The Authenticity of Real Estate Reality TV: Prepare to Be Surprised

Over time, numerous reality TV shows that romanticize real estate have emerged on networks such as HGTV and Netflix – but do these depictions accurately reflect reality?

To help us reach this conclusion, we examined eight popular shows that may appeal to investors. While most focus on redesign efforts and fail to consider practical aspects of investing, some provide realistic tips and relatable challenges that make watching worthwhile.

Flip or Flop was a 10-season show on HGTV that ran between 2008 and 2022, following real estate agents Christina Hall and Tarek El Moussa as they began flipping houses in Orange County, California after the 2008 real estate crash. Their model consisted of making all-cash offers on foreclosure properties before renovating them before selling for a profit.

The 70% rule of house flipping is an established guideline house flippers follow to ensure sufficient profits; it requires them to spend no more than 70% of a distressed home’s estimated after-repair value (minus any repair costs) when purchasing one. Tarek and Christina may take more risks when selecting properties, making things even more exciting!

Example of Red Hot Flip in action – An episode in the final season shows two investors making an offer on a home they hope to sell for $700,000. They estimate repair costs of about $120,000 as inventory in 2022 leaves them few choices.

Repiping required increases their repair costs to $140,000; but due to a hot market they manage to secure an offer for $856,500 that leaves them with $187,025 after closing costs are paid – this yielding 27.9% return on investment (ROI), just slightly below the average of 27.5% reported by Attom Data for home flips completed during Q2 2023.

Many non-celebrity house flippers would likely shy away from undertaking projects with such low profit margins, rather than taking the chance of landing an offer above asking price.