Defining Homes Autumn 2013: Flipping out

Do you have what it takes to turn a dump into a delight? It takes a special kind of personality

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Before and after: Above, a gutted kitchen; below, the flipper’s redo — stylish, but not pricey.

By Arnold Wayne Jones

On an episode of Will & Grace, the lead characters planned to make money flipping apartments with the motto, “The Flippers Who Care.” The same happened last season on Modern Family. And Bravo TV’s Flipping Out was all about gay real estate mogul Jeff Lewis and his business of buying, renovating and reselling homes.

Clearly, it’s something the gays were meant to do.

But just how easy it is? It depends on your motivation, your skills … and your business savvy.

Tony Sicilian, a Dallas-area real estate investor, says knowing if you’re the right kind of person to flip “is the million-dollar question.”

Sicilian has been at this game for about eight years and recently went back out on his own to set up an investment group with his brother. Being a flipper (at least as people understand it from watching HGTV, Sicilian says) requires “optimism and vision. Whether you need to be excellent at design or fabulous at money, that’s secondary. But you have to be able to see the product in your head when it’s done.”

Sicilian calls the current real estate market “one of the most insane we have ever seen. There used to be a three-month supply of product on the market; now, when one house sells, there’s only a 30-day supply at any given time. Things are going up and selling that day. It’s great for a lister, but bad because everything has gone up and your window for finding a good deal is very, very narrow.”

Still, investors like Sicilian can usually find deals when there are motivated sellers who haven’t listed their homes yet.

“We’re advertising for distressed sellers in need of a quick solution,” he says. “I’ll buy for cash and resell them quickly. Buying from an investment group is smart — you can usually buy 75 to 80 cents on the dollar.”

And, he says, the amateur can do it, too … if he or she has the wherewithal to navigate the innumerable pitfalls and secrets to real estate investing that can trip up the unwary.

Keith Yonick, a Realtor with Prudential Texas Properties, has seen flippers and knows a few ins and outs to doing it the right way.

“The ‘seasoning rule’ is very important,” Yonick explains. “When you file the deed [on a property you plan to flip], you must wait three months before you [resell]. If the deed is not expedited, it can be a disaster” trying to sell an unregistered deed.

Not all homes are created equal, either. “HUD homes are a bad idea to flip because they do so many inspections,” Yonick says. The bureaucracy can slow down turnaround. “And do not attach to the listing — they could come up later!”

Because foreclosed properties do not have a disclosure process, it’s “buyer beware!” “Many investors do not like [investments like flips], so lenders are harder, and underwriters tear them apart.”

A rule of thumb is, factor in a 12 percent sales cost (that’s high, but it’s better to be high than low, Sicilian says) “and buy at retail 75-80 cents on the dollar, less repairs.” So, if you’re hoping to see a house for $100k and plan to put $10k of work it, don’t pay a purchase price more than $65–$70k.

“You think you should buy a $100,000 [at a discount] for $75,000, then you put $10,000 into it and sell for about $110k,” Sicilian says. But it doesn’t always work that way. “There are tons of hidden costs,” he explains. “For instance, if you buy a foreclosure — which isn’t the right way to flip, but as an example — you’ll have to pay closing costs based on the higher value. The margins can hurt really quick.”

There are full-time flippers who have this down almost to a science; but if you are thinking of doing it as a part-time hobby and secondary income source, make it easy on yourself.

“If you’re not doing this full-time, you definitely want to find [a property] that doesn’t need an insane amount of work, like normal paint and carpet and foundation fixes — this is North Texas after all,” Sicilian says. Your margins might not be as sweet, but it’s good training for more complicated deals.

“One rule of thumb for flippers is always to buy a lipstick redo —the little old lady’s house,” Yonick explains. Those usually require mostly cosmetic changes by visionary flippers who can get a good deal due to bad curb appeal and unfortunate décor choices, but which can have unseen problems. (Nevertheless, the appeal of so-called “ugly homes” is overstated.)

Costs will always underscore the profitability of a flip. But it helps to think long-term. Consider all actual costs of everything going into the house — staging costs, electricity costs when you’re showing it, interest on any money you borrow, insurance, labor costs and more.

“One of the biggest things people forget is the stuff behind the wall,” says Sicilian. “When you sell, there will be an appraisal and an inspection, but people forget to look at stuff like electrical, plumbing, foundation. You might not think it’s off but you’ll need an engineer’s report which, will cost you $500” — another of those hidden costs. And it’s a good idea to do pressure tests on your plumbing lines early, so you don’t find out three months later you have a leak. “You’d rather know upfront to spend an extra $500 and not spend $5,000 later,” says Sicilian.

