Sunday, July 16, 2006

Flippers in Trouble Gallery: Placer County Edition

Just a handful of the over 120 Placer County Flippers in Trouble. These go out to John in Rocklin:


Anonymous said...

Max, Very nicely done. And I thank you. I have been looking to buy a larger home for about a year and almost purchased an $800,000 home on extra land about 6 months ago. It just did not feel right and I cancelled the deal (We own 3 homes now, each about 1700 sf. We need something bigger, as I am getting married and while the children are grown, we need more room for all when they come home.)

Your web site has served to help confirm what I have been seeing in the market...falling prices, slacking demand, upside down fundamentals. Today, I had an epiphany of sorts. I am going to rent a 2500 sf home from a Placer County Flipper who lives in the Bay Area. It just makes sense. The Flipper bought the home two months ago for $650,000, using an 80% 1st and a 10% second. PITI is nearly $50,000/year. They have it up for resale at the same price (already upside down after commissions). I am convinced it will not sell in this market. They are also offering it for rent at $20,400/yr ($1700/month). Think about it, they will have invested $65,000 and now pay $30,000/yr negative cash flow for the privilage of letting me live there for the next year or two. While I don't like renting, it solves my immediate problem: I need bigger house, but do not trust the market enough to buy. The three homes we currently own all cash flow, since we acuired them in the 1990s' and have NOT refinanced any of them.

I will wait for a couple of years to get back into the real estate market for our dream home. Buy then (pun intended), this strategy should save me about 30% on a $600,000 home. That is $180,000 of value. Who knows, my Flipper landlord may be willing to pony up an extra $125,000 in 2008 to have me take this lemon off his hands. Or the bank may be the seller by then.

I feel sorry for those who bought in the last year, as they are already updside down.....but for the grace of God, there go I. I would also suggest that everyone with a brain start to "batten down the economic hatches". If this real estate market continues to decline, many jobs will disappear, further impacting the ecoonomy, and further exacerbating the real estate market. I saw it happen in 1990, so no one can tell me it is not possible. Today, about 25% of the adds for homes in Rocklin, listed in the Bee, are "seller motivated", "price reduction" and today "foreclosure" and "repo".


Anonymous said...

wow,subsidized housing for the middle class!be careful about renting from a flipper who may get foreclosed on,you may lose your deposit,and i have heard conflicting reports about whether the lender has to honor the lease in california...i know a buyer does,but it would be no fun trying to collect from mr flipper whilst moving in a hurry...

Anonymous said...

The lender does not have to honor the lease. You can easily make up your deposit by using it up as rent after foreclosure. The biggest downside is all the foreclosure prebuyers that will be knocking on you door for once it is in foreclosure. Just make sure you have an out clause in your lease so that you don't have to stay and endure those idiots.