I’m not big on watching the so-called “House Flipping” television shows. Why? Because they’re goofy. And downright dangerous. It’s like learning to perform surgery by watching Grey’s Anatomy. Not good.
While channel surfing a couple of weeks ago, I ran across a show called Flipping Vegas. It’s about house flipping and, since I moved to Las Vegas recently, I decided to watch it.
It starts with the star (let’s just call him “Mr. Investor”) saying dramatically:
Where others saw disaster, I saw opportunity.
My real estate agents scour the city for incredible deals.
Right at the start of this episode, he announces proudly that he’s made a $225,000 ALL CASH offer on a house in a Guard-Gated Community, sight unseen. He plans to fix it up and get a quick profit by (what else?) flipping the house.
Apparently, his agent didn’t have to scour too far to find this lollapalooza of a deal. In fact, she didn’t even have to go look at the house in person before she tendered Mr. Investor’s all-cash offer to the bank.
“There’s been some water damage. How bad can it be?”
Sight unseen by either the investor or the agent. How bad can it be? You gotta be kidding me.
Now the agent opens the front door, and we can see immediately that it’s a total disaster – all the walls are gone, the ceilings are gone, and we haven’t even seen the kitchen or the upstairs yet.
Then the agent looks at a brochure and says, “All the pictures look perfect.” Honest. She really said this. So she bought this property for her client based upon the pictures. You gotta be kidding me.
Here’s the breakdown at the start of the show:
| Purchase Price: | $225,000 |
| Cost of Rehab: | $20,000 |
| Sale Price: | $305,000 |
| Projected Profit: | $60,000 |
Woot. A Sixty-Thousand-Dollar Profit! Oops. They forgot to add in the $18,000 Agents’ Commission. Oh well, minor detail.
Next we find out the flooding went six inches high up the wall studs on the bottom floor, and up the stairs we go to find the source of the flood – a bathroom. Whether someone intentionally left the water running or what, we never find out. But it is the source of Black Mold, which is a super-hazard.
The bathroom has to be gutted and treated, and most of the kitchen (including all the cabinets) has to be gutted and treated for black mold. It’s a true mess.
They replaced 24,000 square feet of drywall, they had to gut the bathroom and the kitchen, pay a hazard squad to remove and treat the mold-infested drywall, cabinets, and flooring.
So I find it hard to believe that with the extensive damage and serious hazardous mold problem the rehab cost only $45,000 for this 3,900+ square foot house.
Miraculously, at the end of program they claim a profit.
With smoke and mirrors, they claim the “added value” of $6,000 for the bathroom that had to be gutted and “added value” of $12,000 for the new kitchen.
HUH? They had to gut the kitchen and bathroom to get rid of all the hazardous mold. How the heck does this become “added value”?
So now the new and improved asking price is: $349,000.
Oh, and with all this “added value” (Hey, look folks, here’s a house that has both a kitchen and a bathroom!) they now claim they got not one, but two full-price offers for the new and improved asking price of $349,000.
And that’s a profit of $79,900. Really!
Internet discussions about the Flipping Vegas: Flood House episode show the property address and say this house actually sold on August 9, 2011 for $275,000.
How do the numbers really add up?
| Purchase Price: | $225,000 |
| Cost of Rehab: | $45,000 |
| 6% Commission: | $16,500 |
| Total Cost: | $286,500 |
| Sale Price: | $275,000 |
| Projected Profit: | $60,000 |
| Actual Profit: | -$11,500 |
If you’d like to see what black mold looks like and why you should never take advice from these “house flipping” reality shows, you can watch this episode of Flipping Vegas online: Flood House.