patrick.net

"Why deal with a middle man (the guy who paid the wholesale price, then paid for it to be fixed up, and then sold it so he would make a profit)?"
Because most people are too lazy to do the work themselves, which is why houses in need of significant work usually remain on the market much longer than those that don't need work.

HousingWatcher says

people are too lazy to do the work themselves, which is why houses in need of significant work usually remain on the market much longer than those that don’t need work.

Wow, I'd be embarassed if I was as wrong about so many things as you are. Even a freaking clock is right twice a day.

Its not that they are too lazy to do the work. It's that easy peasy money is all too available to them. Instead of buying an affordable home, dolts stretch to the max that the lenders will provide and thereby obtain their granite/stainless entitlements that would not be available if they had to actually think about how much money there were spending vs what the monthly payment amount was.

dodgerfanjohn says

Wow, I’d be embarassed if I was as wrong about so many things as you are. Even a freaking clock is right twice a day.

You should be embarrassed about now then, because your post makes no sense. HW is saying why move-in ready homes sell much better than ones needing work. I don't know what you are trying to say...

HousingWatcher says

Because most people are too lazy to do the work themselves, which is why houses in need of significant work usually remain on the market much longer than those that don’t need work.

Which is kind of sad. Homes that are fixed up have the cost jacked up and the materials used are normally the cheapest available. For the same price you can do it yourself with quality materials, exactly how you want it, and still save money.

People are lazy, but I'd say it's more due to lack of knowledge. If people were given the numbers they'd choose fixing it up themselves almost every time.

StoutFiles says

HousingWatcher says

Because most people are too lazy to do the work themselves, which is why houses in need of significant work usually remain on the market much longer than those that don’t need work.

Which is kind of sad. Homes that are fixed up have the cost jacked up and the materials used are normally the cheapest available. For the same price you can do it yourself with quality materials, exactly how you want it, and still save money.
People are lazy, but I’d say it’s more due to lack of knowledge. If people were given the numbers they’d choose fixing it up themselves almost every time.

Nah, its cause they don't have the cash available to do the repairs themselves. If they saved to buy a place they could actualy afford, they would have the cash.

dodgerfanjohn says

Nah, its cause they don’t have the cash available to do the repairs themselves. If they saved to buy a place they could actualy afford, they would have the cash.

That's why you get a loan higher than the cost of the house so that you have the cash to do the repairs. It would still end up being a smaller loan than buying the house that was fixed up.

Buying a house that needs work is not always cheaper in the end. Many such houses are money pits that don't make any economical sense to renovate. They would be better off torn down. I'm talking about houses with structural issues and the like.

HousingWatcher says

I’m talking about houses with structural issues and the like.

Oh ok...yes I would agree about structural issues. I thought you mean things like fixing up a bathroom or kitchen.

la.kings says

I usually don’t like flippers that put in $25k of work and try to sell for $100k more than they paid. HOWEVER, this doesn’t look like a flip. If you scrool down to the listing and check the listing from 2006, it’s the same kitchen and flooring. This looks like a standard REO to me. I’m not sure about your area, but in LA county, $267/sqft and a nice looking house is a great deal. I’m sure you guys do your homework just like I do…let the prices fall!
http://www.redfin.com/CA/Walnut-Creek/145-Montanya-Ct-94597/home/919850/ebrd-40224402

Thanks. . i think your probably right about it not being a flip. At the same time, if somebody's going to remodel a kitchen, please think about the layout and workflow too!

This is a flip, and it's what makes me nervous. It looks nice, but is work done since Feb 2011 really worth a 250,000 markup?

http://www.redfin.com/CA/Pleasant-Hill/349-Gloria-Dr-94523/home/1704905

Also, I'm not necessarily planning on DIY if we do get a fixer upper. I'm handy, but have two tiny children to watch. My husband isn't really mechanically inclined, but we'd be happy to pay an architect and an honest contractor. So, I'm saying if we spent $300,000 on a house, and $150,000 to fix it up, I still feel like we'd come out ahead monetarily vs buying a flip at full price.

If money was no object, I would not buy any house. I would build my own. I notice that houses that are custom built are a thosuand times nicer than those built on spec.

Looked at a flip in my neighborhood. They want $470K for it, the house next door is going for $380K. They paid 285K.

http://www.redfin.com/CA/Garden-Grove/10112-Mcmichael-Dr-92840/home/3390596

New windows, painted inside and out. The floors are terrible. You can tell they picked a very cheap laminite, the tile work is uneven. The kitchen remodel consisted of granite on top of painted original cabinites. The pool needs replastered as there are chunks out of the bottom in the deep end. These guys are smoking crack.

TType85 offer them 290K for it.

I still don't really view housing as an investment. Time and time again shows that if you really want to get in on some "Investing action" you'll likely do much better investing in stocks and boring stuff like 401k's, mutual funds, bonds, etc etc. What most people fail to understand is the long-term effects of compounding interest with investments. That's where the money is. If you have 30k invested by the time you're 20-25 ( or about the same cost as the Acuras and Audis I see people that age driving around here) you'd have well close to $700,000 by the time you hit 60. Real estate has never had that kind of performance over the long term. If anything it barely keeps up with inflation.

