House Flip 101: What You Need to Know Now
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The front of the house was bumped out to capture about 70-square-feet on the interior.
This absolutely adorable house flip at 7045 Gaston Parkway in Lakewood is a perfect template for all the right things to do when you remodel a home for sale.
When my friends and fellow stagers Karen and Eddie Otto of Home Star Staging invited me over to see their latest project, I knew two things: one, y’all had to see this house flip; and two, it’s a great example of doing a flip the right way.
The before shot shows the garage access from the front porch covered by shrubbery. The flippers wanted an interior access and closed this off. And look at the transformation you get with a coat of paint!
The popularity of shows like Flip or Flop, Fixer Upper, Flipping Out, and Flip This House, make a house flip look easy. Guess what? It’s not. In fact, if you’re thinking about flipping because you like to pick out tile and decorate — keep your day job. Flipping a home is, first and foremost, a business. Forget what great taste you have and your stunning decorating skills. In the flipper world, a talent with numbers is what will make your house flip successful.
Joshua Stayton and John Wilson co-founded Kerf Capital just a few years ago. Both of these guys have financial backgrounds. That’s my point. It’s what makes them successful flippers.
Step One: Be Financially Savvy
“In general you will find that either a Realtor or a contractor is doing house flips,” Stayton said. “Our angle of approach is strictly financially based. There is no emotion to it.”
Stayton has been in finance his entire life. He’d done his time in the industry and was ready for a new challenge, something he really enjoyed that would take him out from behind a desk. He’d done some renovations over the years to his own properties and thought he had a knack for it, so why not try his hand at a house flip?
“That first house flip was purely cosmetic, and it sold quickly,” Stayton said. It was an epiphany that I could flip homes as a career. I did not want to be stuck behind a desk all day, but I knew I didn’t want to do it by myself because the demolition process almost killed me!”
Stayton got together with some colleagues from his former financial career and began flipping houses on a syndicated basis with each person investing in the property. It was successful, but of course having more people involved means different schedules, timing complications, and not being able to move quickly on opportunities.
“I decided to partner with John Wilson,” Stayton said. “He had been involved in the equity side on the other flips, and the timing for him made sense. We formed a new business plan and raised capital. Instead of doing properties one at a time, we created a fund. We have a third member of the company who does our legal work, and he structured the investment. We also have three additional investors. We want to keep it close-knit, and these are all people we know.”
Step Two: Know Your Price Point and Find Your Flip
With a tight housing inventory, this is an incredibly big challenge because you cannot choose any home for sale and make a healthy profit. You have to know your market.
“We have a good network of friends and keep our eyes open to find the right homes to flip,” Stayton said. “We look for all sorts of homes, but we look at them from a financial perspective only. I’ve renovated homes from 1,600 square feet to 4,000 square feet, and our purchases have ranged from $100,000 to $600,000.”
Step Three: Get a Real Estate License
Kerf Capitol takes it a step further in that both Stayton and Wilson are licensed Realtors. “I quickly learned that I needed a license to move on properties as fast as I can. I found myself sending a Realtor to check out what I was interested in, and often appointments could not be scheduled fast enough for me. Now that Realtor commission is part of my profit model.”
Step Four: Research
“My Advice to anyone that wants to flip is don’t overbuild,” Stayton said. “Base your design and build decisions off your return, not your personal taste. Use cost-effective materials and use them over and over again. Keep a consistent approach and change one or two things up each time. Do your research on materials, styles, and trends, and keep up with where the market is moving. Whether you personally like something is completely irrelevant.”
The kitchen prior to remodeling.
The kitchen after demo.
The kitchen almost finished, before staging. That lovely counter-to-ceiling blue tile was the element chosen to pack a little punch into the space.
Step Five: Find, Keep, and Manage Your Subs
“One of the biggest learning curves coming from a financial industry into construction is you have to micromanage subcontractors,” Stayton said. “You learn a lot along the way. We also do our own drawings, layouts, and design plans. We always go into a project with a vision.”
Step Six: Be THERE!
Being on the job site allows for quick troubleshooting. In any flip, timing is critical. You want to get the home renovated and back on the market quickly.
“I like being out and about,” Stayton said. “One of the great things about what we do is we are at the project almost daily. We maintain control, and oversite. And I still pick up a hammer and do a little framing work!”
The wall on the right was removed as part of the process to create the open-plan living that is popular with buyers today.
Step Seven: STAGE YOUR FLIP!
“I sold a few homes without staging when I started,” Stayton said. “Then we did a wide-open floor plan, and even I could almost not visualize how it would be furnished. I knew if I was having a hard time, that it had to be staged so buyers could understand it.”
Stayton was a bit skeptical at first. Remember, he’s a numbers guy. “When I researched the numbers on staging I realized the return on staging is well more than the cost.”
Stayton looked online at staging websites and found Home Star Staging. “I called Eddie Otto, and we just clicked. He’s so personal, and he’s a great sounding board as well. Eddie and Karen just get what we are trying to do. I use all the resources I have to make the best product, and they have been a fantastic resource for us.”
After the response to the first staged home, Stayton was sold. “I will never sell another house without staging it, regardless of the price point,” he said. “When you open up homes the way people want them today, you have multiple living and dining spaces. It can be confusing to know where your furniture goes and vacant homes look smaller than furnished homes. Staging is the icing on the cake. It’s what gets that house ready for the party, and it gives us the wow factor. I can’t imagine not staging a house now.”
The original 1958 bathroom.
The demo phase on the bathroom.
Voila! A bathroom everyone will love!
Don’t overlook creating an inviting outdoor area when you flip a house!
Kerf Capital’s latest house flip is listed for $669,900. Remember this is Lakewood, and the dirt here is valued at $450,000. So, for a completely move-in ready, 1,912-square-foot, three-bedroom, two-bathroom home in the Lakewood Elementary School attendance area, this is a rare gem and Kerf Captial’s flips usually sell within a week. If you move quickly and ask nicely, Karen and Eddie might even sell you the furniture. Now that’s really a move-in ready home!
Karen Eubank is the owner of Eubank Staging and Design. She has been an award-winning professional home stager and writer for over 25 years. She teaches the popular Staging to Sell class at MetroTex and is the creator of the online course, The Beginners Guide to Buying Wholesale. She also believes in the power of white paint! Find Karen at www.eubankstaging.com
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I must have passed on a dozen houses flipped just like this. Every inch of character ripped out, delightful kitchen gone, pink vintage bathroom gone, everything that would make me want to buy it, gone. In its place nothing but next years outdated “trends”. And the brick painted to HGTV gray? Not only dreadfully base and common, but it seals up a porous material that requires breathing in order to maintain its structural integrity. Horrible. Thank goodness I finally found a home that hadn’t been violated like this.
Great article an GREAT flip. The home went from dull, stale and tired, to bright, airy and 21st century – Just what the ideal buyer wants today. And happy that the well educated, and marketing savvy Flipper went that extra mile and stage the home – and beautifully done too!
I believe the kitchen had been previously re-done in the 80s-90s? so it really went from drab to fab! We love working with clients who understand what buyers in the market for 2018 are looking for!
And even after she found the perfect unviolated home for herself… she still felt the need to comment. So dramatic.
right?
This is the exact kind of companies we need in the Dallas market. They didn’t take a period Tudor or Craftsman and “violate it” or “rip out” It’s character. They took a bucket of ugly and turned it into a wonderful home. Not only did they create value in the home, but this improves the neighborhood and increases property values. I’ve been able to witness the finish-out on this home and it is the level of quality you would expect from a contractor in his own home, not just a “flip”. Great job; I can’t imagine this will be on the market long.