Well under our Torrens system the register is king. If you have an unregistered security interest and the property changes hands, you’re screwed as against the property.
But still no one has answered my question: do contractors who work on houses commonly get liens in the US?
Depending on your definition of “common,” yes, they do. What’s especially bad is when it’s a sub-contractor that the general contractor didn’t pay, but the lien goes on the house.
It also turns shitholes and crack houses into something people would actually want to live in. To successfully flip a house, you generally need to buy a house that is undervalued for the market it is in. This usually means it is in disrepair.
Really, the downside for the flipper is that you get a house that requires more work than you expected, you realize you know jack shit about home building, are unable to sell the house, incur a ton of holding costs and ultimately lose a ton of money.
I actually have a degree in structural engineering and worked for a year dealing primarily with residential properties, and I’m ok at fixing shit. I don’t feel comfortible flipping a house.
These Flip That House shows make it seem like any idiot can buy a house, not know what the fuck they are doing and after several weeks of scrambling around with a bunch of contractors, pull a half million dollar home out of their ass.
As a hijack, from my perspective as a contractor, we are moving more and more into an idea of houses being a commodity, as opposed to one’s home. Perhaps that’s from the rapid increase of value, and people thinking of it more as an investment, or perhaps it’s people moving on average every 4-5 years, as opposed to generations living in the same house, perhaps it’s more effective marketing, or perhaps it’s from the big builder’s actually making it a consumer item.
I think that house flipping was somewhat akin to day trading.
When houses were appreciating so fast. . .shit, you probably didn’t have to do any work. You could buy a $300,000 house in January and sell it in June for $330,000. The premiums attached to flavor-of-the-month interior decoration just made it worthwhile to drop in a granite countertop and a couple stainless appliances.
Day traders during the net boom probably felt pretty good when they sold stock A, bought stock B watched it rise and then sold it for a profit. Ignoring that stock A was probably appreciating at the same rate as B. The idiot didn’t know anything about A or B. He was just profiting from the rising tide.
The upshot is that the major downside is that you can become extremely leveraged, and be on the hook for hundreds of thousands of dollars when the market stops appreciating so rapidly. That’s why this downturn has really expanded into the banking industry moreso than the dot com collapse ever did.
Do you mean do contractors take out a lien as part of the contract? No, not at all. But if the contractor has completed all the agreed upon work, and the owner refuses to pay, and you’ve got a reasonably well written contract, it’s pretty straightforward (not necessarily easy, but straightforward) to get a lien on the house, which will prevent a sale.
ETA: I’m getting this from my BIL, who has had to do this twice (once to a lawyer!)to deadbeat customers.
House flipping wisdom all depends on location, location, location and project planning, project planning, project planning.
The problem with house flipping is that if you’re an individual or a couple leveraging all your credit to flip a house, the penalty for failure - whether it’s because of your own stupidity or just bad luck - is bankruptcy and personal ruin.
House flipping is sort of a gigantic version of being a professional poker player. You can be a professional poker player if you’re good at playing poker, but your expectation of profit is an average, not a per-sitting guarantee. Poker players are all about bankroll; you need a big bankroll becuase you’ll go through periods of bad luck where you keep losing. If you have enough bankroll, that’s okay, because your luck will even out. If you don’t, you end up living in a fridge carton.
House flipping has a similar element; if you have a huge bankroll, it’s not the end of the world if a flip goes badly. But if it’s stretching you out to max your credit cards, and it goes badly, your next stop is filing for bankruptcy. That’s why the shows with the most successful flips are the ones about house-flipping companies, who flip a dozen houses a month. If you have investors and funds to handle a large number of flips, it’s built into your business plan that one or two will go down the pipes every now and then. IF you’re flipping one with all your money, it has to succeed.
The other factor, of course, is skill. Most failed house flips are simply due to a lack of project planning; someone thinks “I have some access to money, I can flip a house” but doesn’t actually put enough effort into costing, task planning, and project management. It’s just straight up business common sense that before you embark on a big project, you’re supposed to analyse, to a high degree of confidence, what the costs will be in terms of money AND TIME. When you see people on those shows get into deep shit, it’s always because of one of three things:
That nevers happens with the flip companies like those guys in South Carolina, because project management is their profession. They have staff whose professional expertise is in looking at a house in condition A and estimating, with accuracy, how many dollars and man-hours it will take to move it into condition B, and then executing that plan with speed and efficiency. If you know THAT, then you can rely on real estate experts to tell if the expected profit will exceed the cost of going from A to B.
So if you’re going to flip a house as an individual, and you’re not really rich, you had best know what you’re doing in terms of project management.
RickJay that sounds pretty close to actual work.
Oh, it’s work. It’s damn hard work, but we found it really rewarding (we did 95% of the manual labor ourselves).
I worked with a guy who would do this the slow way. They would buy fixer uppers and live there taking a few years for each house and eventually lived in a large nice house that they would not have been able to afford without the sweat equity generated along the way.
It gets House angry. And you wouldn’t like House when he is angry.
I totally acknowledge the reality of all of these things, however my conclusion is that this is a very bad thing for society as a whole.
To add a small item to RickJay’s excellent post, I’ll add that from what I can tell another large part is working consistantly with known sub-contractors. If you as an individual can’t do the work yourself, and don’t have an already existing relationship with a couple of contractors, then you’re not going to get as good a deal. Most of the programs I watch have the flippers working with basically the same contractors every time and driving a hard bargain on the cost. If you’re giving a contractor a very steady stream of jobs, he may be willing to do the work for less, because he doesn’t have to be out finding his next job. If you’re doing one or two houses here and there, then you’ll have a harder time finding a contractor to do the work cheap.
Oh, I’ve also noticed with the Trademark guys for instance they have a huge pot of money to get a large workforce on the job right from the start. They’ll have sometimes 30 or 40 guys working to get it all done in like…2 weeks. So while the initial outlay of money is large, the get it back with speed. Our current house for instance cost us about $260K for rennovating the whole house and adding an addition. But it took 5 months, not 5 weeks.
Is it really all that different from the stamped out houses builders build now? Or since Levittown? My neighborhood was built 50 years ago as a high end development, and every house has a similar floor plan. People have changed them of course, added on, pulled out the kitchen, changed the doors. But when a flipper comes in and redoes a house, it looks different from the one next to it, which is a good thing in a way. The flipped houses look alike, but they’re not close to each other at least.
From the viewpoint of a buyer, the customization comes from the house you select, not from how a particular one is built.
From your other posts on this board I know that you are a reasonably intelligent person, which leaves me somewhat confused as to your conclusion on this topic.
House flipping occurs when a house exists that noone is willing to move into. If the house was in good enough shape that someone would move into it, then someone would have bought it and moved into it. When a house reaches the point that noone will move into it, the price goes down. At some point, the price is low enough for someone to take a financial risk and try to “flip” the house. If they do a good job, the house is ready once again for someone to move into. Now you don’t live next to a crack house, hooray!
Can you explain how it would be better for “society” to have thousands of run-down houses that noone wants to live in? I’ve never been to a neighborhood meeting where someone said, “What we need are more run-down, abandonded houses so that there are more fire hazards and places for our kids to get hurt.”
50million VCO3 is not complaining about house flipping directly in that post. He seems to be complaining about people moving from one house to the next instead of staying there for a long time. Why this is particularly bad I will leave for VCO3 to expand upon.
Any chance that these flip shows flat out lie? I saw another last night where they totally redid a rotted out house, added a bedroom and toilet, nice tile and fixtures, privacy fence, all new sod and paint, etc. in SoCal, a month of work they said, for 40K? The labor alone should be at least that much.
I certainly wouldn’t put it past them. But I’ve also noticed that a lot of these guys don’t bother with permits. Which means they’re not using licensed people. So yeah, I’m betting that in SoCal, there are a lot of cheap labor contractors out there that will do the work as long as you don’t care about it being done right, or to code.
Working without permits? Around here you cannot sell a house with a Certificate of Occupancy, whereupon you are going to be in a shitload of trouble when the City sees the work.
I don’t know Annie. When we rennovated our house, which included gutting the entire inside, new plumbing, electrical, HVAC, and an 1300 sq. ft. addition we had to have the work inspected and get permits, it wasn’t required that we be issued a COO. We specifically asked the permit office downtown, and they said it wasn’t necessary.