tbird2340

Watching Flip Men and had a question.. Why do they always have to have the house on the market in X days and if they don't they lose money??

I'm guessing they don't get the conventional loans (15 year fixed etc) and that has something to do with it.. Like the one they had to have on the market in 10 days and every day over that they lost X dollars?

madcougar

My guess is that every day it's not on the market is another day they have a construction crew in the house and that crew cost them money.

When you buy a house at auction you have to pay cash money for it. No loans.

marginal

Haven't seen the show, but usually it just means that every month the house isn't finished is another mortgage payment that has to be made. Since most of these people buy with interest-only loans (don't know how they still get them nowadays, but whatever), they just tread water with the mortgage payments rather than paying down principal. (Even in a traditional mortgage, the first several payments would all pretty much go toward interest anyway, rather than paying down principal.)

TheBang

Even if they don't have to take out loan payments and pay interest, it's the opportunity cost of having the money tied up. Think of it this way:

Let's say you have $200,000 cash to play with.

You buy a house and put improvements into it, so your total costs for buying and renovating it are $200,000. You flip it and sell it for $250,000. So, your profit is $50,000, and then you take that base $200,000 and reinvest it in another property.

Now, these guys usually flip these houses in 2-3 weeks. So, let's say you do 3 of these houses in 2 months. That's $150,000 in profit, all just by reinvesting your same base $200,000 every 2-3 weeks.

Now, pretend one of those houses turns into a nightmare, and you have to work 2 months just on this one house. So now, with your same $200,000, you only made $50,000 profit in 2 months. So, the longer you hold onto the house, the more it costs you in lost opportunity. I think this is the cost that they are talking about.