Author Topic: ZG - Zillow Group  (Read 2085 times)

Gregmal

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Re: ZG - Zillow Group
« Reply #20 on: November 16, 2019, 05:39:28 PM »
Another reason home flippers make money is they do a lot of the labor themselves, they paint the house, they fix a few cracks here and there.  They do some landscaping, etc.  And if they outsource stuff, they are very hands-on in the process to make sure it is done right.  This can't happen in a "scalable" model.  It just doesn't work.

This is probably the majority of the equation. The other element is obviously a hot market. Without either, you simply can NOT make any money flipping homes. Everything is so expensive, the only way you ever get anywhere is having super cheap and super reliable ways to get the labor done. Either yourself, or a great connection. Otherwise, quarterly property taxes, mortgage and financing cost, and then the 6% realtor fee...yea good luck.  You basically need to be generating 30% return in under a year for it to be worthwhile. Those dont grow on trees and the random tree that does pop up gets pruned quickly.

Most of my research has lead me to believe flipping homes is only profitable for the people selling the seminars that teach you how to do it.


MrB

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Re: ZG - Zillow Group
« Reply #21 on: November 20, 2019, 10:03:00 AM »
Question I'm pondering is whether Zillow is trying to be a market maker rather than a flipper of houses? Market making is a proven business model. Concern is that market making died off, but did it not just move to the high frequency traders? In other words did the business not just move to those who now has the info and efficiency edge? Will value not accrue to those who have a) the information edge (clearly Zillow) and b) who's the most efficient (Zillow's plan)? On b) consider that this year Zillow only invited it's top agents to Zillow Unlock (used to be open to everyone). Message was.... If you want to clear the most inventory in real estate then you need to get on this train. 

In an illiquid market, such as a downturn the value of a market maker goes up as the spreads blow out. If they're the best at clearing inventory then the bulk of the value will accrue to them. From memory they only have to stay within a 4% spread if they can clear inventory within 3 months (on average); believe 4% was the worse depreciation over 3 months in recorded US real estate. Seems doable.

https://www.youtube.com/watch?v=Afwqp_-VJ2E
https://www.youtube.com/watch?v=Iv3o64aKrX0

TwoCitiesCapital

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Re: ZG - Zillow Group
« Reply #22 on: November 20, 2019, 11:30:45 AM »
Question I'm pondering is whether Zillow is trying to be a market maker rather than a flipper of houses? Market making is a proven business model. Concern is that market making died off, but did it not just move to the high frequency traders? In other words did the business not just move to those who now has the info and efficiency edge? Will value not accrue to those who have a) the information edge (clearly Zillow) and b) who's the most efficient (Zillow's plan)? On b) consider that this year Zillow only invited it's top agents to Zillow Unlock (used to be open to everyone). Message was.... If you want to clear the most inventory in real estate then you need to get on this train. 

In an illiquid market, such as a downturn the value of a market maker goes up as the spreads blow out. If they're the best at clearing inventory then the bulk of the value will accrue to them. From memory they only have to stay within a 4% spread if they can clear inventory within 3 months (on average); believe 4% was the worse depreciation over 3 months in recorded US real estate. Seems doable.

https://www.youtube.com/watch?v=Afwqp_-VJ2E
https://www.youtube.com/watch?v=Iv3o64aKrX0

My take is the market making opportunity. They only have to earn enough spread from flipping to compensate them for the risk they're taking - not the double-digit returns that accrue to home flippers who only rarely do a deal.