Flipping houses

[dr_qt]

"Flipping" houses is a great source of revenue in North America. Is there a market in the Dr for this sort of money making venture?

For those of you unaware, "flipping a house" refers to buying a somewhat beat up home, fixing it up and selling it for a profit.

 

[AK74]

"Flipping" houses is a great source of revenue in North America. Is there a market in the Dr for this sort of money making venture?

For those of you unaware, "flipping a house" refers to buying a somewhat beat up home, fixing it up and selling it for a profit.

I am not aware of any house on North Coast that was sold faster than in two-three years of sitting on the market.

Maybe such houses exist, but I never heard of.

 

[Lambada]

I have heard the term 'flipping' used in DR to mean one realtor trying to get an option from another realtor in order to elevate the price for the purchaser & make the intermediary realtor some money.

Clearly you don't mean this, dr_qt. You mean buying an old property, renovating it and selling for a profit. Yes?

 

[gringosabroso]

Average time on the market??

I was a R E broker for a short time. I know 2 - 4 - 6 R E brokers on a 1st name basis. The average listing time for a single family home in POP, &, I think, most of the DR, is 2 - 3 - 5 years! You read that correctly: "years"!
* Unless you have an extremely, extremely deep pocket, can buy houses for 15 - 25 - 35% of fair market value, & know the construction business well, I would strongly suggest that you avoid this career in this country.

 

[MommC]

I'll second that motion!!!
Not trying to be 'flippant' but 'flipping' houses won't work here unless the average wait time of 2-5 yrs doesn't 'flip your lid'.

 

[AK74]

I was a R E broker for a short time. I know 2 - 4 - 6 R E brokers on a 1st name basis. The average listing time for a single family home in POP, &, I think, most of the DR, is 2 - 3 - 5 years! You read that correctly: "years"!
* Unless you have an extremely, extremely deep pocket, can buy houses for 15 - 25 - 35% of fair market value, & know the construction business well, I would strongly suggest that you avoid this career in this country.

Great, honest, informed and educated answer, thank you!!

Now, be prepared for the comments of RE people.

 

[SosuaJoe]

As a general rule, to successfully flip houses you need to bring together a few factors:

1) A rising housing market
2) A property that is undervalued, or one to which you can add a disproportionate value with capital infusion
3) A quick enough sale so that the interest on the mortgage (or the opportunity cost on the money spent if you're doing it out of pocket) doesn't eat up your profits

All this presupposes you'll cover the agency costs, attorney fees and taxes with the increased sale price when you sell it and still have room for a tidy profit.

Obviously, experience in construction/renovation or at least good relations with someone who does is an invaluable asset.

I think it's fair to say that the housing market, at least in Cabarete and Sosua in on a continuing upswing.

There are a lot of owners who want to get rid of their houses, so there are some great deals out there. Whether or not what they consider a reasonable selling price is actually below market value is something you have to look at on a case by case basis. Some people are desperate to sell and will give you a 'steal' price. Others are nuts and massively overvalue their homes.

The sticking point comes when you want to sell the house. As has been pointed out, there is a lot of inventory sitting around for years doing nothing. Over time, this dormancy will eat away whatever profit you might have made. Of course, people are buying houses and condo's like it's going out of style, so if you market and price it properly and it's an attractive property in an attractive neighbourhood, there's no reason why you can't turn a profit in a reasonable amount of time.

Understand this, however: in New York, or Montreal, or Berlin or anywhere like that, if you need to dump a property for whatever reason, you need merely underprice it and someone will pick it up relatively quickly. Not the case in the DR. You get stuck with a property, you can be stuck for a long time.

Fair enough?

 

[cobraboy]

Understand this, however: in New York, or Montreal, or Berlin or anywhere like that, if you need to dump a property for whatever reason, you need merely underprice it and someone will pick it up relatively quickly. Not the case in the DR. You get stuck with a property, you can be stuck for a long time.

Obviously, prices are still too high if it stays on the market for 2-3-4 years.

There must be another dynamic involved, perhasps the unwillingness to price it properly.

