Sunday, August 15, 2010

Flouting Flipping Fundamentals


754 CHERRY, Long Beach, CA 90813
Asking Price: $384,900
Beds: 3
Baths: 1
Sq. Ft.: 1,400
$/Sq. Ft.: $275
Lot Size: 6,750 Sq. Ft.
Year Built: 1920
MLS#: P743611
On Redfin: 31 days
Down Payment: $15,400 FHA
Income Requirement: $105,600
Monthly Nut: $2,400
Description: WOW AGENTS SHOW YOUR BUYERS THIS REMODELED HOME. KITCHEN HAS NEW MAPLE CABINETS, NEW GRANITE COUNTER TOPS, NEW TILE FLOOR, NEW MICROWAVE, NEW STOVE, NEW DISHWASHER, NEW GARBAGE DISPOSAL, NEW SINK AND FAUCET, NEW GRANITE ON BREAKFAST BAR, NEW CABINETS AND TILE FLOOR IN PANTRY. NEW TILE IN HUGE SEPARATE DINING ROOM. BATHROOM HAS NEW TUB, NEW TILE IN SHOWER, NEW FLOOR TILE, NEW SINK AND VANITY. BRAND NEW CUSTOM CARPET, NEW CUSTOM PAINT, NEW HEATER, NEW WINDOWS, CROWN MOLDING IN THE GREAT ROOM, NEW FRENCH DOOR IN GREAT ROOM, NEW INTERIOR DOORS. NEW GARAGE DOOR ON THE TWO CAR GARAGE, NEW SPRINKLERS FRONT AND BACK KEEP THE NEW GRASS NICE AND GREEN. NEW GATE AND FENCING, LONG DRIVEWAY FOR MANY CARS AND HUGE CONCRETE AREA FOR RV/BOAT. MANY FRUIT TREES AND LARGE LOT HAS TWO SEPERATE GRASS AREAS FOR THE KIDS AND ENTERTAINNG. HUGE FRONT PORCH ON THIS CRAFTSMAN STYLE HOME. BRING YOUR FHA BUYERS, WE WILL AND CAN WORK WITH THEM.

"SEPERATE"?

"ENTERTAINNG"?

This illiterate CAPS LOCK fan purchased this craftsman in June for $275,000 and after sprucing it up with some standard flipper fare, slapped it on the market $399,000.

After a month of being laughed at for his ridiculous attempt to extract $125,000 for his "services," he sheepishly lowered the price by $15,000.

And here we sit. On the wrong side of 7th Street. Trying to snatch $110,000 for about $25,000 in upgrades.



I actually think this is a nice little house. But the real question is whether it is priced correctly for this post-Super Summer Selling Season(tm) market. To answer that, we'll need to look at a few fundamentals:

The sold comps are all over the place, and some even justify the asking price. However, he can't escape from 571 Cherry, which is on the good side of 7th and sold for a mere $309,000 just last month. It may not be quite as nice, but I imagine with the $70,000 saved you could make some incredibly nice improvements. Ruling: Overpriced.

This guy is asking $275 per square foot, whereas the average Sold price per square for this neighborhood is about $180. Ruling: Overpriced.

The income requirement, which is calculated at a generous Loan Amount/3.5, is $105,600, whereas the median income in 90813 is -- are you ready for this? -- a whopping $27,375. So for someone living to realistically afford this place, they would need to make FOUR TIMES the local annual income. Ruling: Stunningly overpriced.

On the other hand, here is what it looked like before:
WOOF.

In that context, I can sort of see why he's priced so high. It looks like a piece of fine art compared to its pre-flip state.

But the fundamental goal in flipping is to get in and get out -- quickly. Given that the seasonally slow months in residential real estate are fast approaching, he's taking an awfully big gamble by sticking to what appears to be a woefully optimistic price.

Especially considering these facts:

1) This is a low-income neighborhood, and people making the required $100,000 will be difficult to come by;
2) It's right on top of one of the busiest thoroughfares in Long Beach; and
3) The property is next door to a very big (and very pink) apartment building.


Well, time will tell. But time is also of the essence in the flipping business.

Tick tock, buddy.

12 comments:

  1. I go down Cherry a lot to get to the Ambrosia Cafe, and parking down there is just absolutely NUTZ on the weekends. Cherry is a real choke-point down that way, although there are some very nice houses there.
    I've probably been by this place a dozen times. Next time the wife and I head down there I'll look for that particular house.

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  2. Yep, it's actually kinda nice/decent, but who the F wants to live THERE??? Location location location?!?!?!

    I can just see sitting in the backyard, trying to enjoy some peace and atmosphere, and hearing showers from the next door apartment building, or maybe some little ghetto kid peering through the window and laughing to get your attention, etc, etc...

