The HGTV Generation Gets Flipped

Rookie real estate investors and rehabbers get their first taste of a downturn

- Pat Regnier

Sean Pan wanted to be rich, and his day job as an aeronautical engineer wasn’t cutting it. So at 27 he started a side gig flipping houses in the booming San Francisco Bay Area. He was hooked after making $300,000 on his first deal. That was two years ago. Now home sales are plunging. One property in Sunnyvale, near Apple Inc.’s headquarters, left Pan and his partners with a $400,000 loss. “I ate it so hard,” he says.

A new crop of flippers, inspired by HGTV reality shows, real estate meetup groups, and get-rich gurus, piled into the market in recent years as rapid price gains helped the last property crash fade from memory. Many newbie investors are encountering their first slowdown and facing losses from houses that take too long to sell. Meanwhile, they face steep payments on a kind of high-interest debt—known as “hard-money” loans—that helped power the boom.

“Flipping only works in an appreciating market where homes move quickly,” says Glen Weinberg, the Denver-based chief operating officer of Fairview Commercial Lending, which is tightening its standards for real estate investors. “Those factors are now in flux, and that’s what’s going to lead to the demise of a lot of flippers.”