 

[arturo]

market dynamics, Dominican style

I think there are two factors that drive the unusual pricing you see in Dominican real estate markets:

1. property taxes - properties tend to be taxed at a relatively low rate or not at all, allowing owners to sit on properties for years in the hope a willing buyer will appear and pay what is being asked. In first world markets, property taxes create a pressure to avoid "dead" properties by selling or at least renting

2. irrational sense of entitlement - this is the same mentality that leads members of taxi unions with concessions such as the airports, toursit zones, and malecon hotels to turn down fair offers for hours or days in the hope of catching the one unsuspecting tourist who will "make their week" by falling victim to a gouging scheme. Property owners routinely turn their noses up at fair market offers to wait for the buyer of their dreams who will pay what they think the property is worth.

Talk about hitting the nail on the head....... this is it.

I don't think I've ever heard of someone getting their house appraised, either formally or informally. They don't want to hear what their house is worth.

Most folks will simply pull a number out of the air, because so and so's house sold for xxxx last year.

My neighbor was asking 16 million for his house. After being on the market over a year, he dropped the price to 10 mil , which is still twice as much as it's worth. That is a reduction in asking price of over 180K and he's still asking over 300K for a house that's worth maybe 140K.

I have looked at many houses in SD for 6-8 mil., that are not worth half the asking price.

Not houses that have been priced with a little room for negotiation, I mean 4 wall improvised houses built without a formal plan, pieced together, with columns in the wrong places, itty bitty rooms... you get the picture.

To top it off, houses in Santo Domingo are a dying breed. No one wants to live in a house(except me).

Santo Domingo has gone condo crazy. I think Robert published an article the other day about the insane amount of condos going up in the Naco area.

What really pulls my chain is that everyone wants to dump their houses, but price it so high, that it will never sell..

 

[bob saunders]

Auturo is absolutely correct. People sit on their property assuming it's the lottery waiting for someone to pay them 10 million, turning down offers to 2 million which is 1 million more than it's worth. Meanwhile they live in poverty...etc waiting for their pot of gold at the end of the rainbow.

 

[rubio_higuey]

this is the same mentality that leads members of taxi unions with concessions such as the airports, toursit zones, and malecon hotels to turn down fair offers for hours or days in the hope of catching the one unsuspecting tourist who will "make their week" by falling victim to a gouging scheme.

Oh how true that is!

I don't want to hijack the thread, so this is an off-side comment, do not reply to it.
I have always wondered those taxi drivers ask you 300 or 350 pesos for what radio taxi charges 120. A "recorrido" priced by radio taxi company at 400 pesos, the hotel taxi wanted 1500! Well... wait for a dumba$$, but not me...

 

[leehall]

Only successful 'easy' flips I have seen (and particpated in) are in the right projects and location, particularly in tourist areas. I am not too familiar with the Santiago and Santo Domingo RE market. A lot of people have purchased large home and modernized on the north coast, but the asking price is way OTT and these stick on the market.
Word of warning, re-finishing a house is stressful and can work out only marginally more cheaper than building from new. The finishings e.g. roof, tiles, bathrooms, kitchens are the expensive bit. Blocks are cheap. One a final note, buyer behaviour is different now compared to 10 - 15 years ago. A lot of the older houses I have seen have small bedrooms / no-suite, small living areas, but large external terrace areas. I want both these days!

Good luck if you give it a go.

 

[AK74]

Auturo is absolutely correct. People sit on their property assuming it's the lottery waiting for someone to pay them 10 million, turning down offers to 2 million which is 1 million more than it's worth. Meanwhile they live in poverty...etc waiting for their pot of gold at the end of the rainbow.

The same question often comes up in my talks with people who visit here from abroad and enquire about possible investing.

All of them are surprised in particular by the fact that many sellers/owners do not lower the price when a house is not sold for a long time but INCREASE it!!

So, after much thinking about this phenomenon I came to the following conclusion:

In reality those "sellers? are not sellers. They do not "sell" anything. Often they even do not have any other place to live if surprisingly somebody buys their house.

