Hollywood Actors Find Profit 'Flipping' Homes in L.A.
MADELEINE BRAND, host:
There are a lot of warnings these days that we may be in a real estate bubble about to burst. Well, that hasn't dissuaded one group of people here in Los Angeles from jumping into the market. Emily Meehan reports.
EMILY MEEHAN reporting:
House flipping, cash-out refinancing and no-money-down loans are real estate techniques that have become popular in the past four years thanks to a booming real estate market and low interest rates. Market analysts and even the Federal Reserve say that people are taking big risks, but that hasn't gotten in the way of a few aspiring celebrities who are quitting their night jobs to strike it big in the housing market.
Unidentified Man #1: Gentlemen, Tamara Davis.
Unidentified Group of People: Yea!
(Soundbite of clapping)
MEEHAN: Tamara Davis is a young actress. Her fellow investors club members are cheering her on for her achievement in placing her third renovated house on the market in two years.
Ms. TAMARA DAVIS: I can tell you that when I first started I had an investor that was helping me. I used somebody else's credit.
MEEHAN: Tamara and roughly 60 other investors meet once a month in a house that one of them has placed on the market where they discuss strategy, eat snacks and drink wine.
Unidentified Man #2: And then when you bought it for 400, you sold it for...
Ms. GRAY: I bought it--I sold it for 600,000.
Unidentified Man #2: Six hundred.
Unidentified Woman: What'd you put into it?
Ms. GRAY: Thirty-five thousand.
MEEHAN: She didn't have the credit or the capital to purchase her first house. So she paid someone to use their credit and she had an investor who put the money down and paid for the $35,000 worth of renovations. She and her investors made $165,000 from the sale of the house. It's not unusual for people trying to flip houses to use rather unorthodox methods like this to finance their first purchase. For those who are concerned that this might be rather reckless financial behavior, meet Brock Harris. He's a real estate agent in Los Angeles and the creator of realestateforactors.com, a Web site where he claims to put all those pesky anxieties to rest. He writes...
Mr. BROCK HARRIS (Realestateforactors.com): But overcoming fear is the lifeblood of acting as an art and a job. That's why you'll make a great investor.
MEEHAN: His client John Durler agrees that risk is an integral part of both professions.
Mr. JOHN DURLER: You've got people here that are trying to pursue a career in acting. And that is the biggest challenge ever to do anything. You know? They've left their homes. They left their families. They're out here trying to make it, and that--there is a huge risk.
MEEHAN: John has amassed $2.8 million in real estate in the past two years. When he started he had just enough money for one duplex. He hopes to earn $10,000 a month in the next 10 years from renting out his properties to tenants, otherwise known as a passive income. Since the possibility of such wealth is one that seems universally appealing, you might wonder why this trend is so hot in the community of actors specifically. Well, they have a lot of free time on their hands. They're accustomed to unreliable sources of income because they already get paid in huge chunks and only occasionally. And apparently they make great salesmen.
Mr. HARRIS: They're used to hitting the pavement, they're used to rejection, they're used to, you know, writing offers, getting them rejected, all the ingredients that constitute, you know, a successful real estate investor.
Mr. GREGORY COLLINS (Actor): They say you have to go on a hundred commercial auditions to get one commercial. You know, you're constantly trying to get auditions. You're getting pictures done, you're sending mailers out. You're just like a real estate person would be, calling people, making cold calls, computer Web sites.
MEEHAN: That was Brock Harris and actor Gregory Collins. Gregory was a bouncer for six years. But now, thanks to his real estate, he doesn't need a second job, and he can spend his spare time with his wife and two twin babies. This exuberance for investing could be what Alan Greenspan warned about in his speech several weeks ago when he cited that some local markets are in a state of froth. Froth or not, compared to the alternative of working for tips in the service industry, it's a chance these actors are still willing to take. For NPR News, I'm Emily Meehan.
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BRAND: DAY TO DAY is a production of NPR News and slate.com. I'm Madeleine Brand.