Tuesday, March 18, 2008

Attempt to Flip and Go Broke

My friend (the same one we traveled with--yes, the couple still talks to us after spending four days straight attached to our hips) told me about a commercial he heard on the radio for the "Flip and Grow Rich" program. I haven't had the pleasure of experiencing it yet, but I assume it has something to do with Armando Montelongo from A & E channel's "Flip this House."

Regardless of who is behind the commercial, how big is your ego when you think that you can sell a giant load of poop to average people like me? Do you really think that anyone listening to the radio will believe you when you tell the
m that they can buy a property, fix it up, then turn around and sell it right away, and make lots of money in this market? Puhleeeze!

So, I might find a house like this to flip--with a nonexistent kitchen
Let's say that I worked 100 hours (over the course of two-three months) installing everything (not counting any permits that I might need), and spent only $15,000 because I did it myself on the cheap. Am I supposed to sell it quickly when it's done? By then it would be worth the market value at the time that it was purchased. But, when it's finally ready, real estate, most likely, will have declined even more. So I'd be stuck with something that I threw money into, but can't sell. After you factor in the mortgage payments of a vacant property, there's fat chance that I'd recoup my investment, much less make a profit.

It's unfortunate that those who have touted "flipping" real estate in the past have not changed their "investing" model in order to stay current with the market. That's what most successful business people would do. It's almost like they want to pretend that their way has always been, and always will be, the most profitable.

You may live in a neighborhood and have noticed that a house has been for sale for two years, with regular price reductions. You've also noticed an inordinate amount of "For Sale" signs on every street corner. I doubt you'd say, "Hey, it looks like that house down the street is a really good deal. I could buy it and then turn around and sell it again for a profit that will cover all of my costs of acquiring and disposing of the property, and then some." It would go against every grain of common sense that you possess. So, why are they trying to sell us on this now? There must be someone out there who thinks that this is a good time to flip houses which are declining in value as we speak.

I'm not familiar with Armando Montelongo, so I did a teeny bit of research. It seems that he has a mentoring program along with a book--and his family owns several business in Texas (some of which are defunct). I did a quick search on the site of the organization with absolutely no teeth Better Business Bureau and found this complaint history (he seems to be in some type of network) for Premier Mentoring, Inc.

Now, we can say that 99 complaints in the last three years is no big deal considering the volume of customers they must have. But then I stumbled upon this site. Don't let the April, 2007, date turn you off. Comments are being posted all the time and there are some for the past day or so. All of this took me five minutes to find. So, if you're ever tempted by a slick radio or TV ad, do some research before you fork over your dough. The money for an unrealistic program is the least you'll lose. If you follow the advice of some of these "gurus" you may just lose as much money as I did in apartments (and I didn't even have to buy a program to do it.)