Ken Potter, CT REIA MEMBER "In The News"
Flipping houses looks easy, at least the way they do it on TV. On programs including A&E’s "Flip This House" and Bravo’s "Flipping Out," rehabbers snap up dilapidated properties, foreclosures and handyman specials, they remodel in a mad frenzy, and, if all goes according to plan, they sell for handsome profits.
But while some properties can be flipped just that successfully, the reality can be a good deal more challenging.
West Hartford-based real estate investor Ken Potter, a Realtor with Keller-Williams, has done four flips. On the most recent one, he made money, but "on the other three, I broke even or lost money," he says. "I got excited thinking, ‘There’s going to be a big profit like on TV.’ It is not as easy as it looks."
Christian Winkley, owner of Hartford-based Oxford Builders, has been in the business of custom building and contracting for 12 years. For the first time, he’s flipping a residential property, on Girard Street in Hartford’s West End.
Winkley never intended to get into flipping. The deal came about as part of a set of special circumstances that have more to do with preserving the house and the quality of the neighborhood (where Winkley happens to live) than in making a profit. But even with modest financial aims, "I’m having a tough time bringing this in on budget with my experience," he says. By working with many of his regular subcontractors, "I’m getting some favors, I’m pulling some strings," he says. He’s also doing a good amount of the work himself.
Still determined to flip a house?
The first challenge is finding the right property, veterans say. "Marketing to find good real estate deals is the most important part of the business," says Than Merrill, founder of New Haven-based CT Homes and one of the personalities featured on "Flip This House."
Advertising, word of mouth, social contacts, even random phone conversations can help lead investors to flip-able properties. Potter pays $2,500 to anyone who can refer him to someone who has an unlisted rehab-ready property they’d like to sell. (Before our interview was over, he didn’t miss the chance to ask me if I knew anyone looking to sell or flip a house.)
Crunching The Numbers
Before purchasing any property, you need to decide how much you want to spend on the house and on improvements.
"The bottom line on flipping a house is budget," Winkley says.
For flippers of all stripes, crunching the numbers starts with setting a limit on what is paid for a property.
"The way to make the best profit on any real estate deal is on your way into the deal," reads one of the Flip Tips at A&E TV’s "Flip This House" site ( www.aetv.com/flipthishouse). "If the seller won’t sell at the price you need for your desired profit, walk away."
In today’s market, with values down in some areas and foreclosures and short sales arriving on the market, "competition is fierce," says Potter. Before bidding on any property, he does his homework, checking comparables and existing inventory. He recently toured two properties in East Hartford. "Only four similar properties had sold in the last six months, and there was a high inventory of similar properties [already on the market]," he says. "I decided not to bid."
Flippers should familiarize themselves with the town and neighborhood where they’re bidding. "It helps to know the area," Potter says. "I live in West Hartford. I know West Hartford. You have to understand what real estate sales prices will be." When a house on West Hartford’s Auburn Road went into foreclosure, "there were 14 bidders," Potter says. "I was tempted to increase my bid to make sure I got it, but I didn’t, and I’m glad I didn’t. I wound up getting it anyway."
Winkley’s property on Girard Street found him. A couple who live next door sought out Winkley in an effort to put the house in good hands.
"We’re ‘flippers of the heart’," says Winkley’s wife, Kate, quoting a phrase she says she once heard on TV’s "Will & Grace." "We’d like to break even and return a home in its original condition to the West End."
Christian Winkley, who confesses he was "adverse to flips," was won over by a financing arrangement proposed by the neighbors and by the home’s purchase price. "The house was on the market two years ago for $280,000," Winkley says. He and his financing partners bought it for $199,000.
Get To Work Right Away
With the purchase price set, flippers recommend getting to work immediately, not waiting for the closing.
At Auburn Road, Potter’s flip took 2 1/2 months from purchase to sale. "It’s textbook," he says, "But I spent a lot of time prior to acquiring the property, meeting with contractors and preparing. … I had 11 guys working on the house a day after the closing. Sometimes they get in the way of each other," Potter says, but one of the keys is to minimize the amount of time you’ll be paying the mortgage.