Flippin’ Pronstar

[TheDan]

So, even though I paid cash for the house, it's a liability, because there are maintenance and utility costs?

Yes. A house is a consumable. The property it sits on can be a store of value, but how good of one depends on what the market is like when you have to sell.

The property could be an asset if you make it work for you, but most people don't do that.

 

[deemus]

How do you take into account the value of living in the home / not paying rent for time lived in the home?

 

[TheDan]

How do you take into account the value of living in the home / not paying rent for time lived in the home?

People do that calculation all the time, and some think it's cheaper to rent. Personally I prefer to own; mostly out of vanity.

 

[Brains]

Yes. A house is a consumable. The property it sits on can be a store of value, but how good of one depends on what the market is like when you have to sell.

The property could be an asset if you make it work for you, but most people don't do that.

That seems to be the attitude of SOOOO many based on house shopping. Look people, you've agreed to spend 500k+ on a house (probably 800k over the term of the loan since most suckers don't pay ahead), and you won't even keep up with basic maintenance, much less major repairs? You "upgraded" your house with nowhere NEAR building code bubba work (no permits or inspections either, of course)? You're showing your house, and people coming in are hit in the face with the overwhelming stench (and noise) of dirty neglected dogs?

 

[pronstar]

How do you take into account the value of living in the home / not paying rent for time lived in the home?

I think it gets into a gray area when you own it.

But I would say that’s why they’re called “living expenses”, and expenses = money out of your pocket.

I maintain that the house itself is still a liability because it’s not putting money into your pocket.

If I own a vacant house but live in my grandmas basement for free, the house is still a liability.

If I start renting rooms out then it would be an asset, as the rent goes directly into my pocket.


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[deemus]

I think you have to factor it in as an opportunity cost / benefit. Saving rent money is akin to income. It should be part of the equation.

 

[pronstar]

I think you have to factor it in as an opportunity cost / benefit. Saving rent money is akin to income. It should be part of the equation.

True.

I still think it’s gray because let’s say my house is $2500/month. I could justify this by saying, “well, I gotta live somewhere”.

But I could also couch-surf at my friend’s place for $300/month.

What would the basis for my housing costs be?
$2500 or $300 per month?



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[ZX9RCAM]

True.

I still think it’s gray because let’s say my house is $2500/month. I could justify this by saying, “well, I gotta live somewhere”.

But I could also couch-surf at my friend’s place for $300/month.

What would the basis for my housing costs be?
$2500 or $300 per month?



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Well, where are you sleeping, on a couch, or in your house?

I still think owning my house outright is an asset.
Everybody pays utilities in some fashion.
Most should have some kind of insurance.
Maintenance is typically factored into rent.

 

[deemus]

True.

I still think it’s gray because let’s say my house is $2500/month. I could justify this by saying, “well, I gotta live somewhere”.

But I could also couch-surf at my friend’s place for $300/month.

What would the basis for my housing costs be?
$2500 or $300 per month?



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Its different for everyone.

The couch surfer has a different calculation than the guy who has to actually rent a place to live.

For the couch surfer, the opportunity benefit is low. For a guy with a big family, the benefit is substantial due to the size of home that family needs. For the family guy, payments on a purchased home may be substantially lower than a rental of the same size.

 

[pronstar]

Well, where are you sleeping, on a couch, or in your house?

I still think owning my house outright is an asset.
Everybody pays utilities in some fashion.
Most should have some kind of insurance.
Maintenance is typically factored into rent.

Ahhh...but then there’s folks who house-hack their way to financial freedom - they rent out the rooms in their house and basically live for free.

It all depends on how small one is willing to live, I suppose.

I wish I’d lived a lot smaller when I was young...the old “I wish I knew then what I know now” syndrome.


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[ZX9RCAM]

So, evidently there is no benefit to owning ones own home....

 

[pronstar]

So, evidently there is no benefit to owning ones own home....

“It depends”
“It’s complicated”

When we lived in LA, it was cheaper for us to rent. Rented a nice place 5 houses from the sand in Belmont Shores, nice part of Long Beach.

$1750 a month to rent.
$750k+ to buy (much more now)


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[TheDan]

That seems to be the attitude of SOOOO many based on house shopping. Look people, you've agreed to spend 500k+ on a house (probably 800k over the term of the loan since most suckers don't pay ahead), and you won't even keep up with basic maintenance, much less major repairs? You "upgraded" your house with nowhere NEAR building code bubba work (no permits or inspections either, of course)? You're showing your house, and people coming in are hit in the face with the overwhelming stench (and noise) of dirty neglected dogs?

