Young Real Estate Flippers Get Their First Taste of Losing



Posted by Ed 4 mths ago
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.

A new crop of flippers, inspired by HGTV reality shows, real estate meetup groups, and get-rich gurus, piled into the market in recent years as rapid price gains helped the last property crash fade from memory.

Many newbie investors are encountering their first slowdown and facing losses from houses that take too long to sell. Meanwhile, they face steep payments on a kind of high-interest debt—known as “hard-money” loans—that helped power the boom.


Ed 4 mths ago
Zillow’s home-flipping business could be good for buyers. Is it good for Zillow?

The company announced massive home flipping revenue and massive home flipping losses.

The company’s earnings show that is a serious question without an easy answer. Zillow Offers sold 414 homes in the first quarter of 2019, with $128.5 million in revenue, which caused overall revenue to jump by 51 percent over a year ago.

But after accounting for costs like sales, marketing, technology, and administration—not to mention the cost of actually buying the homes in the first place—the company ultimately took a $45.2 million loss in its Offers program, a whopping $109,190 per home flip.

Since its IPO in 2011, Zillow has never been a profitable company. Home flipping is a capital intensive business, meaning it takes a lot of money to participate because you have to buy houses. But when your capital intensive business is losing tons of money, should you be in that business?

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