On HGTV’s “Fix My Flip,” real estate pro page turner helps novice palmists make their projects profitable. But sometimes Turner has to walk away from certain renovations that seem doomed.
In the episode “Big Plans, Big Pivot”, Turner travels to Eagle Rock, Calif., a Los Angeles neighborhood just 10 miles from Hollywood that she says is “growing rapidly with young art buyers demanding smaller houses.
So she’s a little surprised when she sees what the flippers for the first time David and Tira plan to make do with the 977-square-foot, two-bedroom, one-bath home they purchased. They bought it seven months ago for $710,000, have already invested $150,000 in it, and have stalled because they can’t get a 1,000 square foot addition cleared.
All they really did was gut the place, and they’re paying $4,000 in possession fees every month.
Turner is surprised they have such ambitious plans for the property, as photos in the ad reveal it could have been a cosmetic twist: a little paint, a little reconfiguration, and presto, a quick profit! She has a great plan that will save these fins valuable time and possibly hundreds of thousands of dollars in renovation costs. They accept his plan, albeit reluctantly, along with his $50,000 fee.
As we watch this project unfold, there are some great tips for all of us.
Do not remove the original wood and accessories
Photos in the original listing show that the house had built-in panels, shelving, and wood floors. But David and Tira had ripped everything out, leaving only nails. Turner is shocked and thinks it’s a mistake.
“Looking around this precious little century-old home, I’m shocked at how and why they gutted the original 1920s wood and fittings,” says Turner. “Eagle Rock buyers would have killed for that. Seeing the basement you get a sense of the historic wood that they tossed aside clueless upstairs. That’s a shame.”
Don’t renovate too much for your neighborhood
While adding square footage might seem like a good idea for such a small home, Turner thinks otherwise after consulting comps and doing the math.
“If the pinball machines add the extra 1,000 square feet with their planned addition, they’ll sell for about $1.4 million,” she explains. “But at their current square footage – less than 1,000 square feet – finished homes sell for $1.3 million. So why spend an extra $375,000 on packages that only get you $100,000 more?”
The results of this analysis of the numbers make sense when you consider today’s buyers.
“Eagle Rock’s young art buyers don’t have a lot of money, and they prefer small houses with character, not big, modern ones,” says Turner. So she comes up with a plan to remove the addition and remodel what already exists.
Consider putting a bedroom in the basement
Although David and Tira hope to have three bedrooms in this house, Turner isn’t convinced it’s a good idea.
“In the 990 square feet we work with, three bedrooms feel a bit cramped,” says Turner. But she notices 600 square feet of space in the basement that they could use. She comes up with a plan to put a bedroom and bathroom in the basement, which seems to suit the fins well.
“I would be ok with two bedrooms and a great bathroom upstairs, as long as the downstairs is connected. Then I feel like it’s one space “, explains Tira.
Flip based on facts rather than emotions
Insert a loud recording scratch here. After all this planning, David and Tira meet Turner for coffee and inform him that they want to swing for the rafters and proceed with their original plan. Turner sees no way for them to make a profit and gracefully steps down.
“It’s just a ride – it’s not a house you’re going to live in, it’s not an inherited house, you won’t pass it on to your children. You really only do this out of emotion,” she tells them.
Still, those fins hold on, so Turner walks away.
“I totally disagree,” she says of their plan. “It really makes my stomach knot, because I’ve seen fins lead with emotions and I haven’t seen it work well. I sincerely wish them the best, but this is not a plan I can participate in.
Should you sell or rent a flip? Do the math to find out
“When one door closes, another opens,” observes Turner. A few weeks later, she was called back to Eagle Rock by Anthony and Anthonythe same flippers she helped in Tujunga.
They had bought a two-bedroom, one-bathroom home for $650,000, remodeled it for $100,000, and plan to rent it out rather than sell it.
Again, Turner does the math.
“I’ll be the first person to encourage people to buy and own a revenue property, but after researching David and Tira’s flip, it’s clear that these tiny homes are in such high demand, I don’t think this is the property for rent,” says Turner.
She thinks the rent would probably be around $3,500 a month. At this rate, it would take them years of rental to make the same amount of money as a quick sale.
“In Eagle Rock, rents aren’t booming, but home sales are,” Turner says. “If you sold it for a high price of $1.2 million, that’s $450,000 in cash you have here. So what I see is that this property is worth more money , grabbing the $450,000 and getting a rental property that will bring in more money per month, like a duplex or triplex.
Anthony and Anton see the logic and agree to prepare the house they have already renovated for a quick sale. They make a deal with Turner to help them with this, for 10% of the profits.
White walls work for tenants, but buyers want more character
Anton and Anthony have renovated with the tenants in mind by painting everything, even the fireplace, a clean white, but it looks a little dull.
“Plain white walls are fine for renters to mark up and hang their big screens, but buyers are looking for something a little more unique,” says Turner.
So she persuades the fins to paint the fireplace black and add a cedar mantle and shelves. She also makes the large white wall in the living room more interesting by adding wood arranged in a square grid, then painting it the same color as the wall. These are small fixes, but they have a big impact.
Does Page Turner manage to correct these reversals?
Within days, Anton and Anthony receive a cash offer of $1.1 million. After subtracting Turner’s 10% reduction ($35,000), the pinball machines pocket $315,000 and are thrilled.
What about Tira and David’s Eagle Rock project? Six months later, Turner revisits the property. It appears to be in exactly the same condition as when she left it. It’s a good lesson that when flipping a house, it’s always best to tailor your plans to the end goal in mind: making a profit.