Should your investor clients avoid fix-and-flips?

by Jennifer Paterson07 May 2015
The latest onslaught of flip-focused television shows make the strategy look thrilling and easy, but experts on the ground say investor clients should focus on the long-term game instead.
“When you buy and hold, you don’t have to worry about timing the market,” said Freedom Malhotra, the founder of Condo Planet in Mississauga, Ont. “As long as you don't buy above market value and you do crunch the numbers, you should be very happy with your investment.”
In the past six months, HGTV has added nine new glamourous flipping shows to its roster, including celebrity home remodels, house-flipping adventures and winner-takes-all home renovation competitions.
In 2015, HGTV Canada premiered Open House Overhaul, where designer Sam Pynn and her crew overhaul houses in order to sell them fast and make top dollar.
Given the typical five-year real estate cycle, particularly in Toronto, Vancouver and Montreal, investors who commit to hold a property for at least that length of time have generally come out ahead.
But that kind of long-term strategy doesn’t necessarily make for riveting TV, with strategy-driven property investment struggling to win air time. That’s a shame given the real cash flow potential flippers can leave on the table in the rush to sell.
“As prices increase, people will need that revenue stream, like a basement apartment to offset their mortgage costs,” said Steve Arruda, an agent at Keller Williams Neighbourhood Realty, and an investor himself. “That’s going to be a huge attraction down the road. As prices increase, having that basement rental, or any rental, will help investors to qualify for a mortgage.”
But if quick-flip shows really are the best way to attract viewers, network executives might want to take a page from more experienced flippers who are using that strategy in the hopes of making quick cash to reinvest for long-term gains.
“The strategy is a bit more enhanced – not just lipstick,” said Cindy Wennerstrom, an investor and president of Oro Properties. “It is more full gutting renovations appealing to the more discerning buyer that wants their property move-in ready.”

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