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Fairfax Underground
Welcome to Fairfax Underground, a project site designed to improve communication among residents of Fairfax County, VA. Feel free to post anything Northern Virginia residents would find interesting.
Anybody tried flipping houses(fixing them up and reselling them) in FFX? I had one girl tell me she made $65,000 on one deal? Fact or Fiction? The only time I hear stuff like that is on TV shows and they usually extemely hype the profit numbers. Plus, all I see lately is For Sale signs every place.
Well, considering the real estate market is now growing at the slowest rate in 31 years, flipping a house - even in Fairfax - seems like a pretty quick way to lose your shirt.
Well, there are at least two houses in my neighborhood (Fairfax Club Estates) which were purchased within the past 12-18 months with an intent to flip and they are just sitting. Both owners paid below market since the houses needed some work, but they did most of the work themselves. Still, the investment in finishing a basement, paint and carpet had to run $8-12K.
I figure that if they get close to the current asking price (one dropped $10K after being on the market for 30 days) they MIGHT break even after paying the realtor commission.
There are markets, probably in places like Pittsburgh and Omaha, where you can still make money flipping houses, but NoVA was pure speculation and it could not last forever. While it is a different market, a co-worker bought a condo in Miami for $950K (pre-construction) and now that the building is finished they are selling for around $700K. He lives in Atlanta and can't even find someone to rent the place!
The best thing about the boom wasn't the values, it was the quick turnaround. You would have the house for sale for one day and people would already be fighting for it.
I know a guy who got 2 interest-only loans because he was trying to flip two condos in less than a year... he intended to sell around december and is now scrambling. Not sure what got into his head. I guess if he had succeeded he would have made out like a bandit. I would think only the rich could afford
Like any investment bubble, professional speculators start the trend. Then they wait until enough people like RESton Peace's pal jump in. Once buying gets insane, like it did last summer, all of the speculators pull out, leaving RESton Peace's buddy holding the bag.
Expect waves of defaults and foreclosures to come in the next 12 to 18 months as all of these 7-year ARMs, interest-only loans and negative amoratization loans start kicking in with balloon payments.
The downside for me is I didn't sell at the top. However, I bought at the bottom. Worst case scenario, when real estate prices crater, I will pull together some funds and pick up some real estate from desperate people like RESton's friend.
They're dropping like a rock. Units in my neighborhood were going for the low-400's. Now there's one that had to drop its price below $350k and it's still on the market. To all the people that bought more than they could afford on an ARM or interest-only mortgage: you're fucked. A lot of people are fucked.
The key thing is that these loans are being taken out by people who otherwise cannot afford the payments on a regular fixed-rate. The ARM loans aren't always a bad thing, if you negotiate the terms of later increases carefully and intend to sell in less than X years.
In any event, one taking out these risky loans should budget with an ASSUMPTION that they will not be able to sell in a reasonable period... that way you've got higher payments, yes, but you will at least be able to cover them and won't have to foreclose. The problem is that people taking out these loans are, in many cases, like my buddy.. willing to gamble but not seeing the possible negative effects.
Yes my "buddy" (really just a guy I know who I'm not close to) is not looking like a MENSA candidate.
The amusing thing is that these loans leave no way out if you can't pay, except foreclosure and credit ruin. Banks will almost always let you convert a loan rather than take the charges associated with foreclosure, but if you took out the IO loan because you could not afford a fixed from the start, then that leaves converting off the table.
Edited 1 time(s). Last edit at 09/06/2006 10:47AM by RESton Peace.
What I find outrageous about this whole mess is that the Mortgage Insurance industry is just now bitching about this. If the industry was so concerned, why not simply refuse to insure these kinds of mortgages from the start?
Everyone talks about how the private sector does things better, but here is an example of where greed got in the way of common sense. The sad thing is in a year or two the Mortgage Insurance industry will be coming with hat in hand to the Feds for a bailout and, dammit, if they won't get it at taxpayer expense.
The Mortgage industry doesn't complain because they want to make the interest + fee's associated with risky loans. They make their money either way. It's the homeowner who gets f'd.
