experts: real estate column Friday, July 05, 2002

Shark or Flipper, the market's aways good

Whether you're cruising the real estate waters looking for opportunities or just seeking quick, short-term gain, it's all about awareness

By Ozzie Jurock

This article appeared in The Vancouver Sun on June 30, 2002

Sharks swim through the real estate waters looking for opportunity to feed. They look for the weak and the unwary. When they find one they gobble him up. They are not bad people. They are simply opportunists who take advantage of other peoples misfortune. They don't make the people weak and they don't deceive the people into being unwary. They simply avail themselves of the opportunities when they arise. Flippers are those investors who look for short-term opportunities to buy and resell very quickly.

In either case we are talking about investors who are constantly sifting through the real estate inventory until they find someone who is either ignorant or in trouble or both. There is no magic by which value can be created just because property changes hands. The value is always there and what we're measuring is the awareness of that value and/or the ability to hang on to it. This is the milieu of the Shark and the Flipper.

You will hear people say, "Oh, you only can be a Shark when times are very bad," or, "You can only be a Flipper when times are very good and there's an active market with a high inflationary factor." True, bad times make it easier for the Shark and good times with lots of inflation make it easier for the Flipper, but both of them can ply their trades in all kinds of markets and all kinds of conditions.

Good markets and bad markets are relative conditions. Take a duck swimming across the pond. The pond could be twenty feet deep but it only comes up a couple of inches on the duck. That's the way it is with markets. The market is only a template. You could be in the best market in the world but if you have a mortgage you can't pay, that market becomes a very secondary condition. Besides, the quality of the market simply tells us how many various transactions make up the averages. However, the Shark and the Flipper don't deal in averages - they deal in the exceptions!

Exceptions happen in all kinds of markets. The trick is in finding them, recognizing them, and taking action before someone else does. The fact is that there is no such thing as a bad market. The opportunities are always there but you've got to be out there taking advantage of those opportunities or someone else will.

It sounds brutal to say that the Shark is out there looking to do some grave dancing to prosper from someone else's misery. It also sounds cruel to describe the Flipper as an opportunist who will take advantage of someone else's ignorance to deprive them of potential profit. You have to ask yourself where you draw the line between morals and business. Everyone has to decide that for themselves.

I'm not recommending any particular philosophy; all I'm saying is that if you play in this game these are where the goal posts are. That's all.

The Shark will always be able to find customers whether it be good times or bad times. All the various categories for grave dancing apply. Illnesses, Deaths, divorces, job transfers, business reversals, job losses, bankruptcies, people who got too greedy, too sleepy, or too stupid are all grist for Shark's mill. Bad times simply make the soup a little thicker, but it's always there.

The Flipper has his advantage on the other side of the scale. For him the good times with a rising market and rapidly rising inflation give him the most opportunities. What the Flipper has to watch out for is that 'bigger fool theory' ...because flippers DO get caught. There is a tendency in a rising, inflationary market to jump on the conveyer belt at any price because a bigger fool will come along and take you off at a profit. (As now in Calgary and Toronto pre-sale condos?). This is fine as long as you are not the last fool in line. Here is where you take advantage of options and subject clauses to give you a way out in case the music stops before you're sitting in your musical chair.

Often you will find an investor who is both a shark and a flipper depending on which way the wind is blowing in the market place. The common characteristic they have to have is the ability to recognize the signs, interpret them correctly, and then to act quickly and without hesitation. Those three characteristics are the toughest things to learn about this business.

The key is in having as much information as possible and to interpret it correctly. So where do they keep the information? The information is in the databases and the multiple listings of all the Realtors. The solution is easy. Find yourself a Realtor (or a handful of Realtors) and let them provide you with the information you need. Then go see the 'deal'. Why? Because that is the only way to get to know that it is a 'deal' when you see it.

Do you need all cash? If you have it -buy for cash and sell for paper - or partner up with someone who does have the cash. If you have a good deal you should have no trouble finding someone with cash to be your partner.

However, Robert Allan, the author of Nothing Down, used to boast that you could take away all his money and his credit cards, take him to any city in the U.S., give him $100 for expenses and in 72 hours he would have bought at least one piece of property.

Make sure, you are not working against another flipper. There is only so much room for profit and sooner or later the property has to be sold to someone who is going to keep it and either use it, or operate it for cash flow or keep it for the normal effect of inflation. As with everything in the jungle, 'there is only so many bites on the carcass'.

Where else can you find properties to flip? Auctions, land assemblies, Municipal lot sales, out-of favour towns and in a rising market ANYWHERE! One of my subscribers bought a $165,000 home in Abbotsford, which was appraised on closing at $190,000. Another bought a $46,000 condo in the Valley in May and resold for $62,000. A third bought an 8-suiter in January in Vancouver's East Side and flipped it for a $30,000 profit in May. In all three cases, owners and their Realtors did not believe the market would rise further and UNDERLISTED the property.

So whether you are going to be a Shark or a Flipper, or both, your success is going to depend on accurate, up to date information that is properly interpreted and then acted upon expeditiously. If you say it quickly it sounds easy but it is as much an art form as a business. Remember: The Shark and the Flipper don't deal in averages, they deal in the exceptions.

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