What happens is - immediately upon buying a house for, say $100.000, the owner puts it on the market for sale at $200.000. He knows that if he gets $200.000 he can right away buy another one like this for $100.000 and pocket $100.000 mark-up.

Of course nobody in his right mind will ever consider buying it for $200.000, so practically all this process is simply waiting for an unprepared and unaware of prices person, who came on vacation to DR first time. Fall in love with the country and made an emotional purchase.

Of course the majority of these ridiculously priced houses are never sold, but nobody much cares as people just live in them happily.
Those so-called "sellers? are not MOTIVATED to sell.

If motivated by some life situation, they will sell close to the sensible price.

Those people are doing smart and understandable. In their place I?d do exactly the same.

 

[dr_qt]

Thanks for all your responses. My brother has flipped 2 properties in Canada, and I was having a discussion with him about the possibility of trying it out in the DR. He did not seem too keen on the idea either.

I am surprised that the realestate market moves so slowly there, when so many people have expressed interest in retiring/moving to the Dominican Republic from abroad.

 

[DRob]

Hi QT,

Most of those folks are buying new properties, while the resale markets languish. The dynamic is a bit like buying a timeshare.

Good luck with any RE purchases....

 

[naturelover]

where are these $100,000 houses

 

[AK74]

in right time in right place

where are these $100,000 houses

Sold between insiders (or relatives, friends) for fast cash. Before reaching a RE agency.

If you are a gringo on short visits or living in US/Canada, you will never know about these opportunities - for you only overpriced homes sitting on the market for years.

If you live here permanently and know people, sooner or later you`ll come across a real motivated seller who NEEDS to sell VERY QUICK (health condition, family emergency, criminal charge, drugs issue, etc)

 

[Steve Costa Azul]

House Selling

I am not aware of any house on North Coast that was sold faster than in two-three years of sitting on the market.

Maybe such houses exist, but I never heard of.

The house I bought, sat for 1 year before I bought it. So, now you have heard of one. :cheeky: The agent I used, told me that the average time a house takes to sell in the DR, is 1 year. I have seen many @ Dominican Republic Real Estate CENTURY 21 - Villas, properties, homes in Sosua, Cabarete, Puerto Plata - Houses, Villas, Lots, Land for sale that were listed roughly a year ago and are now sold.
So, now you have heard of many.:cheeky:
Steve

 

[AK74]

The house I bought, sat for 1 year before I bought it. So, now you have heard of one. :cheeky: The agent I used, told me that the average time a house takes to sell in the DR, is 1 year. I have seen many @ Dominican Republic Real Estate CENTURY 21 - Villas, properties, homes in Sosua, Cabarete, Puerto Plata - Houses, Villas, Lots, Land for sale that were listed roughly a year ago and are now sold.
So, now you have heard of many.:cheeky:
Steve

Please accept my warmest congratulations on your arrival to the Land of Love and Freedom!!!

Regarding this - " The agent I used, told me that ..." - with all the kindest respect I have very serious reservations about reliability and truthfulness of this source of info (likewise - when a used cars dealer talking about his cars... aranoid: )

I`d better follow advice of another RE agent (in Sosua, who is also my business and investment partner) - "When buying a RE unit in DR you`d better be prepared to a scenario that you will never be able to sell it in your lifetime

 

[johne]

What happens is - immediately upon buying a house for, say $100.000, the owner puts it on the market for sale at $200.000. He knows that if he gets $200.000 he can right away buy another one like this for $100.000 and pocket $100.000 mark-up.

Of course nobody in his right mind will ever consider buying it for $200.000, so practically all this process is simply waiting for an unprepared and unaware of prices person, who came on vacation to DR first time. Fall in love with the country and made an emotional purchase.

.

Those people are doing smart and understandable. In their place I?d do exactly the same.

AVAILABLE: I once has a partner in a bunch of buidings in NJ. He was a real estate broker in commercial real estate. As we passed signs day after day that said "AVAILABLE" I asked Rick "what does available mean? For rent? For sale? He replied--it means--whatever--for rent for sale, are you interested, pay my price, on and on. Come one come all--lets talk.

Perhaps in DR same theory??????????????/