“I’m just plain sick of hearing from everyone how much they have made from flipping houses while I sit there renting.”

Singh at greaterfool.ca 31 Jan 2011 12:45am“I’m just plain sick of hearing from everyone how much they have made from flipping houses while I sit there renting. Can’t wait for this all to play out!”

14 responses to ““I’m just plain sick of hearing from everyone how much they have made from flipping houses while I sit there renting.”

  1. One thing I know for sure is that a large portion of real estate investors are some of the best professional rose-coloured glasses-wearing accountants around. I’m skeptical they have all made money when the beans are properly counted.

    • Agreed. [The anecdote is posted as a record of demoralized sentiment in some sectors.]
      When this is all over, only a very small percentage of the owners/’investors’ will have profited.
      Some of the sellers of bubble-equipment (developers, contractors, etc) may have harvested profits along the way. But many of them will have partaken of too much of their own product, and will go down with the other holders, too.

  2. After my hamfisted Ipad post yesterday, I will make this short.
    Patience is not a word in most people’s vocabulary.
    This blog Froogle, Greaterfool.ca etc. have all been prescient – but the QE by Helicopter Ben and the shenanigans from Flaherty, Carney and his mob, have made this distorted RE market walk like Frankenstein….( cue Peter Boyle ).
    The leverage that most people have used at the peak of this distorted situation will bury a lot of people in time.
    Sell. RENT, and wait, and watch.

    The FHA in the United States has been my barometer, and judging by the horror I have witnessed firest hand in two American markets, tells me what is coming and it isn’t a cruise ship with an open bar.

    This will be the tsunami that drowns the cardboard McMansion shmucks, as they run out of money trying to keep their pieces of garbage above the plimpsoul line. Trust me, we have to be smart, and have a cushion and we have to make sure debt exposure is limited.

    Take the credit card and burnit if you have to, sell the damn toys, for whatever yo can get, and for Gosh sakes realize that the world is now getting close to the edge of Valhalla.

    The intergenerational war will be next, as young folks make comments like – it is those greedy boomers fault, and there will be much angst and pain. Kids will have to move backin with Mom and Dad. The era of vrbo.com splurges in places like Maui and Arizona are over, dude. Take a look around Vancouver and watch for the signs. Can’t you smell the fear?

    I tried to convince my sister in law that they were insane to buy a place in Phoenix, a year ago. They called last week, and the pace has dropped like a stone. Truly, there are areas in the States where piles of sticks have gone to zero. Take a look how fast lakefront crap in dumps like Kelowna and the Gulf Islands have cratered!

    My Banks loan officer says they are turningn down many refis now, and these are the same guys that were shovelling money at morons paying a million bucks for a condo on English Bay.

    One last stat – carrying costs. We have been renting in the sun, and the condo we are in, the monthly maintenance fee is, ready…..? $2407.61 a month, plus a horrible expensive eletrical bill, and the swimming pool was just done, and each owner had to pony up nearly 45k for repairs. Why do I mention this?
    We were the first people to rent this place in 5 months. The owners in Utah must be desperate, and the Owner committee forced them to upgrade yearly, and so hey also had to Tommy Bahama this place, and gosh knows that that cost. The owners probably thought he were smart to get a place to rent to snowbirds. I bet they were happy when the notice was posted last week, tha this entire Villa complex will have to be re-plumbed. They are shutting the water off for four hours Tuesday….just after we leave for home. The circular said that repairs to the suites will start next week….so I am sure that the owners will be pleased.

    Times have changed. Patience, grasshopper. The party is over, now the hangover is about to begin.

  3. First off, did they actually make the money flipping houses, as in cash, or are they staring at paper gains and dancing around? Huge difference. If they are cash gains after transaction and sunk costs, then good on them. They could have gotten lucky and shorted BP right before that blew up. They could have borrowed money from an aunt and bought soy futures. Some investor/gamblers get lucky, most don’t. It shouldn’t reflect on your own self-image, if that is what is happening here. Being risk averse has huge advantages, enjoy them rather than regret them.

    Our friends “made money in real estate” as they will tell you. Moved to a new job in a bubbly town. Bought a big old house in dire need of some love. Worked on it for 2.5 years, sold it for a tidy profit, bought an even bigger old house in even more need of love, repeated the process. In the end, they cleared what appears to be a nice sum when they changed jobs again and moved away. And they will tell you repeatedly how well they did. But I made them start breaking down the costs (and I annoyed my spouse for tenaciously interviewing the wife (the apparent lead in this endeavor) about this at a party). In this case, they did most of the work themselves so they feel even more like they made a bundle. But my take of these 7 years of gains is: this professional couple each worked a real job and then employed themselves as contractors for about 5.5 out of 7.5 years, and paid themselves just a tad over minimum wage for their time given the hours, not to mention raising your kids in a construction site. It wasn’t a windfall. Not by any normal definition. And had the market not been rising, it would have been an expensive hobby instead.

  4. Shoot, long post and I forgot to add this:

    When someone says they “made money on their house”. Always ask for specifics. Most of the time they mean: I bought a house and now I believe the value has gone up. They haven’t made anything Bernie Madoff’s clients didn’t make: lots more numbers on a sheet of paper. Worse than that, they *think* they are rich, so they spend themselves into oblivion.

