Flipping houses

[Gobsgraham]

Is there any CPers here that are currently flipping houses or even just investing in residential real estate?

I want to know if the High and low inventory cycles seem to repeat each year. I assume that it wouldn't repeat to the extent that it did last year but are we going to see a similar trend this year?

[West Karma]

nm

[Gobsgraham]

Thanks for the info.

I have heard that most of the money is made at the time of purchase, but do you have to have an inside track to find these houses (foreclosures, estate auctions). It seems like the only property that ever hits the open market (MLS, Welist, etc.) is already market value whether or not it is in good condition or not.

[Mike Oxlong]

I have a business I run with a friend that is involved in Real Estate investing. Right now we have 4 rental properties and have flipped 1 house. We are currently looking for more investors to buy some other long term investment properties. In the meantime we are looking for houses to flip to build up our cash again to buy more places. Eventually we want to get into small apartment buildings but that is a little ways away.

Generally the housing market slows in the winter months. Once spring hits the market will generally heat up again and prices will start to rise again.

I don't agree that our market here in Calgary in going to be determined by what happens in the US. Calgary and most of Alberta is in a very unique situation right now. The economy is really hot, there are lots of jobs available and unless Oil drops to $20 a barrel then that trend looks to continue for a long time. The housing market is based on supply and demand. When there is about 30,000 people a year moving to Calgary there is huge demand for housing. Prices are going to keep going up.

There is a small correction happening now after the crazy year our market went through. I think a lot of people were waiting as long as they could to sell their homes because they were getting $500 a day appreciation at peak times and they wanted to milk every penny out of it they could. Now that there has been a slight downturn these people are starting to panic and have flooded the market with homes. Once this over supply dwindles in about 2 or 3 months were are going to start seeing prices gains again really fast. They won't be the same as last year but I am guessing they are going to be about 10% a year for the next 10 years. Which is a fantastic return by the way.

Now is definetely the time to buy. There is going to be a lot of people who are desperate to sell because they are taking posession of a new house soon and they need to get out of the old one but they took a chance on waiting to sell their house. I really see a lot of motivated sellers out there right now. Finding them is a different story.

We have a few realtors we work with and once in a while they find us a good deal. Unfortunately they don't find us as many as we want. My best advice is to look through the papers and contact a few of the realtors who advertise fixer uppers or foreclosures and they can put you on a an automated search for these houses that get emailed to you. Sometimes you have to find the motivated sellers yourself which again is a different set of problems.

If you have the money to buy a place soon and can fix it up for spring time your timing should be bang on and you can make some good cash.

Good luck!

If there are any realtors here on CP that ever find foreclosures, fixer uppers, motivated sellers etc....let me know. We would be very interested in checking them out.

[V]

I don't flip, but I'm thinking of doing that one day, probably in 2-3 years. Right now I just hold on to the real estate. My job doesn't allow me the time it takes to get that stuff done.

But I would think that if I were into flipping houses, as in 4-5 a year, I would spend some coin on some furniture. Vacant houses are so unfriendly when you're looking at buying, IMO.

As for the cycles, there are generally standard times of the year when prices go up and down. I expect another bump from January to April, but it won't be anything like last year, unfortunately. June/July/August are usually pretty slow.

Oh, and flipping doesn't really make sense unless you're coming out with a capital gain of 30k, depending on how many renovations you do.

Foreclosures and estate sales? Good luck. They aren't the deal they used to be, and the few that are a great deal are picked up by others. There are a ton of people out there looking for the same deals you are.

In the end, your best option is to send out tons of offer sheets. Most of them will be laughed at, but all it takes is one of them to stick and you're making money.

photon's more of a flipper, I think.

[Bertuzzied]

Buy my parents house. It was originally appraised by the bank at $500k in May. They will be happy with $435k for it right now. They have since moved to Canmore and the house has been sitting empty for a few months now. In the NW.

[Wookie]

Originally Posted by Mike Oxlong

I have a business I run with a friend that is involved in Real Estate investing. Right now we have 4 rental properties and have flipped 1 house. We are currently looking for more investors to buy some other long term investment properties. In the meantime we are looking for houses to flip to build up our cash again to buy more places. Eventually we want to get into small apartment buildings but that is a little ways away.

Generally the housing market slows in the winter months. Once spring hits the market will generally heat up again and prices will start to rise again.

I don't agree that our market here in Calgary in going to be determined by what happens in the US. Calgary and most of Alberta is in a very unique situation right now. The economy is really hot, there are lots of jobs available and unless Oil drops to $20 a barrel then that trend looks to continue for a long time. The housing market is based on supply and demand. When there is about 30,000 people a year moving to Calgary there is huge demand for housing. Prices are going to keep going up.