Yeah, that's why pronstar can do what he does. Maintaining a house consumes a lot of resources and lots of people just won't do it. Once the house has been used up, a flipper comes in and buys it for basically just what the property is worth, and rebuilds the house to the bullshit tastes you see on TV. Then he sells it to people who bid over asking and will never maintain it. Cycle repeats every 5-15 years

So, evidently there is no benefit to owning ones own home....

It's not a dichotomy. Of course there are benefits, even if that's just maximizing control.

 

[F350-6]

I think it gets into a gray area when you own it.

But I would say that’s why they’re called “living expenses”, and expenses = money out of your pocket.....

LIfe is full of gray areas, and you can't always oversimpify things.

If it's strictly which column on the accounting sheet things fall, then the clothes on your back are a liability. Why do you not go everywhere naked (except for the mask of course).

But I see your point when it comes to finance charges. That's the whole reason banks offer the low or zero down loans on cars and houses. It's possible to buy a house and not be upside down on it, but it takes a sizeable downpayment and a shorter note. Or you just get old and live in a paid off house for a long time and watch the value rise to unbelievable levels.

“It depends”
“It’s complicated”

When we lived in LA, it was cheaper for us to rent. Rented a nice place 5 houses from the sand in Belmont Shores, nice part of Long Beach.

$1750 a month to rent.
$750k+ to buy (much more now)

I don't understand how they do that. It must be an interest only note with a ballon payment every 5 years and they don't really own the house. They're just renting it from the bank in essesance and charging you slightly more than their costs to generate some cash flow.

 

[WT_Foxtrot]

pronstar.....nice work! Where are you finding your projects? Been flipping for the better part of six years and have hit a wall on finding eligible properties since the end of last year, which is obviously the most important and hardest part. Done some listed and quite a few wholesale deals too. But the wholesale deals are now down to basically retail. It's insane. Love flippng, but about to take my $$ elsewhere.

 

[pronstar]

LIfe is full of gray areas, and you can't always oversimpify things.

If it's strictly which column on the accounting sheet things fall, then the clothes on your back are a liability. Why do you not go everywhere naked (except for the mask of course).

But I see your point when it comes to finance charges. That's the whole reason banks offer the low or zero down loans on cars and houses. It's possible to buy a house and not be upside down on it, but it takes a sizeable downpayment and a shorter note. Or you just get old and live in a paid off house for a long time and watch the value rise to unbelievable levels.



I don't understand how they do that. It must be an interest only note with a ballon payment every 5 years and they don't really own the house. They're just renting it from the bank in essesance and charging you slightly more than their costs to generate some cash flow.

The folks who owned the house, were the original owners from the 50’s. They never raised my rent in the 10 years we lived there.

But the family matriarch died, kids sold the place. New owner kicked us out, mildly renovated the place, and tripled the rent.


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[pronstar]

pronstar.....nice work! Where are you finding your projects? Been flipping for the better part of six years and have hit a wall on finding eligible properties since the end of last year, which is obviously the most important and hardest part. Done some listed and quite a few wholesale deals too. But the wholesale deals are now down to basically retail. It's insane. Love flippng, but about to take my $$ elsewhere.

Yeah finding deals is usually the hardest part.

I’m in a mentorship program, my mentor is also a wholeseller so that really helps kickstart everything.

It’s not a cheap program but it’s absolutely worth it. Some of his students have been with him for years, and TBH I don’t see myself ever leaving the program.

I can leverage his relationships with insurance, title, trades, banks...his son owns a brokerage and they sell the houses on the back end, with a discounted seller commission which helps keep money in my pocket.


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[Mac7]

Subscribed.

 

[pronstar]

Just started demo on my latest flip. This one has thin margins but not a ton of work. Hoping to be done with rehab in 4 weeks, need to minimize my holding costs.

But I do need to add a layer of shingles to the roof ($5500) and the entire HVAC system including ductwork ($4600)...that’s what’s pinching my margins.

Biggest issue I’m dealing with today:
One of these laborers smells like he pooped his pants and no one is fessing up to it




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[pronstar]

Here’s the before pics.
Keeping the tile, it’s dated but in good shape.

Unfortunately, also keeping the popcorn ceiling. It’s in good shape and the ceilings are high...not thrilled but I don’t think I’ll get the ROI on the $3k-ish it’ll be to remove, float and paint the ceiling.

To give you an idea of my margins:
House is in Cedar Hill.
Purchase price: $180k
ARV: $240k
$10k already spent for roof/HVAC

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