With TV shows such as “Property Brothers,” “Flipping Buddies” and “Fixer Uppers,” house flipping is not only popular to watch but it is an increasingly popular and lucrative action to perform.
While buying and selling residential property is a hot commodity these days, there are plenty of risks, as well as rewards.
“This is a capital-intensive program,” local house flipper Jim Lewandowski said. “There is a lot more involved than they show on TV. Besides the overall cost aspects, you have to know what you are doing at each point of the process.”
Lewandowski works with wife, Rhonda, on projects, mostly in the Denison area, and the couple has been house flipping for about two years. As part of a team, he does a lot of the construction, and she does the paperwork and aesthetics.
“You must know what you are getting into — on every project, you could have money problems such as foundation, electric or HVAC costs you didn’t see,” Lewandowski said. “And if you have to get an electrician or plumber that will cost you more.”
The advantages of house flipping, according to Lewandowski, are being your own boss, creativity and profits. He added that if the project is right, the margins are fantastic.
“You can work as much as you want on it; and be as creative, too,” he said.
On the downside of house flipping, Lewandowski said that one can get upside down quickly on a project if you don’t know the neighborhood or the needs of potential buyers.
“You have to play to your audience,” he said. “You have to take pride and put in the effort to get the most out of your project.”
Barbara Wilson, a real estate agent for Virginia Cook Realtors in Sherman, said house flipping can be a lucrative endeavor. She noted that many investors do such work but many others are getting into the act.
“In today’s market, it’s not too bad if you can find good condition houses,” she said. “Cosmetic work can make it look better; it’s amazing what some paint and new carpet will do for a house.”
The appeal of such a house for buyers is simplicity, Wilson said.
“People just want to move in,” Wilson said. “Many people used to do the work themselves, but they don’t have the time anymore.”
Wilson said if you have the cash and can do the work yourself, house flipping is a good way to make money. There are a lot of people around town who do a great job at it, she said.
“Of course, you must find a good location first, then calculate how much money is needed for a given project,” Wilson said. “The profit margins can be quite good.”
Wilson said in her experience that house flipping became better known around 2000; it was called sweat equity as people put their own work into selling their homes and other houses. Many investors today are buying low-priced houses in the $30,000-range and doing the work to increase the values considerably.
“Of course, there are risks. The foundations and roofs are notorious as potential problems after you get into a project,” Wilson said. “But if you can do the work quickly, you can make a profit quickly, but only if you do the project right.”
Justin Briscoe, a local real estate investor, has done house flipping in the area. He said finding the right deal is the most important aspect.
“Purchasing the house at the right price is key and then, what do you have to put into it,” Briscoe said. “You need to be able to look ahead at the finished product. If potential equity is there, then it is a good choice.”
Briscoe said appraisals can derail a project. If you have a price in mind for your profit margin and the appraisal comes back lower, then the investor has to either “eat it” or not sell the property.
“As an investor, you have to keep up with the market in your area,” Briscoe said. “Do your homework; look up the (comparables) in the neighborhood. This is sometimes hard, but worth the effort.”
Briscoe said comps can be obtained in the Multiple Listing Service available to Realtors and on some websites such as Realtor.com and Zillow.com.
“You have to look at these because the market can change from month to month or quarter to quarter, and if your project is a long-term one, all your work may be worth less at the end than you thought,” Briscoe said. “And surprises can eat your profits too. You can get in over your head fast.”
Briscoe, who has been investing for eight years, said house flipping can help make neighborhoods more attractive and raise home values.
“You can see your city grow just because of it,” Briscoe said.
The Lewandowskis, who have done 22 house projects in Grayson County, mostly in Denison, agreed.
“We love the architecture in Denison. We want to bring the neighborhoods back,” Lewandowski said. “That’s a big piece of why we do it. You do a good project and people see that — they want to live there. It’s infectious.”