There is a small correction happening now after the crazy year our market went through. I think a lot of people were waiting as long as they could to sell their homes because they were getting $500 a day appreciation at peak times and they wanted to milk every penny out of it they could. Now that there has been a slight downturn these people are starting to panic and have flooded the market with homes. Once this over supply dwindles in about 2 or 3 months were are going to start seeing prices gains again really fast. They won't be the same as last year but I am guessing they are going to be about 10% a year for the next 10 years. Which is a fantastic return by the way.

Now is definetely the time to buy. There is going to be a lot of people who are desperate to sell because they are taking posession of a new house soon and they need to get out of the old one but they took a chance on waiting to sell their house. I really see a lot of motivated sellers out there right now. Finding them is a different story.

We have a few realtors we work with and once in a while they find us a good deal. Unfortunately they don't find us as many as we want. My best advice is to look through the papers and contact a few of the realtors who advertise fixer uppers or foreclosures and they can put you on a an automated search for these houses that get emailed to you. Sometimes you have to find the motivated sellers yourself which again is a different set of problems.

If you have the money to buy a place soon and can fix it up for spring time your timing should be bang on and you can make some good cash.

Good luck!

If there are any realtors here on CP that ever find foreclosures, fixer uppers, motivated sellers etc....let me know. We would be very interested in checking them out.

So, if I have a $450,000 house, it should sell in ten years for $1,167,184?

Sorry, I don't buy it.

I agree the economy is doing well, I agree it should continue, even with a hiccup here and there, long term it's a good place to be, but I don't believe for a minute a lot of the analysis that comes from people in the RE market. I think (no offense) the bias seeps through in the analysis, of what you want or what you want other people to believe then what is fundamentally sustainable.

I don't think we're in for a crash like a lot of the bears believe. But I think the bulls are reassuring themselves a bit much.

I also know I could be wrong, and you could be right.. But right now that's how I see it.

[Gobsgraham]

Originally Posted by Kobatuzzied

Buy my parents house. It was originally appraised by the bank at $500k in May. They will be happy with $435k for it right now. They have since moved to Canmore and the house has been sitting empty for a few months now. In the NW.

PM Sent. More info please.

[looooob]

Originally Posted by fotze

Advice to the flippers that I have seen. Cheap out and you can see it a mile away.

Try and disguise the fact that you are flipping.

Hire qualified people. Qualified people don't include your alchy uncle.

Don't paint tile, I don't care what trading spaces told you.

Don't go high end on everything then leave the ****ty mauve original countertops in the kitchen, it makes you wonder what things you are hiding that we can't see.

Laminate flooring shows that you have cheaped out, don't expect hardwood sale price. And yes you can tell the difference.

Don't put the house on the market before being done.

hey I think you should have your own show

[Gobsgraham]

Originally Posted by Dominicwasalreadytaken

Oh, and flipping doesn't really make sense unless you're coming out with a capital gain of 30k, depending on how many renovations you do.
photon's more of a flipper, I think.

What do you mean by this? If I wanted to start smaller and flip condos or townhouses, I would not expect to make more than $30k.

Do you have to pay tax on all money made on flipping houses?

[Bertuzzied]

Originally Posted by Gobsgraham

What do you mean by this? If I wanted to start smaller and flip condos or townhouses, I would not expect to make more than $30k.

Do you have to pay tax on all money made on flipping houses?

If it is not your principal residence then you have to treat it as a capital gain. However you could put it in the name of a family member who doesn't own a house..... hehe.

[V]

It all depends on your expenses. Add them all up, and then tell me if you want to come out with capital gains of less than 30k for all that work. Especially if you'll be selling with a realtor, since they'll take 10-15k all by themselves. Lawyers, accountants, utilities, etc. all have to be factored into your expenses.

It costs money to make money, just make sure you make enough money to make it worth your while. Personally, I wouldn't go through all the trouble of flipping a house that needed some serious renos, just to come away with 5k.

As for tax on capital gains, if it's not your principal dwelling, you'll have to pay capital gains taxes on half the capital gains. Unless you do a bunch of houses in one year, in which case you will have to pay taxes on the full capital gains. There are ways around this, as Bertuzzied alluded to, but that's why you have accountants and lawyers.

[Bertuzzied]

Originally Posted by fotze

Plus it costs a lot of money to buy and sell the house. Legal fees are probably $1000. Mortgage cost is dependant of course. Realtor fees can be $20,000.

Huh? who uses a realtor? hehe.

Seriously though if you know the person you are selling too and you know how to calculate mortgage interest. I sold 3 houses for $70 each.(fees i mean)
$70 to register with land titles, thats it!

Oh thats if they are assuming your mortgage.

