You Thought WHAT Was a Good Idea?
As I mentioned this weekend, my house was taken over by a nasty flu bug. My son was hit first, so I blame it on his preschool. However, I soon followed him down the road of sickness, and spent a large part of Sunday and Monday doing something I hardly ever do - lying around in bed watching bad TV.
Yes, I know of the evil time suck that TV is. I’ve actually fought the good fight with my former TV addiction and mostly slayed it - there is maybe an hour or two total of TV I watch in an entire week. But when you’re so sick you can barely sit up for any length of time, but your head hurts too much to sleep or read, TV helps pass the time.
I discovered a lot of really odd things, like for example, Bret Michaels (of Poison fame, one of those big hair bands I used to listen to in high school) has a reality show where he’s trying to find love (or something), and there is also a reality show where a bunch of odd used-to-be-big celebrities are trying to break into country music… and I also watched a show I have seen a few times before called Property Ladder. Property Ladder is where people flip houses for profit (they hope) and the show chronicles the flipping process and what happens when they do try to sell it. I find shows like this really interesting, even though it is not anything I would be interested in doing, because we have no do-it-yourself skills at all. But I admire those who do have skills, and I find the idea of flipping houses really fascinating.
But this episode… was scary from start to finish. It was called “Babes in Demoland” and was about a young couple who buys a house to flip in a bad neighborhood that was in much worse condition than they thought, and go about 25% overbudget and end up selling it for a really slim profit. That wasn’t the scary part. The scary part was their whole monetary plan. I honestly think they got off easy for how bad the plan was from a financial standpoint.
They expected to spend $30,000 to flip the house. Their plan to pay for that? The show said “some small savings and their credit cards”. From watching the episode, I’d say it was 1% small savings (if that) and 99% credit cards. They decided to flip a house with their credit cards? That just seems like a recipe for disaster. Even before they were overbudget, in fact, before they’d even spent half their projected budget, they were complaining about not being able to pay their bills and acting like the mortgage payment (that they knew they would be paying) was a big surprise and going to throw their entire financial lives into turmoil.
I just don’t understand how anyone can think this whole plan was a good idea at all. And the fact that they were willing to be filmed for a TV series shows that they must have thought it was at least a good plan.
Even those people who love their credit cards - would you flip a house with all of your financing based on credit cards? Am I missing something here? Or am I in line with thinking that they are just lucky they escaped the whole thing with any profit at all in the end?
And as an aside, I only watched a few minutes each of those other reality shows I mentioned. Even I have a limit to how bad the TV is that I’m watching.
If you enjoyed this post, make sure you subscribe to my RSS feed!
February 26th, 2008 at 6:53 am
I guess it could be done. As we inch ever closer to having our paid off, they keep upping the limit. Citibank just sent me a letter saying I had a, get this, $35,000 limit, I have another one that’s been zeroed for a couple of years that’s at $20,000 and we have our Bank of America Card limit at $15,000. That’s $70,000 in available credit card debt. %70,000….$70,000? Are these people nuts?
Our balance is down to $3000. Within another month or two, I hope to have it down to about $2,100 since that’s the amount we should get from the “economic stimulus package.”
February 26th, 2008 at 7:51 am
Wow… That does NOT sound like a good idea to me! I guess you need to take some risks in life, but this is one I would NOT take!
February 26th, 2008 at 7:54 am
You mean I shouldn’t be going into CC debt on our house renovation?
Seriously, that is such a bad idea for so many reasons. Thank you for the link love. I’ll send hubby to your house someday 
February 26th, 2008 at 9:00 am
Maybe, but only if it was 0% interest for 12 months, and I had the mad skillzorz to bounce that credit card to another one in 12 months.
February 26th, 2008 at 9:06 am
I love that show! It keeps reminding me why I will never become a house flipper!
Seriously, so many people on that show have really, really bad plans on how to finance their flips. And it rarely turns out well.
February 26th, 2008 at 9:56 am
I used to watch that show (and other house flipping shows) when I had cable. They’re addictive…mostly because people are horrible! I saw someone lose about $100k…yeah, awesome!
February 26th, 2008 at 10:40 am
People have huge differences in in views when assessing risk. What may seem absolutely suicidal for one may seem “Yup! Looks like the odds are not too bad!” for others.
I, for one, will not even think of house flipping. Don’t lets even talk about funding a house flip with CC’s.
February 26th, 2008 at 12:27 pm
Using credit cards to finance something that risky sounds quite nuts to me!
February 26th, 2008 at 7:24 pm
I think the best part is they didn’t even get an inspection to “save money”, when in fact it ended up costing them money as an inspection would have caught some of the issues.
February 26th, 2008 at 11:30 pm
Mr. PT, I think that’s a good point for anyone buying a house—whether to live in it or flip it.
As for the credit cards, no I definitely wouldn’t. They’re just not a good kind of loan. The cycles and rate raises and everything…it’s too shaky. I’d need a loan with a locked-in rate, even if it was only for a month or two (that is, even if I only had the loan for a month or two, I’d need the rate locked in longer).
February 27th, 2008 at 2:56 am
Woha! Bad idea!!
I am shocked and kind of appalled. I don’t watch TV except for shows I get into on DVD (for Sunday night snuggling with my man). I’ve heard of this show but only on Dave Ramsey.
Personally, I would never do this. What if they couldn’t flip it? Then they’d be in the hole with the credit cards and they’d have lost a year of their lives working hard for something that didn’t happen. AND they’d be stuck in a bad neighborhood!
I’m with most commentators here - bad idea.
February 27th, 2008 at 4:54 pm
First off I hope you feel better!
I’m a huge fan of those “flipping houses” type shows but if I’m not mistaken, Property Ladder follows the rookies in the field. Generally, you’ll see a lot of mistakes on that one.
If you want to watch the experts, I personally like “Flip This House” or A&E has a good one as well, I forget the name.
March 1st, 2008 at 4:06 pm
I LOVE this show (and all like it) and remember this episode. The killer….NO inspection on the house they purchased!!!! Duh! And the “real estate expert” that coaches them along on this episode TOLD them they were heading for disaster and they did exactly what she warned them NOT TO DO. This couple just gets the DUH award.
March 2nd, 2008 at 11:08 am
Dumb and dumber!
I will say, when one of my card issuers, unbidden, granted me a startling increase in credit, I realized I could charge the cost of a small house or a car on it. At 21%…what a deal!
Even if you could move the debt to a 0% interest card for a year and then move it to another such card for a second year, in this market there’s a strong likelihood you couldn’t sell the shack in two years. It will take at least three months to do the fix-up — twice that long if you’re working on Contractor Standard Time — and that would leave you only 18 to 21 months to turn the house over.
Around here, houses aren’t moving that fast. And the longer they sit on the market, the more their value drops. Plus every foreclosure drops the value of your house another 1 percent. Right now my neighborhood has four foreclosures, and compared to other areas it is fairly stable.
Well anyway…I guess when you see television programs like that, you realize where people get their dumb ideas!