Live Flipper

10420 E. Live Oak Ave.


This speculator-investor didn’t get the memo so I better spell it out for him again – the US housing market is dead. These people are either really greedy or really stupid. I can’t figure out which it is, but it’s probably a bit of both. This is a classic flip and my guess is this person watched too many HGTV shows like Flip-That-House and Property Ladder.

Asking Price $899,000 ::: Sq-ft 1746
Purchased Price $610,000 ::: Lot Size 10,530 sq-ft
Purchased Date 08/09/2007 ::: Beds 3
Days on Redfin 10 ::: Baths 3
$/Sq-ft $515 ::: Year Built 1940
20% Downpayment $179,800 ::: Area Live Oak
Annual Income Required $224,750 ::: Type SFR
Est. Payment* $4545/month ::: MLS# 22104087

*Estimated monthly payment assumes 20% down, 30yr fixed @ 6.50%

This flipper bought the property just 5 months ago in August of 2007 for $610k. At that point, the market was already showing signs of serious issues and softening, yet this flipper was so inundated with greed that they proceeded with the flip anyways. From the looks of it, they updated the kitchen, bathroom and flooring. For a mere $899,00 they threw in some shutters as a bonus. If you made $250,000 annual income, would this be the kind of house you would want to live in?

While both the house and the lot is of good size, it’s located at the very south part of Arcadia near Temple City and El Monte. A house in that neighborhood doesn’t warrant the $899k asking price. In addition, they got lazy during the renovations because they didn’t even bother to get a permit for the bathroom addition. That makes me wonder what other corners they cut during construction.

Let’s take a look at their numbers.

Purchase Price: $610,000
Downpayment: $209,600
1st Mortgage: $400,400

Monthly Payment w/30yr-fixed @5.5%: $2,273/month
Cost of Renovations: $50,000

I’m surprised to see this flipper put as much downpayment as he did when he could have probably gotten away with just 5%-10% down. Regardless, if he gets his asking price of $899,000 and taking into account the above assumptions, he stands to make $227,635 before paying capital gains tax. That’s equivalent to mind-boggling $45,527/month!

In this credit-crunched market, there are no more liar loans or 0% down. Assuming there’s a lender willing to do just 10% down, that would leave a mortgage of $809,100. With no more secondary mortgage market, that’s a jumbo loan at say 6.5% for someone with a great FICO score. That’s a monthly payment of $5,114 excluding insurance, taxes and maintenance.

How buyers out there have a 700+ FICO score, $90k cash for downpayment, documented income and can afford a $5,000 monthly mortgage payment? And how many buyers that qualify would want to buy this house? Not many, if any.