I hang out on the Web a lot, in chat rooms and on social networking sites, telling people about who I am and what I do. Among other things, I answer questions. Sometimes, to establish real estate expertise, you have to give a little advice.

And so the other day, two things happened: the first is that a potential client, someone I know in real life, said, “Can you find me some investment properties?” The second was that someone on one of my social sites said, “Hey, I want to get into flipping.”

My advice for the flipper wannabe was what I pretty much tell everyone who mentions the F-word: No-o-o-o! Don’t do it! I have a decent eye, and always made money off homes I have lived in. But a year and a half ago, when I tried to jump into the flipping game full time, I found that all I did was waste time and therefore money.

For one thing, when you see the happy people doing it on TV, they always rig the numbers a little. Just like Rachael Ray’s 30-minute meals — which assume that magical elves have already shopped for you, as well as pre-chopped your onions — the flipping shows forget little things. Like taxes, for instance.

For example, Geoff Lewis, the protagonist of Bravo’s “Flipping Out,” made for good TV because he was so anal and yet charming he might have been scripted. But over the arc of the season, what happened? He sold his large home and moved into a smaller one, hardly a mark of success.

And when one of his deals was presented, it was presented like this:

Las Palmas
Sale: $990,000
Purchase $620,000
Renovation Costs: $250,000
Profit: $120,000

Not bad, right? Too bad that profit figure didn’t include tax payments — which for a flipper are capital gains, with no homeowner’s exemption since he hasn’t lived in the home for two years — or the payments to his fabulous real estate agents Boni and Carrie. Or closing costs, such as title insurance (which I’ve heard in Southern California is paid by the seller), the tax payments that he made on the home while he owned it, or the utilities costs of having all those lights on (and air-conditioning, this was California) while it was being shown.

All in all, he must have made a five-figure, not a six-figure, return, which had to support him and his business partner, a staff of three, a maid, and numerous assorted psychics, veterinarians and pet psychics. (OK, so that must have been why people watched the show.)

I cautioned my potential real client about all this, even while telling him I would dig up some possible investments for him. Absolute prices are so high where I am that rents can’t possibly support carrying costs — you turn out to be lucky if the rent subsidizes most of the mortgage, you take everything for a tax loss, and you play for capital gains.

A new two-bedroom condo, for instance, costs $2 million, so with maintenance it’s maybe $12,000 a month to carry and it rents for $8,000 to $10,000. If you’re willing to feed those cash-flow losses for a little while, of course, you can make some money as the neighborhood goes up (crazy, isn’t it, that in the center city a neighborhood can go up from $2 million?)

Primary owners do better, I believe, because in addition to their capital gains tax advantages they are better at actually adding value to a home by knowing what to improve in it. Their day-to-day life helps dictate where another closet is needed, what’s right and wrong with the kitchen.

But hey, if my investor knows the risks I’m willing to help him. Especially because he’s a contractor, so if he wants something customized he’s got the skills to do it himself.

Given some of the jobs that he’s done, I’d say he could even do as good a job as those guys on TV.

Alison Rogers is a licensed salesperson and author of “Diary of a Real Estate Rookie.”

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription