Spot The Speculator #24 – “They are just an ordinary couple, no spectacular income, who bought a home in an appreciating neighbourhood a couple of years back and were now “looking to flip a house”.”

Posted on 15 January 2011 | 4 Comments

TPFKAA at VREAA 11 Jan 2011 at 7:13pm – “Here’s an anecdote from last summer [2010]. I was at a birthday party and got talking to a couple I barely knew about living out in Abbotsford. They said they have been going to open houses in their neighbourhood because they are looking for a house to “flip”. Their words, not mine. They are just an ordinary couple, no spectacular income, who bought a home in an appreciating neighbourhood a couple of years back and were now “looking to flip a house”. They told me of a guy in their neighbourhood who had flipped two homes in the same street, living in them and renoing for about six months then selling. The prices were escalating rapidly, they said.”

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4 Responses to Spot The Speculator #24 – “They are just an ordinary couple, no spectacular income, who bought a home in an appreciating neighbourhood a couple of years back and were now “looking to flip a house”.”

  1. serferboy | 16 January 2011 at 10:49 am | Reply

    That’s the beauty of this whole situation in Vancouver (and greater Vancouver area).

    There are lots of “amateur” investors who are getting in the game; those who have no idea how they will react and feel if/when prices start coming down.

    It’s such an interesting psychological / sociological phenomenon, when prices are going up everyone recommends a buy, but when prices are going down, everyone won’t even want to touch it….

  2. TPFKAA | 16 January 2011 at 9:09 pm | Reply

    There’s more, VREAA….

    The more I think back over the past six years, the more I realise how crazy this town has actually been. As a naive 24 year old, when I arrived in 2004 I took it as a fact of life that house prices rose forever…. that’s what everyone told me. I also believed that the route to riches was to invest in RE.

    Latent anecdotes that I paid no attention to in the past now take on more significance. There were people I met who were obviously making a superb living through RE investment: I remember two in particular. Back in fall of 2005, A forklift driver and lead hand at a warehouse where I briefly worked, owned five rental properties in Poco. He had owned a cannery back in the eighties and made a killing. He had no real need to work; he had already retired once in his early forties. But after two years he realised he was spending all his money at a crazy rate, on harleys, snowmobiles, a boat and cottage on Harrison, golf, drinking parties, and so forth. He decided to go back to work to have something to do. He chose to go back to forklift driving because he was extremely good at it and enjoyed himself doing it (his dad had been a big warehouse owner and he grew up driving rigs and forklifts). He used to be really happy in the lunch room at month’s end because all the rents would be rolling in. One day he was talking about taking on more overtime. I asked him why, knowing he was worth millions, and he replied: “‘Cause I’m saving up to buy an apartment building out in Chilliwack.” His opinion on RE in 2005 was bearish for Greater Vancouver: “you can’t get in on Vancouver, Burnaby, Coquitlam, even Poco, any more” because prices were already too high. But he anticipated Chilliwack, Abbotsford, etc. to see further increases and wanted to invest. I am not clear if he just wanted the building for rental income or as investment. Nobody at the warehouse begrudged the guy for all his RE investments, despite a largely blue-collar work crew, because he was a stand up guy and had amazing energy. I dropped out of contact with him in 06, so I don’t know if he did buy that apartment building.

    The second example made my jaw drop. A guy I knew from a sports class in his early twenties did nothing else but RE investments, flipping, for a living. I suspect he got his start with a large DP from family or with some lucky assignment flips. He went from taking the bus and wearing scruffy clothes in ’05 to a Benz, tall blond girlfriend, the works, in the space of a couple of years. All he did, literally, was RE buying and selling, full time. In early ’08 I ran into him last and asked how the downturn was affecting him. He said he felt sorry for those getting in on the game late, who did not have the reserves to absorb the losses, but that “we” – his partners included perhaps – had enough reserves to ride it through.

    Speculators are everywhere.

    • Snats | 17 January 2011 at 10:12 am | Reply

      I knew some flippers who did quite well down here in the states in the boom years and were able to exit the business fairly unscathed as things fell apart. The problem is that they didn’t make enough to retire on or anything like that, and flipping doesn’t work when prices are headed the wrong way, or even when they’re just holding steady.

      So it was a good thing for them to do for a few years, made some money, worked hard. But leaves them looking to completely switch gears, find a new line of work in the downturn. If they’re unable to, all that money they saved up gets spent down pretty quickly. No unemployment insurance for house flippers (in the States anyway).

      Actual investors, i.e. people buying viable income-producing rental properties for an uninflated price, will be just fine.

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