Monday, May 12, 2008

More Experts Come Out Against Flipping (In This Market Anyway)

Anyone who reads this journal even sem-regularly knows how I feel about flipping. Not a good idea generally, and definitely an insane idea in this market.

Well, I'm not the only one. Dian Hymer, a columnist for Inman News, says the same thing. That is, she's saying don't buy to flip in the current market. Here is an excerpt:

"Short-term investing paid off for many investors a few years ago. In most cases, this strategy should be avoided today. Although the home-sale market is localized, generally the current housing market is soft and is expected to take a year or more to recover. You don't want to be caught having to sell in a year or two when the value of your house might be less than or equal to what you paid for it. After taking into account the costs of sale, you could find yourself selling at a loss."

True, short-term buys and sells did generate some cash. And it was enough to spawn a raft of questionable television shows showing the "benefits" of flipping. But I would hardly call flips "investing." It is speculating -- pure and simple. Commodity traders don't invest; they hedge and they speculate. Buying houses to flip is no different.

Still, there is money to be made -- serious money -- buy buying houses and holding them for investment. Rent them out, take advantage of a wealth of tax writeoffs (expenses and depreciation), plus have income. Work the numbers with someone who understands investment real estate, look at the pros and cons and pick your investment carefully. It's not like there aren't a few possibilities out there. Work it right and the income will cover the note. The expense write-offs and depreciation is gravy. And as the market recovers, appreciation is the icing on the cake. It is truly a buyers' -- an investors' -- market.

Savvy investors do not flip. They buy to hold. And they let their residents (tenants) pay what is owed to the bank.

Remember, people are perfectly willing to help you pay your bills -- if you let them.

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