    And I’ll reiterate: begrudging people actual good luck serves no useful purpose.

    • I’m also gob-smacked when people make comments like “he bought the house in 2006 for X and just sold it for Y, so he made (Y-X) — not bad for five years!”

      Ah — the magical world where mortgage interest, taxes and fees don’t exist….

  5. Darn Ipad did me in again. Sorry….wait til I get home. Yikes.

  6. At work, we are only 6 or 7 renters (out of approx. 75 colleagues). People are betting that the madness of the last few years will continue for years to come. My dad keeps talking about a “new paradigm”, which is setting off 1000 alarm bells in my head. I can’t stand this madness either. Can’t wait for the interest rates to climb to a decent level so savers will get the break they deserve.

  7. In 2003, my wife and I ventured from an apartment into our first home . I remember the housing market was flat on the east side of Vancouver. Average median price was about $375,000 to get into the neighborhood we wanted. Well we bought a home worth $500,000, paid $100,000 over assessment price and $60,000 lower than asking. I priced out land and cost to build this type of house and it was a no-brainer.
    Needless to say I got nothing but ridicule from my siblings and most of all called “foolish” by my father who was a realtor.
    I lived in that place for 8 yrs. and have not spent anything as the house was only 3 yrs old.I sold last fall for $1,000,0000. If I had just put in another $150-200 thousand to live on the west side I would have cleaned up even more. Point is, family is now telling me that I will be left out and that I ,was once again, acted “foolishly”.

    Fact is, it is a very lonely “trade” on the opposite side of the herd but if you joined the crowd’s opinion then you’re likely to be on the wrong side of the trade. That is how markets function. When everyone has bought, who else is left to buy. You need buying pressure to keep prices moving up, whereas you just need to lose momentum for prices to go down faster than it went up. I am now more convinced than ever that RE will turn down for the pure fact that everyone and their grandmother is bullish on housing.

  8. My old condo, which I sold almost 4 years ago (my anecdote was recorded here on Jan 9), is still for sale. It’s priced a whopping $20K above what I sold it for, and it’s been sitting at this price for almost two months. If they manage to sell it for the asking price, at best they’ll have a loss of $5K. And of course, during that time they were paying strata fees, maintenance, and city property taxes.

    If they sell at their asking price, would renting have been any better? Maybe so, maybe not. It depends on their mortgage interest rate, mostly, and I guess they had stability for that period of time. They’re certainly not light years ahead of a renter in a comparable unit, though.

    • M-: any idea why they’re having such a time of it? I really want to know: the benchmark condo index is significantly higher than in 2007. Either depreciation on condos is faster than we think, there’s something wrong with the suite, they overpaid, or the condo market is soft.

      Did you ever notice how all the hype we’ve been hearing of market strength is surrounding detached properties and lots? What’s up with that?

      • Hi Jesse, when we sold it we broke the building (and neighbourhood) records in cost per square foot, so they definitely paid a high price for the unit. We have nice furniture and very carefully decluttered the place so that it looked spectacular when we sold it. We had also recently repainted (including new ceiling paint!) and installed new carpets upstairs, so the unit looked about as good as it could.

        That said, I wouldn’t say they overpaid– 6-12 months after we sold, units in the building were asking ~5-10% more than we sold for, and I presume they were able to get pretty close to those prices.

        Looking at the photos they’ve posted, it’s evident they didn’t do anything with the suite– same paint, same carpets, same appliances, same fixtures, so it’s looking a little more dated than when we sold, plus it’s not staged very well– cheap furniture that looks like a student’s (hey! that’s why the owners bought it– for their daughter to go to UBC). Staging the suite might be able to enhance its value, but staging’s not cheap if you don’t already have the furniture.

  9. My husband and I sold our house for three times what we paid for it – sold it too early I might add – but with the cash we have been able to put our two children through UBC so they have incurred no debt and all four of us have travelled the world over the last 15 years. We have been to Africa, Europe, South East Asia, many parts of the USA and all throughout Central America. If we had stayed in our too-small west side home we would have been stuck with repairs and all the other crap that comes with owning. We still have the bulk of our windfall as well as the wonderful memories of travel and experiences that we couldn’t have had without the backstop of cash in the bank. We have also been lucky enough to have rented a four bedroom house in the Arbutus area at a low rate with landlords that are only too glad to have good tenants, we have never had to move since selling our own house. House porn addicts should give their heads a shake and realize, at the end of the day, it’s not granite counter tops that matter, it’s the life you’ve led. I can imagine readers thinking that they want the opportunity of making a bundle on their own house but, let’s be real, that ship has sailed – it’s time to think about what you want from the life you lead and if shiny appliances and soaker tubs are it – go for it – I just think that when old age comes you might not want to be one of those old grey haired people being wheeled onto the cruise ship hoping to experience a “foreign land”.

    • We sold our westside home last year and after too many moves in 6 months are finally happily renting for what we hope are the next few years. Although we sold to buy another home it didn’t work out and we found ourselves to be accidental renters. For the best I think now and like you we’ll be traveling and building memories.
      Do you really think though that the ship has sailed on cashing out? I’m still seeing houses selling at v healthy prices often with multiple offers. I do believe that prices will soften in Vancouver but have given up trying to predict when or why. This is one strange market…

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