, often featuring arguments between the different people involved whose ideas for the renovation tend to clash. Once the renovations have been made, the cost is listed, as well as the price that the investor is hopping to get for the house that was flipped. Not without its share of scandals, including lawsuits and accusations of fraud, but regardless of these setbacks, the show’s impact can be seen in the number of do-it-yourselfers that are entering the home flipping market.
House flipping has a large presence on the Internet, as far as those seeking to dispense advice and share their stories about a house flip gone bad. House flipping has become an accepted part of the real estate market, and due to this fact, there are plenty of people wanting to throw their two cents into the fountain of information. For example, newhouseflip.com offers a wealth of information, covering everything from interior decorating to tax liens. House flipping loans can be acquired, as can useful tips regarding popular design psychology. No matter the aspect of house flipping you need to figure out, you can find it online.
Flip this House and the online presence of house flipping have no doubt popularized the concept of fledgling home investors making a tidy profit with earnest renovation work and some luck in finding as house that can be flipped. The effect that house flipping has on the real estate market and the country’s economy in general, though, is very important to look at in conjunction with the show.
The United States real estate market has been recently described by expert economists as being in an economic bubble, which is to say that the prices by which homes are being bought and sold do not match up with the intrinsic value of the house. This can lead to economic side effects ranging from the unfortunate “wealth effect”, where unassuming consumers spend more money because their assets are overvalued, giving them an illusion of their real monetary value, to dreaded events like the Great Depression. Economists who discourage the practice of flipping houses cite the fact that the real estate bubble will eventually correct itself, leading to the reverse incarnation of the wealth effect with decreased spending and less disposable income.
Flipping is a key part of the gentrification of older communities, which is when the older real estate is renovated, increasing the market price. This is favorable for the flippers and the investors; however, those that have lived in the area for generations as well as those who can no longer afford rising property costs may be forced to move away. But the influx of population into formerly-inexpensive areas to live can further raise the cost of living there, causing a cycle of relocation that can ripple outwards. Interest rates have a profound effect on the real estate market and house flipping in general, because rising interest rates mean that potential home buyers who would otherwise take out loans to pay for the home will instead hope for a time when interest rates are not so steep.
There are acknowledged positive effects to the process of flipping homes, regardless of all the possible negative outcomes. Sociological evidence points to a vicious downward cycle existing in neighborhoods with a poor face value. Called the “broken windows” theory, upstanding citizens are less likely to live life in a neighborhood that seems to be falling apart, which would instead attract those who may not be living lawfully. This, in turn, forces even more relocation, which attracts more people of criminal intent to the unkempt neighborhood. The cycle, though, can be broken by flipping the homes in the neighborhood. Whether systematic or not, the increase on the property value, as well as the overall aesthetic appeal of the neighborhood, is more likely to attract citizens with respectable intentions, which then goes to create jobs, attract businesses, and create a larger population base in the region. Higher home values incur higher property taxes which generates more money for the local governments, allowing more money in the budget to go towards law enforcement, education, and community improvement.
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On a home-to-home basis, flipping is generally a positive move. Home flipping requires several aspects to be successful: labor, the purchasing of new goods like paint and construction materials, and willing buyers. The labor creates new jobs, which can be important and beneficial for certain parts of the country. Any increase in consumer spending generally has a positive effect on the economy, because an increase in demand for products brings about an increase in sales tax, creating more revenue for the government. Increasing the value of a house increases the property taxes, which similarly provides revenue for local government. On a home-to-home basis, flipping is by large an improvement in all areas.
You may have some money to invest, and you may be handy with a sledgehammer as well as a paint roller. Throw in a healthy bit of courage and you may find yourself at home in the house flipping market. There is plenty of information, both on television and on the Internet, at your disposal, so use it wisely.
