Flipping Fantasies Go Bust

Flipping houses used to be a lucrative business but now it takes a lot more to get a prospective buyer to take the leap.

By James R. Lindamood

Would you spend $37,000 to renovate a closet for a prospective buyer? It’s a renovation most property owners wouldn’t dream about; however Lawrence Rich, a condo property owner in New York City did just that. Wanting to get in on the great interest rates of 2006 Rich purchased a unit in the still being constructed ThreeTen complex. His intention was to fix the property up and flip it in order to make a profit. The problem was that by the time he could sell it the market had suffered through the sub-prime lending failure of 2007. Now it was going to take a lot more to sell his easy flip.

It’s a trend being seen all around the country as property owners who bought up houses left and right are now seeing their dreams of a hefty profit go down the drain. While those with good credit and a large income have no problem purchasing property they are still leery about doing so. Without making a profit many of these so called flips are turning into flops. Some are even at risk for foreclosure because they were purchased with loans that can not be repaid because of the low demand.

For those who own property in large complexes the problem is even worse because there are several properties for sale in such close proximity. Owners are being forced to either take losses on the investment or fork over more money to appease the buyer, like Rich did. Flipping has always been a gamble at best though it can be a very lucrative if done right, unfortunately, with the current economic climate the risk is becoming too large.