Tuesday, January 5, 2010

Alive and Well, Thanks for Asking

Flipping in Long Beach is alive and well, my friends.

Address: 931 EUCLID Ave, 90804
Asking Price: $389,000
Beds: 2
Baths: 1
Sq. Ft.: 804
$/Sq. Ft.: $484
Lot Size: 5,670 Sq. Ft.
Year Built: 1922
MLS#: P706493
On Redfin: 88 days
Income Requirement (4x income): $97,000
Down Payment: $14,000 (FHA)
Monthly Nut: $2,500 (FHA)
Description: 1922 Cal Bungalow Classic on large lot (5670 square feet) which allows a very large backyard for multiple uses. Attached laundry room has brand new washer and dryer and could have additional use --possible additional toilet and sink. Amazing upgrades include newer wood floors, newer copper plumbing, upgraded electrical, remodeled kitchen with new stove and refrigerator, newly painted inside and outside, newer garage door with detached garge in rear yard. Could build much larger garage for more 'toys', cars, boats, or ?


This brave flipper purchased from the bank in September 2009 for $288,000. Here's what it looked like:

Wow! REO-lawn and everything!

The flipper slapped on a new coat of paint and in less than two weeks had it back on the market. WITH A $111,000 PREMIUM.

But hey, for that kind of mark-up, you at least get a "remodeled kitchen," right? Here's the old one:

And here's the "remodeled" one:


Well, uh, at least you get a new front door.

It looks to me that other than some new paint, sod, and a call to a staging company, this flipper didn't really do shit.  The floors, copper plumbing, and garage door are listed as "newer," meaning he didn't put them in. Otherwise, he'd just say "new." This guy has some serious stones demanding more than $100K for his "efforts." 

And speaking of balls, check out the recent price increase:

Jan 03, 2010 - Price INCREASED $389,000
Jan 03, 2010 - Relisted
Dec 28, 2009 - Delisted
Dec 10, 2009 - Price Reduced $374,900
Nov 16, 2009 - Price Reduced $389,500
Oct 09, 2009 - Listed $399,750
Sep 30, 2009 - Sold (MLS) $288,000 (If the bank listed on September 3 for $239,000, why did it sell for $288,000--a 20% increase--four weeks later? A guess a flipper bidding war ensued?)
Sep 12, 2009 - Delisted
Sep 03, 2009 - Listed $239,900
Jun 01, 2004 - Sold (Public Records) $367,500 (18.9%/yr. Note: This is what bubble appreciation looks like)
Nov 06, 1998 - Sold (Public Records) $140,000 (4.4%/yr. Note: This is what "normal" appreciation used to look like)
Mar 15, 1996 - Sold (Public Records) $125,000


Nobody gave a crap in November when it was listed at this price, nor December when it was reduced to $375,000 but apparently 2010 is looking so good that jacking the price by $14,000 makes perfect sense. He must be reading different newspapers than me, because I don't see much in the way of '10 green shoots that would justify asking peak prices.

Don't get me wrong.  This looks like a pretty nice house, but considering its proximity to 10th Street (as you know, I likely wouldn't consider anything on the "other" side of 7th) I just can't see it selling for nearly $400,000.

The good news is he has room to negotiate because he barely put any money into the flip.  All he really needs to worry about is keeping up with the carrying costs until the Spring Bounce provides salvation.

Look, flippers are taking an awfully big risk buying on the courthouse steps and deserve some profit.  But all of this flipping comes at a price to the community.  A family could have bought this place FHA and slowly fixed it up.  But now, because a flipper got to it first and jacked up the price beyond any rational market-based comprehension, it's now out of reach for that family.  Those $2,000 worth of appliances are now $5,000 worth of appliances, that $5,000 paint job is now a $12,000 paint job, and so on.

But the good thing about flippers is they certainly improve the look of so-so neighborhoods like this.  No more dead grass and Tijuana-pink paint jobs.

As we all know, flipping is A Man's Sport, and he clearly has the minerals to play.  It's crazy out there, so maybe this guy's hubris will pay off.  Being so close to the scarlet letter of 90 DOM, he's taking an awful big gamble.


  1. He got it for around 288k on Euclid? That's not a gamble. It's right next to a school, and it's in decent shape. The worst he could do is break even. Don't forget Obama and crew are always going to be adding short term incentives to keep the idiots coming. I guess everything in real estate right now is at least a bit of a gamble, but I wouldn't lose sleep over this one, if I'd bought at that price.

  2. My experience is that a lot of the foreclosures are being snapped up with cash offers instantly by investor groups. All of which tells me that the bubble days, while deflated, are pretty much still around. IMHO the bottom won't be in until flippers and vultures all get wiped out due to rent and price deflation. 2012 anyone?

  3. Anon,

    You're right. For the price he paid and the minimal cash invested in improvements, this was a safe investment. Unless he's a complete fuck up (remains to be seen), he won't lose any money on the deal.

    The real gamble is on where the market will be when he decides to finally stop dicking around with price increases and get it sold. After months and months of carrying costs (not to mention sales commissions), he could find himself in a high interest rate situation. That profit margin keeps getting thinner.

    However, if he priced realistically instead of trying to bilk buyers, he could still guarantee a fat ass profit (like you said, this is on Euclid--although I'm not a fan of anything that far past 7th) and move on to the next flip.

  4. Qualified,

    Speaking of rent deflation, a lot of these investor groups (you hear their awful infomercials on weekend AM radio) are renting properties out (especially the would-be flippers who can't flip fast enough to beat the price declines). What happens to rents when all of that supply builds up?

    I have yet to hear a bullish explanation for all of this "investor" rental inventory. The only thing I can see is lower rents, and therefore higher own vs. rent ratios.

    Flippers trying to sell have very few worries thanks to the short-term incentives for buyers that Anon mentioned. Investors trying to rent out have a bigger problem because supply and demand can't be artificially manipulated for renters.

    How's the new pad?

  5. Not in just yet- being held up by appraisal difficulties. Same thing happened to my brother 5 years ago and they just got a different appraisal. Not so easy these days. Will keep you posted.

  6. Chelsea in the LBCWednesday, January 06, 2010

    All I can say is: don't go to Riverside County! Investors pay all cash at auction and then get it listed before they even close escrow for $50k more than they paid, OR MORE. Many of them ONLY paint the interior. THATS ALL.

    Don't hate the player - hate the game...