Flip That House seminar- scam?

ynnejNovember 15, 2011

DH went to a Flip That House seminar. I am a big believer in "if it sounds too good to be true, it probably is," and DH has a bad track record of saying no to salesmen. So I tried to convince him not to go, that they were just trying to get him to buy into this program, etc. He went, and didn't pay for the next class, which they were charging $300 for. Well, he's very upset with me for discouraging him! He's convinced that this was his chance. We are on a very tight budget. Does anyone have info on this? The internet isn't helping me much right now.

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It is a scam.

Even the TV shows 'neglect' to report how much money is made (or lost) to keep interest up.

I have spent almost 40 years repairing and renovating older houses for profit.
If I hired out like the fools on TV I would have been broke a long time ago.

At least a decent part of making profit is in the labor you must personally supply.
I have a group of trade workers that I know and trust to perform jobs I do not have the skills for.

The present economy has made it harder and harder to find continuous work, so I have had to stop running even a single full time crew (I had two crews for a couple years).

Unless you have large financial reserves (and it has only gotten worse as credit has tightened) you wil lbe hard pressed to even get purchase loans.

I have moved from 30% down to get easy credit to closer to 50%. All in CASH.

Often a couple of hundred thousand dollars.

    Bookmark   November 15, 2011 at 11:41AM
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Of course it's a scam.

Any scheme that charges you to "learn how to make money with real estate" is only making money for the seminar holder. "No money down" has always been a scam. There is no "secret" that anyone can sell you to make you a successful real estate investor. It takes money to make money in real estate. Things haven't changed except to make it harder to flip a house. A lot more money is being required to be put down. Homes values aren't insanely appreciating. Labor costs are still high. Even experienced investors are taking losses in the current market.

But I do have this sure fire method of picking penny stocks that will easily fund your dream home and retirement. It's so simple! And I'll sell you the secret behind that for only $500. I'll even include 500 shares of one of the companies that I rate as a "great buy"! (Tongue firmly in cheek!)

    Bookmark   November 15, 2011 at 12:31PM
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was it a seminar with one of the Montelongo brothers? You may want to show your husband the attached article.

Here is a link that might be useful: Montelongo seminar

    Bookmark   November 15, 2011 at 3:18PM
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You don't need to spend time and money on classes. Just get a good RE agent that understands the process, and enjoys sniffing out the good deals. One would think that in this market it would be cake walk to find those deals. But in reality it is much harder now because most of the "deals" you find can not support a high enough of a sales price on the back end to make the #s work.
Like Brickeyee says, my clients do the labor themselves to make the #s work.

    Bookmark   November 16, 2011 at 7:02AM
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If you are on a tight budget, then there is no way that you should be trying to flip houses in this market.

First, you need money to buy the house.
Then, you need money for all the known repairs.
Then, you need money for all the unknown repairs you'll find out about later.
Then, you need to be able to pay for the house while you are waiting for it to sell.

Beyond that, you need to actually do a good portion of the work. Think of it this way. If you are going to hire a company to do the actual repairs and then sell for a big profit, why would that company not just buy the place themselves and keep all that profit? Unless you have actual, real construction skills that you bring to the table AND are willing to put a lot of hours into the project, the chances of you making money are nill.

    Bookmark   November 16, 2011 at 8:25AM
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I agree with all the above posts.

We have "flipped" 2 houses and are now on our 3rd. We do almost all the work ourselves. If we paid others to do the work we would not make any money.

It's not as easy as it looks.

    Bookmark   November 16, 2011 at 8:48AM
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And do not do the work yourselves if you are not very handy. There is nothing more of a turnoff than a rehab that yells "DIY". And make sure that all repairs are done by code or you will be doing them again after the inspector catches it. And pull permits where appropriate, or you will more than likely be tearing up good work in order for the city to issue a permit.

    Bookmark   November 16, 2011 at 2:06PM
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LOL, this seminar must be popular around here. I can't tell you how many places I've looked at that were bought recently as foreclosures, had the most atrocious pseudo updates applied, and now they're trying to flip them for top of the market prices. Note to these folks: taking an ugly semi-functional kitchen out and randomly throwing in the minimal number of horrible grab and go cabs you could come by, or putting a plastic vanity top in place of the old formica one, that doesn't add $50K to the home's value.

I've seen so many places where the "upgrades" were serious downgrades from what was.

