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House Flipping vs. P2P Investing

Started by Peter, January 23, 2014, 11:00:00 PM

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Saw this article today: The fastest way to triple your money is...housing? in Yahoo! Finance --" class="bbc_link" target="_blank">

This sentence particularly caught my eyes: Investors made an average gross profit of $18,391 per home, or a 9 percent gross return.

While 9% is a commendable return, it is not as compelling when you consider all the works required in flipping house -- selling house six months after buying.

I would rather get the same return from P2P investing, without all the hassles.  Nice and clean.

Any of you are flipping houses?  Any thoughts?


IMO, I don't even think you can remotely compare the two investment options - if you can even call house flipping an investment at all.

House flipping takes not only an investment, but basically requires you to run a business if you want to be successful.


I took a look at flipping but I didn't want to get my hands dirty.

One of my friends passed on P2P and went back into flipping houses in Wyoming (oil boom town) after he moved there from San Diego last year.  He wears a hard hat and acts as the 'general contractor' as he buys distressed properties.  He likes it.

As I told him,  "you can take the boy out of Kalifornia, but you can't take Kalifornia out of the boy"


I agree with Zach.  Flipping house is a job, not an investment.


I read this article too, but the person who wrote it seems confused on their terminology.  They mention 9% profit and 9% gross return in the same sentence.  Profit and gross return are not at all equal.


My wife wanted to get us into this back around the 2004-05 timeframe.  I kept trying to explain how much work it is and that it would be another full-time job on top of my full-time job.
After the bubble burst in 07-08, I did a little "see, i told you so" routine.  She ignored me, and now that real-estate is finally starting to come back, she's bugging me again about doing house flipping." alt="???" title="Huh" class="smiley" />
...think I'll stick with the investment plan we've been on." alt=";)" title="Wink" class="smiley" />


I have a coworker that is doing it.  I also have a friend who is a realtor who is in discussions with another friend about starting to do it.  It is a business.  You need trusted partners and some start up money.  If you think you are going to do all the work yourself, I think you are delusional. 

My coworker has partnered with a general contractor who only does flips.  He walks the property with you before you buy it and quotes you a round number right then and there.  The homes they look at it's typically ~20k - ~30k to get it shipshape.  Then, he immediately starts the day you close.  The home is gutted in a day and is finished within two weeks (if it takes him longer than 2 weeks he starts losing money).  Then, it immediately goes back on the market.  His contractor is specialized to do flips.  My coworker began this using personal funds and 401k loans but the tax implications quickly became a nightmare so I think he has an LLC now.

I have thought about doing this after trying to buy a condo and seeing so many properties that were sitting on the market for a while because of a few glaring problems.  Fix those and do some updating and you would be beating away offers, including mine.  Then, I think of all the work involved and quickly go back to my computer and lending out my money to strangers.


Depending on the area of the country, house flipping is like musical chairs. Speculation not investment.


My father has done house flipping... For most of his adult life... He does fairly well at it and has a good grasp of it. He is generally making 10-20% per house and is turning that money over several times a year. He comes in well above anything we could make at LC with the equivalent value and he lives on it.

When the market collapsed he lost his shirt and was on the brink of bankruptcy. Today he has resolved all those problems and is doing very well again, in fact he just purchased a 7 million dollar home in California.

That being said, flipping houses -is- a job and it's a lot more work than most think it is. Also you have to have good contacts and be very knowledgeable about the market conditions and what to look out for. It's easy to get screwed bidding the wrong amount for the wrong house with the wrong unknown problems and take a big hit. Meaning you need to have good capital available and be able to properly manage that capital and not over leverage yourself into oblivion. Also, I suspect that my father is an outlier with the returns he makes, I suspect those are very hard and difficult numbers to consistently reach for the average house flipper.

I've had some confusion as to why people really do this when you can get free houses today. Interest is so dirt cheap and the rental market is good and strong. It's not difficult to come out ahead on cashflow when you buy the right properties these days.... Then you also get the benefit of someone else buying a house for you.

Bohb Daishi

After the housing market crashed, my father started flipping houses. He would focus on distressed properties and buy them up at short sale auctions. It's been pretty good money for him.

However, in recent years a number of big REITS have moved into the market, looking to buy houses as part of a large renting portfolio. They have been squeezing the margins quite a bit, making it difficult to find good deals. Luckily flipping houses has only been a hobby for him, so he's not hurt much by the competition.


It seems to me that the real estate agent is the one who is making all the money when you flip a house.


flippers usually have a significantly lower commission from agents since they're getting a large number of listings from a single person instead of having to pay to acquire each customer (via free notepads etc)


I only flip houses to buy more rentals.  I only invest in p2p because I need to show reserves for loans.  p2p is far better than money sitting in a bank account.  I won't touch a rental unless I can get 20% cash on cash return.  If I were to calculate in principle pay down, my returns would be much higher.  My all in costs are always under 80% of full market value, so I have built in equity as well.

Owning or flipping properties is a business and is hardly passive.  That could almost be said about the guys who clock watch attempting to get p2p loans.  I don't think it matter how you define them.  The biggest question should be, is the time commitment, risk and profit allowing you to reach your goals.  P2P serves its purpose, as does real estate investing, as does my job.



nonono everyone knows it's easy money anyone can do it" class="bbc_link" target="_blank">

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