Journalists Reveal the Nasty Truth Behind Reality Real Estate And “Flip or Flop” Houses
You’ve all heard me talk about reality real estate on television in the past, and you probably are pretty aware that I am not the genre’s biggest fan.
However, I was floored when I recently came across a serious, line-by-line breakdown of the things that these shows do to distort reality. While it might make for good television, it’s terrible for real estate investors.
It creates unrealistic expectations on all sides, from investors who do not realize the actual timelines renovating a home should take to buyers who are, as a population, increasingly likely to demand upgrades that ultimately take a home right out of their price range. This has lasting effects on housing affordability as well.
Here are just three problematic filming practices that skew perceptions of the real estate investing process:
1. The shows film multiple projects in each market
“What’s so bad about that?” you may be thinking. “I do multiple projects in each market too!” You’re right. There is nothing wrong with doing a lot of deals in a market that is working for you. However, when it comes to reality real estate, the productions tend to make each project look entirely unique, as if it stands alone. In reality, multiple franchises may all be working on multiple projects in the same area, which means they are using the same contractors over and over. That means:
- They likely are getting bulk discounts an individual investor would never get
- The contractors can wrap up the “main areas” of a project so it appears finished on time for the show, then return later to actually complete the job (spoiler alert: there is at least one lawsuit alleging they don’t always make it back)
Both of these factors make flipping look faster, easier, and cheaper than it actually is. In fact, the only way you can dream of getting close to this type of advantage is if you work with investors who have a large, established presence in a given market.
2. Staging costs money and is not a given
One of the most attractive things viewers say keeps them coming back to reality real estate television is the beautiful end result. As the credits roll, we see happy homeowners or (allegedly) soon-to-be homebuyers sitting cozily on the front porch in rockers or enjoying a comfy sofa by a warm fire. In reality, however, that furniture usually does not belong to the homeowners or come with the house – not without paying a hefty price, at least. If you stage a house, you must pay for the service. Investors often fail to realize that the staging we take for granted in our entertainment real estate is not a given in the reality of real estate.
3. Your math has to add up
When you see the financial breakdown of a reality-television real estate investment, you likely see dollar signs and stars in your eyes. After all, in the space of about half an hour, these folks just made tens of thousands of dollars! And it has to be true, because they showed you the financial breakdown. Of course, the real truth is that a financial breakdown for any real estate investment is really complicated – far too complicated to break down in 15 seconds on T.V. What you saw was actually a very oversimplified financial breakdown that leaves out things like holding costs, property insurance, commissions, closing costs, staging, and more. Higher profits lead to higher ratings, so higher profits are what the show gives you. However, the reality is there are a lot of other expenses that never make the cut.
Real Estate Rock Stars Face Facts
When the going gets tough in real estate, the cameras stop rolling (unless it’s marketable “drama” of course). To be a real real estate rock star, you have to face the facts rather than turning off your phone. At Strategic Passive Investments, we have made a lifelong business out of facing facts in markets that other investors can’t handle using strategies that other investors do not always even understand. When you work with us, you can be confident you will see all the numbers every time (and any time) you want because of our unrivaled transparency and a new platform that helps our investors track their investments on an online dashboard. You’ll never have to worry about the reality of a situation when you flip with PIP group. That’s our commit to our investors every day.