Sean Pan wanted to be rich, and his day job as an aeronautical engineer wasn’t cutting it. So at 27 he started a side gig flipping houses in the booming San Francisco Bay Area. He was hooked after making $300,000 on his first deal. That was two years ago. Now home sales are plunging. One property in Sunnyvale, near Apple Inc.’s headquarters, left Pan and his partners with a $400,000 loss. “I ate it so hard,” he says.
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“Flipping only works in an appreciating market where homes move quickly,” says Glen Weinberg, the Denver-based chief operating officer of Fairview Commercial Lending, which is tightening its standards for real estate investors.
Nevertheless, she’s reconsidering the wisdom of reselling rehabs. Her goal now is to buy 25 houses in Pittsburgh, a cheaper, less volatile market, with a strategy of holding on to the properties as rentals.
So we have the first down cycle since 2010? Exciting time!
I don’t see a down market in SF and Penisula , I do hear it’s softer in the South Bay though
SF home price is not going up, right? I think it’s kind of flat now, but price declined late last year
Fourth-quarter losses for flippers who sold within a year were the highest since 2009, according to a CoreLogic analysis that looks at buying and holding costs, but not rehab expenses. In the San Jose area, 45 percent of flips lost money.
45% of SJ flips in 4Q18 lost money, even before accounting for rehab expenses. Seems likely 80% of them would lose money after accounting for rehab expenses. It’s a bloodbath.
Pan, the aerospace engineer, is undeterred. He started a blog and podcast about flipping and plans to quit his job to focus on flips full time. He got into property investing after reading Robert Kiyosaki’s financial advice book, Rich Dad, Poor Dad . Pan began scouring online investment forums and attending meetup groups to learn more, but his biggest lesson came last year with the Sunnyvale home. He thought he got a “sweet deal,” negotiating the $2 million asking price down to less than $1.8 million. He and his partners decided to go all out on the remodel. The project took longer than expected, and then the market went soft.
Pan couldn’t afford to wait for a rebound. The holding costs alone for three properties he was trying to dump totaled $30,000 a month. The home sold for less than $1.7 million, or more than $80,000 below what he paid for it. “When you buy these houses, you never think you’ll lose money,” he says. “I fixed it up. It should be worth more, but things change.”
I never get what’s the big deal about that scam of a book “Rich Dad Poor Dad”. It just reads like basic motivation crap with zero substance.
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Those are newbies. The experience ones had left.
That is because you know a lot, most don’t know much.
This woman had the word LOSER tattooed on her forehead:
But the latest boom has also lured people such as Rachelle Boyer in Seattle, who got into property investing after attending a $25,000 real estate coaching program.
Her new plan to buy 25 rentals in Pittsburg is also crap. She should join the forum and read up.
Plenty of sales in Lake Tahoe. Rents still going up and vacancy near zero.
$300k on a fix and flip is a lot, unless he bought in the $2m+ range. I’m sure he was helped by buying during appreciation. The obvious risk is to buy at the end of the upswing and then loose…
he doesn’t know “loss” until one of his buyers sues him. More likely with “affluent” buyers (not silicon valley worker bees), who have their litigation attorney on speed dial.
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You people are full of crap. Shamelessly judging and critiquing others as if you were an all-mighty RE god. Give me a break… 