Thursday, January 04, 2007 Story on HomeVestors

Newsweek spoke with John Hayes, CEO of HomeVestors in an exclusive interview. It's a bit of a fluff piece, but he does briefly address the real estate slowdown, TV shows like "Flip This House", and the misconceptions of people wanting to flip houses.

The point I find interesting is that he says a franchise costs $49,000 plus an additional "couple hundred thousand" in capital to get started. Since this is a franchise, franchisees will also be required to pay a percentage of their profits back to HomeVestors. Personally, I think this is a bad deal for anyone wanting to flip houses. You can do the same thing on your own and save yourself the $49,000 franchise fee and the ongoing payments to HomeVestors. If you use hard money, you can even get started without the "couple hundred thousand" capital investment. What HomeVestors really offers is marketing - their signs are all over town and their "We Buy Ugly Houses" slogan is well known. However, I think anyone can spend some time locating and networking with other investors in their area and come up with enough deals on their own.

One good thing Mr. Hayes mentions is that it is a misconception that you are going to make $50,000 on a house and that a more reasonable profit to expect would be in the $15,000 range. He states a franchisee might buy 25 to 30 homes a year, which I find a little on the high side. If you follow the 100-10-1 rule of house buying (look at 100 houses, make offers on 10, buy 1), you're not going to buy that many in a year. Given his figures, I think his system might encourage the purchasing of properties with marginal profit potentials.

(I like the pictures at the start of the article.. Notice the satellite dish looks good in the "before" picture and broken in the "after" picture! Also notice the trees in the background. The "before" picture looks like it was taken in winter because the trees have no leaves. The "after" picture has trees with lots of leaves, so it was probably taken in spring or summer. In case anyone thinks rehabbing is a quick job, this picture should show it takes at least a couple months.)


Anonymous said...

Looking at those before/after pictures, I swear the only thing I see different is new paint, trimmed shrubs, and some general clean-up. But then it's hard to see anything else from that view point.

Anonymous said...

Earth calling Shaun!!!! You've been tagged at least three times now for your five things! Check it out:

Shaun said...

Ack! I've been on vacation for two weeks and haven't been keeping up with my blog reading.. I'll get on it! Thanks for the heads up!

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