By Pete Carey
(MCT)—In an era of rising home prices, making money flipping a house seems like a slam-dunk.
But buying, remodeling and quickly selling a house at a profit is an art practiced successfully by only a few, even as many of us dream that we could do it ourselves.
The sweat, anxiety and hard work that go along with quickly turning over a house can be seen in a new reality television series based in the San Francisco Bay Area. The show is billed as “the ultimate house war,” and follows six teams of investors and real estate agents as they bid on foreclosures at the courthouse steps and then race to outdo one another in profits and speed to resale.
“It’s not for the faint of heart,” says Beau Eckstein, a Walnut Creek, Calif., real estate broker and contestant on the new HGTV series “Flip It to Win It,” which airs Tuesdays. “If you’re trying sell a $4 million house in a $2 million neighborhood, you’re going to lose your shirt, and you don’t want to build the ugliest house on the block, either.”
Eckstein and teammate Greg Cromwell bought four houses for the show, including a two-bedroom, one-bath home in Berkeley, Calif., for $438,000. It was remodeled for $93,000 and sold for $800,000. In Concord, Calif., they bought another for $305,000. After spending $98,000 fixing it up, they recently sold it for $485,000.
“It was a complete remodel from start to finish,” he says. They put on a new roof, opened up the walls, redid the bathrooms, restuccoed the house and landscaped the yard.
The Bay Area’s soaring home prices “definitely helped,” Eckstein says. “If you got in at the right time, you’ve got $60,000 to $100,000 on the upside.” He has continued to flip houses since the show, recently buying and remodeling another Concord home. He intends to donate 10 percent of the profit to a local cancer foundation.
He has a word of caution for would-be flippers:
“People see all this money getting made, but at the end of the day, with the interest you pay, the selling cost and the repair cost, you really need to know what you’re doing.”
Buyers at auctions typically don’t see the inside of a home until they own it, according to Michael Kaufman, a Los Gatos, Calif., real estate investor who was a contestant with his business partner, Todd Hill.
“We never bought a property without physically laying our eyes on it, but you can’t get inside,” Kaufman says. “Sometimes one might be vacant and you can look in the window, but in most cases you can’t get inside.”
He says that one day before the auction, his team researches 25 to 30 properties that will be sold. “We need to come up with an after-renovation value, an estimated construction budget and a maximum bid price by the day of the auction,” he says. “It’s a tremendous amount of work that has to take place all in a day. It’s crazy.”
Doing a volume business in flipping—they’ve done more than 200 in the past three years—helps cushion the impact of the houses that don’t make huge profits.
“If we have a property that doesn’t perform as well, it’s offset by one that does. Somebody who is going to take their life’s savings to go buy a house and flip it, that’s very risky,” he says.
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