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this post was submitted on 30 Jul 2024
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No house flipper is buying bottom of the barrel derelict homes that no one would ever want because those are hard to flip.
If you're truly saving a property that's literally sitting abandoned and unused and falling apart without you being there and restoring it, then yes, you are providing a service. If you're instead just buying a fixer upper that literally any starting couple might want, then no, you're not.
i.e. house flippers do not increase supply because by and large they do not buy out-of-market assets and restore them to in-market assets, they buy low in the market assets and try and flip them as cheaply as possible into slightly higher in the market assets.
I think the key is that unless you're already a general contractor, you're a speculator. There exists people fixing shitholes to be livable, but those guys margins come from the fact that they already are in the remodeling business and can fix it for cheaper. I've worked with both types in building supply.
Yes, if you have some process efficiency, like you're a GC who knows exactly how to fix it up as nicely and efficiently as possible because you already have a crew of workers in the area or something then you might actually be providing a service.
But even in that case you might not be if you do a shitty job renovating and drive up the price more than the value you provide. If you say, cover up structural or water damage but make the house look nice and new, you may still be doing a net disservice to society by making someone else both pay more for the house and then pay even more to fix your mistakes later, then if they had been able to buy it cheaply and fix it up themselves.
Plus there's always the added cost that if a GC designs something a certain way, the eventual homeowner may still want it a different way, which then still doubles the overall cost when you have to redo a decent renovation.
It's why the overall effect of house flipping is generally to drive up home prices unnecessarily when you examine it at a systemic level.
So we agree then
I think we disagree in that I know of virtually zero house flippers who engage in the practice you describe of buying out of market houses.
Every single house flipper I know buys a house that some young starting couple would be happy to buy and renovate themselves. Though that maybe a difference of markets given that where I'm at there are basically no out of market houses because every property is too expensive too abandon like that.