Reset Button

“Knowledge rests not upon truth alone, but upon error also.” – Carl Jung

This summer, Jeanine and I, along with another couple bought a fixer in Palm Springs. The renovations were completed in a two-month period and after the group hug, we put it back on the market about six weeks ago. Based on our track record of fixing up and selling our own homes, we all believed there would be a flurry of activity at the first Open House and we’d be long into escrow at this point. Don’t uncork the champagne just yet.

I guess we didn’t take into account just how seasonal and second home oriented that Palm Springs happens to be. Forget about a “flurry” of activity. Aside from a few curious neighbors, the traffic during the last few open houses has been basically non-existent. And it’s not just our beautiful re-do. Many of the other homes that went on the market around the same time are patiently awaiting new owners. I think we all have come to the conclusion that we have to reset our expectations. The place isn’t going to sell until after the snowbirds arrive in January or beyond.

I’m not admitting that this “project” was a mistake. I’m just saying that sometimes investments or at least the timing of them might not work out as planned. I’m learning that the key is to be prepared and be flexible. And just like in Monopoly, the only thing that mitigates risks is a healthy reserve of cash to cover what could turn into longer-term expenses… at least longer than we anticipated.

Cynthia Crowley offered some tips on how to flip real estate the right way. “One of the key things is being prepared for the worst. Be prepared to deal with problems. What if the house needs a new foundation or interest rates suddenly shoot up? What if the house doesn't sell or goes into foreclosure? If you can’t handle the financial risks, don’t do it.”

“Think long term. Traditionally, real estate performs very well. Crowley says in the worst-case scenario, you can live in the home or rent it out. It may not be profitable in the short term, but she says real estate is almost always a good investment in the long run.”

Dian Hymer wrote in the Los Angeles Times, “It’s possible that the home-sale market hit its peak for this cycle sometime last summer. This doesn’t mean you’ve missed the boat. It just means the market is different now than it was earlier in the year, when buyers were willingly paying over asking for prime listings.”

So what is our contingency plan? I think it makes sense to wait until we are a good sixty days into the New Year and if nothing happens, then we should consider leasing it out. This means the short-term flipper might become a longer-term hold as a rental, which would really irk me since the kitchen is decked out way nicer than what is in our Newport home. I didn’t plan on Palm Springs becoming a rental. In my opinion it is way too fabulous for this destiny! Okay... I will hit the reset button now and try to manage my expectations today.