Average Joe becomes a real estate flipper

Sun-Herald
03/17/2005

I know an average Joe who's made more than $225,000 by investing in Charlotte County real estate over the past 18 months. Here's how he did it.

In September of 2003, Joe spotted a wind-battered sign on a vacant lot in Rotonda. He got predictably muddy hiking through the rutted, rain-saturated swale to read the small lettering on the sign. It read "By Owner -- $26,000" and had a phone number.

Joe had done his homework. He knew it was under-priced by about $10,000. Fighting a tinge of cold feet, he took out a home equity loan and paid cash. Ironically, the seller complained that he got very few calls on the lot. Joe didn't tell the seller he blew $10,000 by requiring potential buyers to hike through mud to read the sign.

Joe had never done this before and was feeling like a land baron. He made daily biking trips to walk his land. On the third day, Joe noticed a "for sale" sign on the vacant lot beyond the swale and one street over. He called the agent. It was listed for $30,000.
"Nothing special," thought Joe. That changed abruptly a few hours later, when the same agent excitedly called Joe to tell him that the adjacent, similar lot just came on the market for $25,000.

So here are two nearly identical lots side by side. One's listed at $25,000, the other or $30,000. Which one do you think Joe bought?

Of course, Joe bought them both. He paid a total of $55,000 and immediately resold them as a rare double lot for $79,900. To pay for the lots, Joe cashed out $24,000 from his IRA and dug a little deeper into his home equity loan.

Joe noticed that many listed lots are so overgrown with scrub that you can't even walk them. Using a $5 machete, Joe searches for amenities that no one else sees, such as mature oak trees. He buys the ones with hidden treasures. He then mulches the scrub to showcase the features and allow potential buyers to amble across the land. This typically nets 60 percent more than his purchase price.

Joe also uses the Charlotte County's incredible GIS Web site to study each lot. He looks for special features such as high elevations requiring no fill.

Since buying that first $26,000 lot 18 months ago, Joe has made about $225,000. Better yet, it's taxed as capital gains, so the taxes are much less than what he pays on ordinary income.

Excited about the easy money, Joe encouraged his friends to join the party. His girlfriend jumped in and made a quick $33,000. Everyone else was from the old school where you don't touch your home equity.

Do you think Joe is an investor or a speculator? Is he a hard-working capitalist benefiting from his efforts in the free market, or is he the reason we lack affordable housing?

Doesn't matter. Joe has his own priorities. He's got bills to pay, a son in college, and a dream of retiring someday.