As
a real estate agent in Fort Lauderdale with a prominent internet presence I get
one or two calls every week from prospective investors who have heard about all
the money they can make “flipping” houses. Some have gone to seminars (some
even PAID) where so-called experts tell them about fortunes others are making
buying homes, fixing them up, selling them again for huge profits. Other people
have simply heard stories. Like they went to a party once, met a guy who had a
cousin who picked up a hitchhiker who was drinking in a bar one night, talked
to this guy who used to work with somebody who read about it on the internet.
Well,
according to the internet I win the Nigerian Lottery three times a week. I have
to explain to these poor folks just how hard it is in Fort Lauderdale to make
much flipping homes.
For
one thing this is not exactly an original idea. The Fort Lauderdale real estate
market is renowned. Fortunes have been made here. But it is a unique market,
and you need to understand how it works.
Most
people don’t realize how highly this market is shopped. At least 10 people get
off every plane that lands at Fort Lauderdale International Airport, thinks: “Man!
I would LOVE to live here!” And that’s during the warm months. When it’s
snowing up north, people board planes in Chicago, Boston, Newark and
Philadelphia, walk out of the terminal at Fort Lauderdale International into
sunny 70-degree weather, start wondering why they should ever go back to that
sub-arctic craphole they call home.
It
never ceases to amaze me how so many people can want to live in South Florida,
are then surprised to discover it’s not that cheap. Like they’ve never heard of
supply and demand.
The
Big Leagues.
If
you want to invest in real estate in Fort Lauderdale, you are playing in The
Big Leagues.
In
Fort Lauderdale home prices stratify. An updated 3/2 pool home in a specific
neighborhood is worth a certain amount of money. A property listed for less
will invariably require repairs and/or improvements which, when added to the
purchase price, will total about that same amount.
Now
if you are in construction and you can do your own work, you might be able to
save enough to create a small profit. If you are not in construction, however,
you best remember that you are competing with people who are.
Earlier
this year a foreclosure came on the market in Lighthouse Point for a 3/2 Pool
Home listed at $285,000. The property needed around $50,000 of work, but everything
else in the neighborhood was $400,000. I sent out an email blast to my Client
List and one of my clients called, put in a cash offer of $315,000. We did not
get the deal. In three days these Sellers got NINE offers.
Do
the math. Add $50,000 of improvements to a purchase price of $325,000, along
with $3-4,000 in Closing Costs, six months of Insurance (approximately $3,000)
and (maybe $2,500) Property Taxes. Also remember at $400,000 you will be paying
$24,000 in Real Estate Commissions.
How’s
that working out for you?
Now
I’m not hosting seminars. This is a real deal, a property that was on the
market.
Here’s
another one. A real deal, right off the MLS.
This
home was in Imperial Point, a nice neighborhood in Northeast Fort Lauderdale.
It was purchased on March 28th for $263,000. You can see the before and after
photos. The Investor put in a new Kitchen with granite and stainless steel, new
baths, painted, re-coated the pool, put new carpets in the bedrooms. Looks like
around $40,000 worth of work. In addition, there were Closing Costs, Insurance
and Property Taxes, which might be another $8,000, and at a Sale price of
$350,000 there will be $21,000 in Real Estate Commissions. That means after
selling the property for $350,000 the Investor might’ve made a profit of
$18,000.
Honestly,
this is about the largest profit we have seen anyone make lately.
Now
there are ways to make better money in this market and I will be more than
happy to discuss them with you if you give me a call. To really prosper in South
Florida you need to work with an accomplished expert who knows this dynamic
real estate market inside and out. Simply flipping houses is probably not going to get
you there.