A buddy of mine was telling me that he bought one of those "no payment down, make millions fast in real estate" type books etc... He said this course was teaching how to use credit cards to finance the original buy and then you had to sell the house in about a month before you had to pay the credit card balance off. If you don't sell the house your f'd.
Lurker Wrote:
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> The Mortgage industry doesn't complain because
> they want to make the interest + fee's associated
> with risky loans. They make their money either
> way. It's the homeowner who gets f'd.
I'm not talking about the Mortgage companies. I'm talking about the Mortgage Insurance companies - the companies that take it in the ass if the buyer defaults.
KeepOnTruckin Wrote:
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> It was quite the boom though. This house was 190 k
> in 1996, now its 650 k
It will be $190K again before it is all said and done.
KeepOnTruckin Wrote:
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> It was quite the boom though. This house was 190 k
> in 1996, now its 650 k
Don't bet the ranch.
A friend had to drop his price 75K below what 3 indentical houses sold for just this past April. He still did pretty well, due to buying it cheap in the '90s. But, the real estate party is OVER!
duh Wrote:
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> KeepOnTruckin Wrote:
> --------------------------------------------------
> -----
> > It was quite the boom though. This house was 190
> k
> > in 1996, now its 650 k
>
> Don't bet the ranch.
>
> A friend had to drop his price 75K below what 3
> indentical houses sold for just this past April.
> He still did pretty well, due to buying it cheap
> in the '90s. But, the real estate party is OVER!
Correct. Your assessment may say that your house is $650K. A realtor may try to tell you that your house is worth $650K. But I can guarantee you that if you put it on the market you won't get anywhere near $650K.
We had neighbors who just sold their house. They had to cut the price $90K. With the realtor fees, etc, they probably ended up getting about $120K less than what they wanted. However, it was still about $200K more than what they paid for it just four years ago.
If, for example, you owed $400k on a house, it was foreclosed, and the bank could only sell it for $350k, the IRS will expect you to pay taxes on the $50k of income they think you just got.
brianl703 Wrote:
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> Oh, by the way:
>
> If, for example, you owed $400k on a house, it was
> foreclosed, and the bank could only sell it for
> $350k, the IRS will expect you to pay taxes on the
> $50k of income they think you just got.
How do you pay taxes on a debt? You would either pay back the $50K to the bank or you would declare bankruptcy. It's not income.
Non recourse loans mean you dont have to pay back the 50k. Debt forgiveness is considered income, though case law makes it capital gains instead of earned income so it's a lower bracket.
Fairfax MF-er Wrote:
-------------------------------------------------------
> duh Wrote:
> --------------------------------------------------
> -----
> > KeepOnTruckin Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > It was quite the boom though. This house was
> 190
> > k
> > > in 1996, now its 650 k
> >
> > Don't bet the ranch.
> >
> > A friend had to drop his price 75K below what 3
> > indentical houses sold for just this past April.
>
> > He still did pretty well, due to buying it
> cheap
> > in the '90s. But, the real estate party is
> OVER!
>
>
> Correct. Your assessment may say that your house
> is $650K. A realtor may try to tell you that your
> house is worth $650K. But I can guarantee you that
> if you put it on the market you won't get anywhere
> near $650K.
>
> We had neighbors who just sold their house. They
> had to cut the price $90K. With the realtor fees,
> etc, they probably ended up getting about $120K
> less than what they wanted. However, it was still
> about $200K more than what they paid for it just
> four years ago.
Yeah, this will probably sell for maybe 400k-500k. 1/3 acre though, not 1/4.
There must be a lot of distressed homes. I've never seen so many flippers sending out cheap-looking postcards and letters. I get at least one or two a week. The idiots don't even bother to check whether there's a house on the lot. They just scan databases where the cities for the property and the owner don't match.
>Hi everyone from 2006! Sell your houses asap and buy again in 2011.
Weird seeing those messages from 2006 - I know several folks who bought that year or 2007, and they pretty much lost their shirts.
Hasn't really recovered yet either, not in my area. One of my neighbors was under water and just walked away from their house. The bank finally unloaded it onto some speculator and it sat for another year and a half before he unloaded it at a loss. Nice house too.