    What's next? Sprucing up a place in the middle of Compton or So Central??

    Maybe I'm just being negative (I know, I know), but there's a reason some hoods are the way that they are. It's because this city WELCOMES low income residents, like a dirty person who leaves food out welcomes roaches.

    If I want to enjoy a nice home and yard, I'll do it in a place that isn't surrounded by such.

    For those that want to plunk down their money, feel free to cut in line.

    I'm sure I'll see you, right where I saw all these other numnuts out there, who were buying homes during the bubble.

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  3. Dave in Alamitos BeachMonday, August 16, 2010

    Okay, this house has the major problem of this entire area and that's a horrible zoning hodgepodge of single family homes next to crackerbox apartment buildings. It's a disaster in Long Beach.

    Personally I'd like for the city to buy up the crackerboxes and rip them out and put in duplexes or parks, but that's not going to happen. So the only other real option is for the homeowner to give up and put in their own crackerbox housing unit. It's a vicious cycle.

    I drive this block of Cherry every single work day and I've noticed this house and a few others. They're semi-cute due to the 1915 style arts-and-crafts architecture, but almost every thing they've done since to "upgrade" has made it worse. Look at those chintzy little wrought iron "pillars" holding up the front of the house. They look ridiculous. This isn't New Orleans.

    Ditto all that granite and faux-travertine. It's going to look dated in just a few years. I hope they at least upgraded the electrical and plumbing. Now that might be worth something I guess.

    Oh by the way, are we sure this is in the 90813? I think of that as more north of downtown. I live near 4th & Cherry and it's the 90802. I'd guess this is 90804, not that it really changes the demographics of this area. Anyone stuck on Cherry is not going to be "rich."

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  4. As long as shenanigans like this are still going on in Long Beach - I AIN'T BUYING!
    Sellers are still thinking that Long Beach is Southwest Newport Beach. Hey, now THAT has a good ring to it!

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  5. Dave, I SO agree with your comments!!

    You said it way better.

    "vicious cycle" is right, and it's REAL real bad.

    Ditto your comments on the "upgrades" as well. If I want an "upgraded" house, I'd rather buy a piece of shhh and do it myself. THAT way I'll know that it's done in a quality way, not some flipper who doesn't give an F about anything except for making a quick buck, who is probably going to take every possible shortcut, even if it means a year or more down the line, something is going to self-destruct.

    Take a house like this. I wouldn't trust the "upgrades" at all, because I know that every shortcut available was taken. So why should I feel good about it???

    Now a quality home that somebody has upgraded for their own personal use? That's more likely to be a home-owner who CARED, and wanted to try their best.

    An upgrade might "look" nice, but I want stuff done in a QUALITY way. I want stuff that's done with quality materials and workmanship, that's gonna last.

    I don't want a house that has nice LOOKING upgrades, but then just two years down the line, I'm going to find out that I'm going to have to totally re-do something, because the "upgrades" ignored other problems/issues.

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  6. I meant 'Northwest Newport Beach' - sounds even better!

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  7. Dave in Alamitos BeachTuesday, August 17, 2010

    Really, the City needs to get serious about the godawful zoning which I think came about in the 1980s. They need to decide which parts of the city can't be saved and therefore should be subject to more hideous development, and then they need to see if any parts can be saved and zone them for single family or duplexes only. They've sort of started doing this by creating historic zones, but it's unclear if that means your crappy crackhouse slum is "historic." (I almost typed Shitstoric. Freudian slip?).

    And as for upgrades, I say amen to the entire post. I'd rather take a house that was completely neglected and make some real changes (electrical and plumbing) rather than ripping out the redwood framing timbers and putting in cheap Home Depot lighting and tile and keeping my fingers crossed that it lasts a year until the warranty runs out.

    This part of Cherry is pretty much unsaveable. They should move any decent houses to vacant lots in a historic zone, and then infill with something at least bulletproof if not beautiful.

    Oh, and as a driver down that street I always fantasize about at least planting a lot of street trees to hide all the ugly. That's the cheap and easy fix.

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  8. Dave in Alamitos BeachTuesday, August 17, 2010

    Oh and the apartment building next door has been painted. It's no longer hot pink, but is now a kind of piss yellow. Progress?

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  9. I love the rage on your blog, man. Keep it up. I'm LMFAO over here!!!

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  10. It's 'flouting' not 'flaunting.' I like this blog!

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  11. Thanks Anon. Not sure how I missed that.

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  12. Don't look now El Bee, but reading all these nitwit realtor's listing is contaminating you!

    And lmao at Dave!

    QM, welcome aboard!

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