“For a buyer going to FHA for an insured loan, they will be looking that what they are collateralizing is a good, secure house,” Sicilian says. “So, cutting corners isn’t always smart — it may save you money but will cost you down the line.”

Of course, there are often hidden bonuses as well. Buy one of those old-lady homes, and you might just pull back the original 1950s carpet only to discover pristine hardwood floors. “Those are ‘in’ right now, and you just got them for free!” says Sicilian.

This article appeared int he Defining Homes Magazine, October 4, 2013.

—  Michael Stephens

Great Spaces: Kitchen possible

Mary Kathryn Reese, below, and her partner Jennifer Sherrill founded Snappy Kitchens which helps clients pick materials and looks for their kitchen including backsplash and countertops. (Photos courtesy Ruda Photography)

One local couple can take the nightmare out of revitalizing your kitchen into a dream

By Rich Lopez

When you cook that extra special dinner for your loved one or family, you want to feel inspired as you go through the recipe. But you need much more than the pretty picture in that magazine and those drab cabinets aren’t helping. The kitchen is the heart of the home but if it’s causing heartache, well, something must be done — and it may not be as daunting as you think.

“Before people think about remodeling their entire kitchen, they should consider a facelift,” Mary Kathryn Reese says. “What we’re doing is basically that, an aesthetic update, but we also try to enable the consumer to define for themselves what they like to do with their kitchen.”

Reese and Jennifer Sherrill, her partner in both business and life are founders of the seven year-old Dallas-based company Kitchen Design Concepts which focuses on full-scale higher-end redos. That comes with more involvement and process. But the ladies discovered a niche market where people were interested in updating their kitchen without breaking ground or the bank. Some touch-ups here and there or maybe a new sink and they would have been happy. This became an aha moment for the team and Snappy Kitchens was born.

“What we’ve learned is that people are interested in doing some of it themselves,” she says.

They just need that push to get them going and that’s where Snappy Kitchens comes in. The couple created an online portal where people can design their new look all on the web with a wizard model and get an estimate of the cost. Once the client is happy with the results of both the selections and the prices, an appointment is set with the company to verify measurements and costs and begin the journey to a brand new kitchen.

“It’s basically a do-it-yourself redesign,” she says. “People can do it at their own time and pace and there’s no cost for the estimate. Plus, this gives clients all the power in their own hands and they can edit the cost. Sometimes people are embarrassed to say ‘I can’t afford this.’ This model lets them narrow down the cost.”

The company has two designers on staff who then help the customer streamline their facelift.

“People want some confirmation that what they selected looks good,” Reese says.

Reese and Sherrill debuted Snappy Kitchens in March, but have been at work on it since lasy July. The service opened to a warm reception at the Home and Garden Show in Dallas and even in its infancy, business is buzzing.

“The response has been fabulous and we’re doing about a proposal a week,” she says.

She says they are working out some kinks and doing all the web tools to maximize visitors to the site. However, the site runs smooth enough and easy to follow. By clicking the “Estimate My Kitchen,” button, the Snappy Kitchen Wizard appears and you’re on your way to that kitchen facelift. First the kitchen shape is determined followed by cabinetry, countertop measurements and options and then sink, faucet and backsplash. Since cabinets make up a big design element of most kitchens, you’d think that would be the most popular of the selections. Wrong.

“The most common request people want for their kitchen is a new countertop and then new appliances” she confirms. “Backsplash and then painting cabinetry and replacing hardware.”

You are in good hands with this team. With their primary company, the couple has realized their dream. But Sherrill is also one of 31 women in the industry to have certified remodelr designation from the National Association of the Remodeling Industry or NARI and that’s huge. Reese is also a hobby chef and Cook’s Illustrated recipe tester, so her knowledge of the kitchen adds a perspective to the redesigning beyond just looks.

And although Snappy Kitchens is their new baby, as any proud parent, they got big plans for it.

“Of course, KDC is our first business there is a different approach to services, different level of intimacy,” Reese says, “but even though Snappy Kitchens costs less for the customer, the quality is the same. We’re going full throttle with this and because it’s web-based, we even hope to franchise it.”

Likely everyone else does to, so make it snappy.

For more information or to begin your kitchen’s facelift, visit SnappyKitchens.com.

This article appeared in the Dallas Voice print edition April 15, 2011.

—  John Wright