Sunday, July 06, 2008

Flippy the Pinhead

There used to be a place for "flippers" as a market niche. They were the "scratch and dent" buyers and sellers earning a nice profit for the risk and effort. I just think their time has passed. Between the exposure from television shows and an increasingly price sensitive buyer I don't think there is any longer room for the professional. It also matters that the industry has been rightfully mauled for the horrors of amateur butchery that went on in the past decade. Much like the Real Estate profession has been painted by the broad brush of Carl Cole and John Lockwood and Mark Thorngren and Greg Swann, flipping is known by its asses. Let's not forget young Casey fancied himself a flipper even though he wasn't. More, much more on those named Realitters® real soon. Some amazing stuff is still vomiting forth despite the undeniable market conditions.

Most professional flippers though, earn their profits fairly, pay their taxes, then move on to the next one. The last few years have been awash with amateurs who have worse than no clue but very wrong ideas. They weren’t the same animal and some of them haven’t been burned yet. They are still out there with a successful last deal looking for that flip that will break them. The market rose so much so fast even the incompetent made money giving them a false sense of mastery of a difficult business.

There’s nothing wrong with selling to a flipper as long as that’s what you are doing. Taking back a note is not selling, it is a partnership with you as first loss target and deep pocket liable. And the other things, don’t participate in any convoluted transactions that could make you an accomplice to tax fraud. And it should go without saying never, never, never give a flipper access to the property before the check clears.

And in there's any confusion this is the flipper business model these days.


Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

Flipping is a lot tougher in a declining market. Just ask Casey.


Santa F. Clause

Casey Serin said...

"They call me Fliptard, Fliptard! Poorer than bankrupt,
No one, you see, is dumber than me...."

(Source Material) ;-)

I'm sad to say that the only flipping in my future might be burger-flipping... and I'll probably get rejected for that job as well!!

Steve said...

So when is it time to become a Section 8 slum lord by buying up some of this "bargain" property and become a big time real estate owner.

Rob Dawg said...

My story and I'm sticking to it:

End of 3rd quarter I will be sticking my nose out of the undisclosed location bankerdome to get a radiation count. Until then there is no reliable data upon which to make even a wild ass guess. Anyone who suggests otherwise is either lying or too stupid to realize they are basing opinions on unreliable or deliberately falsified data.

At that time I might see my shadow and go back in for 2 more quarters of hibernation.

Regardless, no Section 8 for me. Sure you get paid but ethically I am uncomfortable with the economic discrimination it induces.

When the implosion meter reads zero I'll be loading up on SFR rentals 30¢ on the dollar with banks falling all over me to get the property off their books and a little cash on their balance sheet. Maybe Fall '09 based upon the models I developed prior to the current disaster but like I said, everyone's model is wrong now and I see no reason to think mine different.

Steve said...

Rob Dog,

But you could combine falling housing value with a side business of "Clown Houses", vertical integration.

A fleet of unmarked buses running down to the border to pick up cargo, clown houses to store inventory, Governor Gavin to declare the whole state of California a sanctuary state, Mazal Tov...a real Mitzva, and all brought to you by Countrywide.

w said...

Here is a great opportunity for you Rob,

I know a guy who can get you hooked up in Mexico with a good coyote. You pay him and he brings you fresh renters. Don't worry they will stay for a few years to pay off their debt and rent. Just threaten them a lot with how you will have them sent back and that they will go to prison if anyone finds them here. Just don't mix batches in the same house. Keep the fresh ones together so they don't get any ideas.

Just hurry. Every foreman I know is planning on getting in on the deal and becoming a slum lord in Oxnard. Guys tell me they are gonna buy 10 houses and pack 'em full.

Bakersfield Bubble said...

Indymac - DONE!

My sources put Gov’t officials at IndyMac this weekend doing the deed. I am being told an announcement will come tomorrow first thing, that IndyMac is no more and at least their wholesale operation is gone effective immediately. Apparently wholesale operations will get pink slips, no new loans will be locked and all existing loans in the pipe must be closed by the end of July.

Rob Dawg said...

Yep, and no one here is the least bit surprised.

Peripheral Visionary said...

Rob, setting aside the humor, Steve and w do have a point; you'll be competing with the clown houses in your neck of the woods. I definitely see a lot of downward pressure on rents, especially as the larger homes get subdivided into apartments. That's already happening in the D.C. area as I've mentioned before, and the housing market here isn't falling apart as quickly as it is in Southern California.

