Reality TV is Fake!
Ever watch those House Flipping shows on TLC, A&E, HGTV, or any other station? I love ‘em. They take a house that needs a lot of work and buy it for cheap – then renovate it quickly and sell for a huge profit. Sounds like a nice line of work, right?
But don’t you ever wonder how these Flippers can make such a big killing?? I mean, doesn’t it seem too good to be true!?
Well, it is. Especially in today’s buyer’s market, where it easier to buy a house than it is to sell. The numbers they use on the summary of these TV shows are pretty far-fetched. They usually don’t take into account all the Holding Costs associated with the property.
What do I mean by “Holding Costs”? Well, to acquire a home, there are a number of fees that come along for the ride. Title fees, home owner’s insurance, Abstract fees, Utilities such as water and electricity, closing fee, and the monthly mortgage payment are just some of the charges you have to pay when buying a home.
So to simply add up the (initial sale price) + (cost of repairs) and then take those away from the final sale price to figure out your profit, isn’t what happens in the real world.
(Initial Sale Price)
(Cost of Repairs) +
= Total Investment -
(Final Sale Price)
= Total Profit!!!
So why do they fudge the numbers to make it look like these investors are making off with millions each year?? Well that’s easy; it’s TV! They can make anything look desirable if they want to. Just like another favorite show of mine “Deadliest Catch” where they somehow romanticized the job of fishing for crab on the Bering Sea in Alaska. How many people have wanted to be crab fisherman just because it looks so cool on the show??
Don’t Believe The Hype”
Long story longer: don’t believe the hype. Sure, there are people who do house flipping for a full time career, but these are mostly seasoned investors or contractors who calculate every factor, so that they are not taking a big risk. After all, the term “investing” means to give money for the future return of profit. So professional investors know their numbers and don’t leave things to chance.
If you are thinking of owning real estate as an investment, but have never purchased a property before, I would suggest start by owning your personal residence first. You will learn many things in the process, and will see first hand what being a homeowner is all about. If it works out, then you will have the knowledge and tools necessary to start owning other investment properties, and can work your way towards a nice real estate portfolio.
For now, just watch your House Flippin’ shows for entertainment, and if you really want to earn money from your home purchase, buy when the prices are low, and sell higher!
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