So if you want to get involved in something like this, be reasonable about what it's going to cost you if you really want to raise the value from what you paid. Around here, it seems like it's mostly a wash. Buy cheap, put in the difference between what you paid and what it would normally sell for, and you can expect to get what it would normally sell for. That doesn't seem to me like a path to riches, frankly.

    Bookmark   November 16, 2011 at 2:40PM
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The seminar is a scam. i used to work (briefly as a 2nd job) for a guy who owned a business that cleaned out foreclosures and winterized them for banks. He wrote a book about how to start your own business doing this type of work and how you could make so much money in this line of work. He wrote a book about it and sold it for $200 a copy. Trust me, he made more money selling his book (which didn't have any great secrets to success in it) than he did running his business. The last I heard he was struggling... As someone else said- if you have to pay for advice on how to make $, chances are the person promoting their advice is making their money on that= not on the actual business. Also if it a Montelogo seminar- have you ever watched their show? They do a HORRIBLE job fixing up houses to flip, they rip off their contractors etc plus they are getting paid a hefty sum to appear on a tv show so that is where they make a lot of their money. Flipping houses sounds like a great "easy" way to make money in theory but in real life things just don't normally work out that way...

    Bookmark   November 16, 2011 at 2:51PM
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I wish you could make some money doing this because my husband and I would love to do it. We're real handy and I think we have great taste! I'd never put a plastic crappy counter top in! lol I'm also good at marketing and that part of it. BUT there are so many expenses on top of what it costs you to do the fixing, I think it just eats into the profit.

    Bookmark   November 16, 2011 at 11:02PM
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One still can make money doing this. It is just a ton more work finding the right properties, and then finding the right buyer on the backside.

    Bookmark   November 17, 2011 at 7:56AM
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Just to be clear - you can certainly make a living in home construction and renovation. Lots of people do just that. However, it is a full time job. If someone tells you that you can make tons of money in your spare time with no capital investment and no risk....well, you know it is a scam.

    Bookmark   November 17, 2011 at 8:54AM
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The only people I've heard of who make this work are people who have a real feeling for it.

In other words, people who are great at finding (and knowing) homes that are diamonds in the rough, have an excellent sense of what will make a property marketable and enjoy doing at least a significant portion of the work themselves. This is not a skill set that can be taught in one or even multiple seminars.

Also, what other people have said about cash flow is right on. We're kind of house-hunting and have seen some undervalued homes that would be beautiful and significantly increase in value if you could put 50K or 75K in them. Honestly, it pains me to pass these homes by, but the last thing we need in our lives is an expensive project.

    Bookmark   November 17, 2011 at 9:34AM
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There are two ways to make (or lose) money in real estate - equity and cashflow.

Equity in this market won't just happen on its own in most market, you have to buy VERY low, and probably have to put some elbow grease in. These shows, I watch them and see these tight profit margins that are tight even if everything goes perfectly (making 10% on a %900,000 house in L.A., come on, one false move and you lose 200 grand!) and you haven't even paid the realtor yet!

You have to buy at a pretty steep discount, generally 30% or more (which means foreclosures and distressed properties for the most part unless you get lucky), and whatever you estimate as the repair cost, double it.

Cash flow from renting the house out is different...but also requires either a BIG down payment or again, a steep discount. Take whatever you can realistically rent that house for, and multiply by 55%. If the principal plus interest of your proposed mortgage payment is over that number, YOU WILL LOSE MONEY.

    Bookmark   February 21, 2012 at 3:28PM
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"Take whatever you can realistically rent that house for, and multiply by 55%. If the principal plus interest of your proposed mortgage payment is over that number, YOU WILL LOSE MONEY."

It is not that bad, but unless you have other RE income to shelter with paper losses (like depreciation to shelter other rental income) it can be pretty tough.

You will be paying federal income tax at your final rate on income you cannot shelter.

You should also base the calculation in PITI (Principal, Interest, Taxes, & Insurance), not just PI ((Principal & Interest).

    Bookmark   February 22, 2012 at 10:35AM
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The T&I is included in the 45% operating expense ratio, which is why I said to use the P&I vs. the 55%. Reason being, you pay that whether there is a mortgage or not.

    Bookmark   February 22, 2012 at 3:31PM
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Please tell your husband I have a nice bridge I will sell him for a low down payment. It's in Brooklyn...

    Bookmark   August 15, 2013 at 2:27AM
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The OP and her husband have since retired on St. Croix, UVI, and in Aspen, CO, respectively.

    Bookmark   August 15, 2013 at 12:42PM
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