There is opportunity awaiting at the bottom of this real estate market, but that bottom may be a lot further down than anyone realizes. Some areas of the country, like Sacramento and Inland Empire, the real estate market will be broken for many years, decades even. Anyone buying at the bottom will need to be very patient--as in, buying-tech-stocks-in-1975 patient.

w said...

PV's point about large houses being subdivided is interesting. I was down town this weekend and got to thinking about the large old homes that were converted to MFR many many years go. Nothing really changes. Wash-rinse-repeat.

Property Flopper said...

So, what is that dolphin doing to her to give her that smile?

And why hasn't the FBI (and or IRS) done that to Casey yet?

Lost Cause said...

Biggest crappy flip of all time.

Big square house on the crappiest street in the hood. It is on a major street with busses and trucks going by, and filled with 50 year old 1400 sq ft houses. This street commanded the lowest prices in the zip code for years.

Property Flopper said...

That is one ugly pillbox... um, house.

Peripheral Visionary said...

"PV's point about large houses being subdivided is interesting. I was down town this weekend and got to thinking about the large old homes that were converted to MFR many many years go. Nothing really changes. Wash-rinse-repeat."

Yep. I remember a few years ago, looking at some old, once-beautiful homes, some of them very large, in Springfield Mass that ended up in the middle of the ghetto and had been converted to apartments. What a terrible waste. Don't think it can't happen again, only this time it will be in the far suburbs, not the city center.

Bill in NC said...

New suburban developments would have covenant restrictions on turning a SFR into a MFR.

Rob Dawg said...

You are all correct. There will be residential chopping. It will happen quietly. I know the Springfield houses of which you speak. My grandfathers' print shop was downtown where the freeway is now.

When I resume slumlording again it will be honest permanent rentals as rentals. Simple SFRs and maybe a few duplex/quadplexes. But they won't be in places like Oxnard. I've owned rentals in Oxnard and won't again. That city is on the brink of municipal implosion and only one person seems to care. I can see the inmates easily taking over there.

Casey Serin said...

When I resume slumlording again it will be honest permanent rentals as rentals.

I'm interested in renting a nice starter home around Camarillo, Robbo... hook me up -- I promise I'd give you a security deposit of 200 Jamba Juice gift cards up front, and would always pay the rent on time. Would you accept payment in counterfeit postal money orders?? ;-)

soem dood said...

Terrific. Thanks Casey.

Freddie Mac, Fannie Mae Plunge on Capital Concerns
By Jody Shenn and Shannon D. Harrington

July 7 (Bloomberg) -- Freddie Mac and Fannie Mae fell to the lowest in 13 years in New York Stock Exchange composite trading as concerns grew the two largest U.S. mortgage-finance companies may need to raise more capital to overcome writedowns and satisfy new accounting rules.

Freddie Mac fell 18 percent and Fannie Mae dropped 16 percent after Lehman Brothers Holdings Inc. analysts said in a report today that an accounting change may force them to raise a combined $75 billion. Speculation that the companies may take further writedowns also weighed on the stock, said John Tierney, a credit strategist at Deutsche Bank AG in New York.

Casey Serin said...

Terrific. Thanks Casey.

Happy to oblige! ;-)

The market's tanking, house values plummeting... some baby boomers who were counting on their home equity for their retirement portfolio will be forced to work for the rest of their lives... You guessed it -- all thanks to me!!

I myself will continue to work hard, as well -- working hard to defraud hard-working taxpayers and citizens, all while getting them to bail guys like me out. SWEET!!!!!

soem dood said...

he he he

In these days of uncertainty, it's always great to see American Entrepreneur Casey Serin ready to saddle up and "get 'er done"!!!

Adam said...

Eh, the irony here is that the Mexican housing market is doing remarkably well, with balanced building and reasonable price appreciation taking place. No bubble there.... Primarily because the Mexican banks didn't get caught up in the fraudulent lending practices that brought American lenders to their knees!

So all those Mexican laborers who left back for Mexico are finding good work at home.

(And since they weren't actually officially employed on the books by contractors and paid "under the table, well there's one good explanation why unemployment rates didn't skyrocket early on, like during past recessions)

Furthermore, some of these "stupid" Mexicans actually signed up for a free (no money down, or cash-back) home in America, and extracted the equity with a HELOC; when they decided it was time to go, they left for Tijuana with a no-down payment Excalade, and a bag-load of $$$ from the home, never to be heard from again.

So WHO screwed WHO here, again? Stupid gringos thought they were screwing the poor Mexicans, when in fact the Anglos got royally screwed, LOL!