I received an email from the Baltimore “Real Estate Investors Association” this morning, inviting me to attend a seminar hosted by Than Merrill, of A&E’s “Flip This House” show, and thought it would be a good time to talk about house flipping and why it’s not all it’s cracked up to be, if you’re an honest person.
Generally, like most “you can be rich like me, from the comfort of your own living room” schemes, you need to be aware of the pitfalls, and you also need to be aware of the fact that the only people who get rich from these seminars…are the people who collect the seminar fees. Thankfully, when Than and his merry band of flippers went to Cleveland last year, local housing and consumer groups issued warnings via the Cleveland Plain Dealer.
The article gives some really good tips if you’re considering attending one of these seminars — and by “tips”, I mean “warnings”:
- Cheap houses have problems. Most cheap homes in the area have been long abandoned and need costly and extensive repairs, making them difficult to flip quickly.
- Homes carry hidden costs. If you buy a home with violations, you could face fines or criminal penalties for failing to fix them.
- If you can’t pay for a property in cash, you’ll need to finance. Costs include not just the price for the house but appraisals, filing fees, insurance and maintaining the property until it’s sold. Plus, you’ll have to figure out how to protect building materials, including furnaces and wiring, from thieves.
- Sales seminars often contain hype. Carefully check the details, look at the refund policy and get all promises and earnings claims guaranteed in writing before you buy.
- High-pressure tactics are the norm. Steel yourself to resist pressure to buy immediately. Give yourself time to read and consider paperwork.
- Research will help you avoid costly mistakes. Check out the marketer as well as the product. (As of Tuesday, the BBB listed Fortune Builders Inc. as having no rating, pending an update on the company’s report.)
Note on the company’s BBB rating mentioned above — the company is now rated as A+, due to the company’s compliance with BBB in changing its grandiose claims on its website. Go here for more details.
And also note, this is not to say Than Merrill is a dishonest businessman. But please — be careful when signing up for these or similar seminars where “building wealth” is the lure. One of the biggest complaints I hear from owners of vacants is they don’t have the money to fix them — my guess is they didn’t realize how much it would cost, or how stringent the legal requirements were to bring them up to code. Going into any business transaction, especially a real estate transaction, is something you’ll want to make sure you’re prepared for — mentally, and especially financially.