[V]

Originally Posted by Wookie

So, if I have a $450,000 house, it should sell in ten years for $1,167,184?

Sorry, I don't buy it.

Meh, I do. The average house prices in Calgary from 1995 to 2005 doubled, with a pretty steady 6% increase over each year. I'm sure if I were told in 1995 that my parent's house valued at 100k would be worth 200k in 10 years I would've laughed at you. And the economy wasn't even all that fantastic over that period. Not like it is now. Shucks, I would've called you crazy if you told me that a house I bought for 180k would be worth 350k less than 2 years later. The economy's red hot, and there will come a time when prices come crashing down as people bite off more than they can chew, but we've got a ways til that happens, methinks.

[V]

BTW, if you're content making small returns on flipping, flip tent trailers instead. I spent about 4 hours total with one trailer, and sold it for 1600 bucks more than I bought it. Virtually no work, nice payoff. And it's pretty easy to find some good deals out there.

[Bertuzzied]

Originally Posted by Dominicwasalreadytaken

Meh, I do. The average house prices in Calgary from 1995 to 2005 doubled, with a pretty steady 6% increase over each year. I'm sure if I were told in 1995 that my parent's house valued at 100k would be worth 200k in 10 years I would've laughed at you. And the economy wasn't even all that fantastic over that period. Not like it is now. Shucks, I would've called you crazy if you told me that a house I bought for 180k would be worth 350k less than 2 years later. The economy's red hot, and there will come a time when prices come crashing down as people bite off more than they can chew, but we've got a ways til that happens, methinks.

It would never be that high. People wouldn't be able to get financing for it, unless all their salaries double too. I don't think thats going to happen.

[V]

Over the next ten years? Why not? My salary has increased by 75% in the last five years. I expect it'll go up by 10% again next year.

I honestly wouldn't be surprised if the economy stays strong for the next ten years. And if it does, I wouldn't be surprised if house prices keep rising and rising. I also wouldn't be surprised if 1 million bucks in ten years isn't going to be close to what it is right now.

[Bertuzzied]

Originally Posted by Dominicwasalreadytaken

Over the next ten years? Why not? My salary has increased by 75% in the last five years. I expect it'll go up by 10% again next year.

I honestly wouldn't be surprised if the economy stays strong for the next ten years. And if it does, I wouldn't be surprised if house prices keep rising and rising. I also wouldn't be surprised if 1 million bucks in ten years isn't going to be close to what it is right now.

I'll buy your house for a dollar! hehe. You seem to forget to factor in interest rates.

[Sylvanfan]

Well I think in Alberta you can expect to see better than average returns in real estate. Especially for the next 5 years. After that the bubble that is the baby boomers starts to explode and than it gets pretty tough to predict.

I don't know enough about Calgary's current market to say that you can flip property's and make good money. From what I've observed in about 5 real estate markets over the years. Right now you're getting close to Christmas and people aren't exactly keen to move. Once you get into February people start looking again and real estate should be pretty steady until October as people who didn't find houses in the summer panic big time in September. I've seen a few reports that suggest that the Bank of Canada could make 4-25 basis point cuts on the interest rate. If that happens you can pretty much take todays $2000 payment amortized over 25 years and than compare what that payment would be at 1% lower and be pretty confident that will be the price of houses. Nowadays, it's not about the price anymore, for most buyers it's about the payment.

Also don't get into doing reno's on houses if you don't have a lot of time, the proper time, or don't know what you're doing. Especially when it comes to finish work. You can screw up the most minor thing but it will turn people off because thats what they see. Whereas you can frame your floor with rotten wood in 80% of the joists and cover it up and no one will really notice. Sad but somewhat true.

[Wookie]

Originally Posted by Sylvanfan

Well I think in Alberta you can expect to see better than average returns in real estate. Especially for the next 5 years. After that the bubble that is the baby boomers starts to explode and than it gets pretty tough to predict.

I don't know enough about Calgary's current market to say that you can flip property's and make good money. From what I've observed in about 5 real estate markets over the years. Right now you're getting close to Christmas and people aren't exactly keen to move. Once you get into February people start looking again and real estate should be pretty steady until October as people who didn't find houses in the summer panic big time in September. I've seen a few reports that suggest that the Bank of Canada could make 4-25 basis point cuts on the interest rate. If that happens you can pretty much take todays $2000 payment amortized over 25 years and than compare what that payment would be at 1% lower and be pretty confident that will be the price of houses. Nowadays, it's not about the price anymore, for most buyers it's about the payment.

I think in todays G&M they were suggesting with the recent decline in the CDN$ that any change in interests rates may be postponed. But rates, are def. one thing that can help keep the market strong!