I was recently asked by a family member if the House Flipping Real Estate TV shows are what it's like in Real Life Real Estate. My answer is that Real Estate TV shows are as real to Real Estate as Soap Opera relationships are as real to marriages. So, while there are certainly some truths to things that you see, you must remember that it is entertainment television...not a truthful documentary. One of the most problematic issues with the House Flipping TV shows are that they constantly show that if you buy a house for $80,000 and spend $20,000 fixing it up and sell it for $150,000, they show your profit as $50,000. But, your profit will not be the whole $50,000 because there are costs that the television doesn't show you. What else is there to House Flipping Costs you ask? First where did you get the $100,000 for the purchase and fix up costs? Did you have to borrow the money? How much are you paying to borrow the money? What are the upfront "points" and interest rate costs? Did you pay closing costs when you purchased the property? Attorney fees? Recording fees? How about taxes? How long are you going to own the house from the time you purchase until the time you sell? Are you going to use any electricity or water, heat or air conditioning while you own the home? How about insurance costs? You'll want to insure your property (from fire, theft, vandalism, flood etc) and if you're borrowing money you'll be required to do so. And this isn't a house you live in so we're not just talking about regular homeowner's insurance. You need to insure a vacant property and you need to protect yourself with some type of "builder's risk" insurance in case someone hurts themselves. Are your contractors insured? And you going to have to pay closing costs when you sell the property too. Are you listing the home with a Real Estate Broker? Even if you're selling it without a licensed Real Estate person, there are going to be costs involved. Then there are the other House Flipping miscellaneous items, you need to keep the grass cut and the yard trimmed, the leaves raked, the snow and ice cleared, etc. etc. etc. We don't point these items out to scare you, only to show you that the Reality House Flipping TV shows are often far from Reality.
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