{"id":1564,"date":"2007-06-22T06:07:29","date_gmt":"2007-06-22T13:07:29","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1564"},"modified":"2007-06-22T06:07:29","modified_gmt":"2007-06-22T13:07:29","slug":"the-real-risk-in-real-estate-flipping","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1564\/the-real-risk-in-real-estate-flipping\/","title":{"rendered":"The Real Risk in Real Estate Flipping"},"content":{"rendered":"<p>New investors rarely stop to address the subject of risk tolerance.  People who have never done a single real estate deal see others making a lot of money in real estate and want to jump right in.  They never stop to understand the true risks of real estate.  <\/p>\n<p>Most investors and books will tell you that real estate is a pretty safe asset class to invest in.  This is certainly the case if you are buying core buildings or if you are employing a reasonable buy and hold strategy.  Sadly, many investors hear safe investment and assume that opportunistic investing is just as safe.<\/p>\n<p>If an investor is solely a real estate flipper, he\/she is taking more risk than investing in the stock market.  That might be a surprise to some, but consider the returns.  On average the stock market returns 9-13%, while flippers should expect 15-20% returns on their capital investment.  <\/p>\n<p>This higher return is certainly accompanied by more risk.  First, consider the fact that in the stock market your downside risk is typically capped at 20-30%.  Very rarely does the stock market lose more than 10% in a given year.  Additionally, a single blue chip stock is not likely to even have that kind of a loss.  In contrast, a flipper has a very real chance of losing all of the money invested in a deal.  The odds of this are even higher for a novice flipper.<\/p>\n<p>Another aspect of real estate investing is the sweat equity or opportunity cost of the investors time.  I can go into my E*Trade account in about two minute, buy a Dow Jones ETF (exchange traded fund), and essentially guarantee myself a 9-13% return on that money for 20 years.  However, if I decide to flip property I either have to hire a property manager or I have to act as general contractor, organizing the work to be done.  Either way, investors will still spend a tremendous amount of time working on site or dong something with the investment.<\/p>\n<p>Taking <a href=\"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1564\/the-real-risk-in-real-estate-flipping\/#more-1564\" class=\"more-link\">Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>New investors rarely stop to address the subject of risk tolerance. People who have never done a single real estate deal see others making a lot of money in real estate and want to jump right in. They never stop to understand the true risks of real estate. Most investors and books will tell you [&hellip;]<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,2,8,5],"tags":[],"class_list":{"0":"post-1564","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-blogging","7":"category-general","8":"category-investment","9":"category-real-estate","11":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1685,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1685\/real-estate-investing-vs-stock-market-investing-is-there-a-clear-winner\/","url_meta":{"origin":1564,"position":0},"title":"Real Estate Investing vs. Stock Market Investing- Is there a Clear Winner?","author":"Cooksquared","date":"July 23, 2007","format":false,"excerpt":"Real estate enthusiasts have been sounding their trumpet during the latest run in the real estate market. Many real estate focused investors truly believe real estate outperforms every other investment by a wide margin and even go as far as to wonder why investors would choose any other investment vehicle.\u2026","rel":"","context":"In &quot;General&quot;","block_context":{"text":"General","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/general\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9803,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9803\/real-estate-investors-its-time-to-come-out-of-hibernation\/","url_meta":{"origin":1564,"position":1},"title":"Real Estate Investors: Its Time to Come Out of Hibernation","author":"Cooksquared","date":"September 19, 2009","format":false,"excerpt":"Is it time to start investing in real estate again? \u00a0 First positive sign, I am writing again.\u00a0 While I write that half-jokingly, there really has not been a lot to write about for the past six months.\u00a0 My previous advice was to take shelter and start researching the markets.\u00a0\u2026","rel":"","context":"In &quot;Investment&quot;","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1560,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1560\/can-an-8-billion-private-equity-fund-affect-a-1-million-commercial-investor-it-certainly-can\/","url_meta":{"origin":1564,"position":2},"title":"Can an $8 Billion Private Equity Fund Affect a $1 Million Commercial Investor? It Certainly Can&#8230;","author":"Cooksquared","date":"June 21, 2007","format":false,"excerpt":"Addressing several people's concerns about the state of private equity and the possible assertion that private equity could be the next fallout candidate, I thought I would look into this situation a bit more. For those of you who think that this discussion will be outside of the scope of\u2026","rel":"","context":"In &quot;Blogging&quot;","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1221,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1221\/the-carnival-of-real-estate-26\/","url_meta":{"origin":1564,"position":3},"title":"The Carnival of Real Estate . . .","author":"Greg Swann","date":"March 26, 2007","format":false,"excerpt":"...is at miOaklandCounty, Maureen Francis' weblog. Teri Lussier's introductory post came in fifth place,* not bad for a start. With his post Persistence: The Investors Greatest Tool, Michael Cook took top honors at The Carnival of Real Estate Investing, hosted this week by the Ral Estate Investing for Real Blog.\u2026","rel":"","context":"In &quot;Blog Carnivals&quot;","block_context":{"text":"Blog Carnivals","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blog-carnivals\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":928,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/928\/the-carnival-of-real-estate-20\/","url_meta":{"origin":1564,"position":4},"title":"The Carnival of Real Estate . . .","author":"Greg Swann","date":"January 22, 2007","format":false,"excerpt":"...is up at Minneapolis Real Estate Market Update. And the winner is... our own Kris Berg with The Plastic Pig (and How to Pick Your Agent). Kris also wins The Carnival of BloodhoundBlog, a testament to her excellence amidst the stiff competition around here. The Carnival of Real Estate Investing\u2026","rel":"","context":"In &quot;Blog Carnivals&quot;","block_context":{"text":"Blog Carnivals","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blog-carnivals\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1593,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1593\/new-homes-sales-market-slowdowns-and-investor-irrationality-looks-like-its-time-to-face-a-correction\/","url_meta":{"origin":1564,"position":5},"title":"New Homes Sales, Market Slowdowns, and Investor Irrationality: Looks like its Time to Face a Correction","author":"Cooksquared","date":"June 28, 2007","format":false,"excerpt":"Tanking new homes sells should have real estate flippers and small investors worried. Today KB Homes reported a loss of $149 Million. Additionally, CEO Jeffrey Mezger remarked in the Wall Street Journal, \"We can't predict when market conditions will improve,\" essentially ensuring investors conditions will not improve next quarter. Homebuilders\u2026","rel":"","context":"In &quot;Blogging&quot;","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1564","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=1564"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/1564\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=1564"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=1564"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=1564"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}