My parents owned 2 rental houses. This is in rural NC. They paid 20k for one, 50k for the other. Both bought in the early 90's. They sold them both last year. One for $110,000, the other for $80,000. In other words they did pretty well over the 20 years they owned them. That said- had they taken the 70k they paid for those houses and invested it in stocks, they would be sitting on more than double in profits from what they got on those houses.

edvard2 says

I still don’t really view housing as an investment. Time and time again shows that if you really want to get in on some “Investing action” you’ll likely do much better investing in stocks and boring stuff like 401k’s, mutual funds, bonds, etc etc. What most people fail to understand is the long-term effects of compounding interest with investments. That’s where the money is. If you have 30k invested by the time you’re 20-25 ( or about the same cost as the Acuras and Audis I see people that age driving around here) you’d have well close to $700,000 by the time you hit 60. Real estate has never had that kind of performance over the long term. If anything it barely keeps up with inflation.

I don't understand why people see their primary residence as an investment either. If they understood risk and reward, it would be a very poor investment because a primary residence largely functions as forced savings.

Real housing investors have to do a lot more work for their money. What we saw during the boom was speculation, not investment.

corntrollio says

Real housing investors have to do a lot more work for their money. What we saw during the boom was speculation, not investment.

After helping my parents fix up their 2 houses I know I will never-ever buy houses for investments. It was a pain in the ass. We're talking spending months of backbreaking work. That and the houses became huge albatrosses. In the meantime all I do is just stick 10-15% of my income in stocks and mutual funds. No maintenance required. So much easier than scraping paint and patching roofs.'

We'll buy a house someday. But I view it as a large wooden box to sleep in ans store my stuff. That's it.

"That said- had they taken the 70k they paid for those houses and invested it in stocks, they would be sitting on more than double in profits from what they got on those houses."

Did you factor in the rent they collected all those years from those 2 houses in coming to your decision, or are you just looking at the difference between what they bought and sold the houses for?

corntrollio says

I don’t understand why people see their primary residence as an investment either. If they understood risk and reward, it would be a very poor investment because a primary residence largely functions as forced savings.

If it's your primary residence, then pretty much by definition it isn't an investment. It is where you live. People think of it as an investment because they assume that they will have to sell it at some point and want to make sure they maximize their sales price.

edvard2 says

After helping my parents fix up their 2 houses I know I will never-ever buy houses for investments. It was a pain in the ass. We’re talking spending months of backbreaking work. That and the houses became huge albatrosses. In the meantime all I do is just stick 10-15% of my income in stocks and mutual funds. No maintenance required. So much easier than scraping paint and patching roofs.’

We’ll buy a house someday. But I view it as a large wooden box to sleep in ans store my stuff. That’s it.

You gotta pay the tax man on those stock market capital gains... And on the low end it ends being 25% (15% federal/ 10% CA state tax). On any of your stock gains...

Meanwhile when you sell your house you pay ZERO capital gains tax... And to really make money in this volatile stock market you sometimes have to sell for short term gains and get taxed at a higher rate... Because if housing drops.. The stock market is gonna crash again too...

And just wait until the capital gains taxes are raised on the stock sales... Soon you'll see the government taxing any stock market gains at as much as 50%...

Everyone thinks they'll raise taxes on homeowners... What's to keep the government from raising taxes on stock traders and stock sellers!?

corntrollio says

I don’t understand why people see their primary residence as an investment either.

true.

1) most people are unaware that investing in (domestic and foreign) companies that produce goods and services is far better than investing in a house that produces nothing but shelter. the people hoping for price appreciation on their house are hoping for a "greater fool" without knowing they just might be the greatest fool.

2) most people are short sighted, making them terrible investors. they invest in real estate ---after--- prices ran up like crazy. instead of investing in an asset class that is priced low.

3) the point about compounding, made by edvard2, is huge. you can't reinvest your house's capital gains into another house without large transaction costs. there's a reason Einstein called compounding the 8th wonder of the world. over 30 years the effect of compounding with a conservative stock/bond strategy has a good chance of making you a millionaire. with real estate? not so much. again, those that are short sited with their investments ("i want to make money today") and ignorant about the effects of compounding in stocks/bonds will choose real estate.

edvard2 says

My parents owned 2 rental houses. This is in rural NC. They paid 20k for one, 50k for the other. Both bought in the early 90’s. They sold them both last year. One for $110,000, the other for $80,000. In other words they did pretty well over the 20 years they owned them. That said- had they taken the 70k they paid for those houses and invested it in stocks, they would be sitting on more than double in profits from what they got on those houses.

Well, why did you let them sell last year? That's the same as if they sold all their retirement stock in March 2009 with DOW at 6000! If they'd done that after 10 years of investing then you could say stock market investing is terrible too!

Had they sold their Real estate in 2006.. and stocks in 2008... They might be singing a different tune as to which investment was the better one for them!

I'm not saying the housing market will improve at the same speed and veracity as the stock market.. But were it not for the governments intervention in the housing and financial markets..... The DOW might be at 3000 right now instead of at 2006 highs.

Stocks traded in lock step with housing starting in the 90s pretty much.. Actually if you bought a house in 1998 and sold in 2006 peak you made more profit then you would have in the stock market during that same period.

You home might have quadrupled.. While your index fund wouldn't have even doubled.

Our economy is all based on bubbles... and timing is everything. People on here like to think that bubbles will all of a sudden cease to exist moving forward.... Another housing bubble will occur maybe not for 20 years... but those buying a 30 year mortgage that lived through this bubble period.. If they have a good memory... May remember to sell then next time homes start quadrupling again in 2030.