On HGTV's “Fix My Flip,” real estate pro Paige Turner helps first-time real estate enthusiasts turn a profit on their projects. But Turner also has to abandon renovations that seem doomed to failure.
In the “Big Plans, Big Pivot” episode, Turner heads to Eagle Rock, California, a Los Angeles neighborhood just 10 miles from Hollywood that she says is “growing rapidly with younger, artistic buyers looking for smaller homes.”
So she was a little surprised to see what first-time property flippers David and Tyra planned to do with the 977-square-foot, two-bedroom, one-bathroom home they bought. They bought it seven months ago for $710,000 and have already put $150,000 into it, but they're stuck because they're not allowed to add a 1,000-square-foot addition.
Unfinished Flip
(HGTV)
All they've actually done is gut the building, and now they're paying $4,000 a month in maintenance fees.
Turner was surprised they had such ambitious plans for the property, because photos of the property showed it could be resold on the outside alone: a little paint, a few remodels, and a quick profit. She came up with a brilliant plan that would save the resellers valuable time and probably hundreds of thousands of dollars in renovation costs. They reluctantly agreed to her plan, and even paid her $50,000 fee.
As we watch this project unfold, here's some great advice for all of us:
Do not remove any original wood or fixtures
Original photo with woodwork incorporated
(HGTV)
In original listing photos, the home was shown with built-ins, shelving, and wooden floors, but David and Tyra had stripped it all down, leaving only the columns. Turner was shocked and thought this was a mistake.
“Looking around this precious 100-year-old little home, I'm amazed at how and why the original timber and fixtures from the 1920s were demolished,” Turner says. “The Eagle Rock buyer would have risked their life for it. Looking at the basement, you can see the historic timber they callously discarded upstairs. It's a shame.”
Don't over-renovate for the sake of your neighborhood
A typical Eagle Rock home
(HGTV)
Adding more floor space to such a tiny home might seem like a good idea, but after looking at the competition and doing the math, Turner thinks it's not.
“The real estate agent's planned addition to add 1,000 square feet would sell for roughly $1.4 million,” she explains, “but with the current footprint (less than 1,000 square feet), the finished home is selling for $1.3 million. So why spend another $375,000 on plans that will add just $100,000?”
The numbers make sense when you consider today's buyer.
“Eagle Rock's young, artistic buyers have limited cash reserves and prefer smaller homes with character rather than big, flashy contemporary houses,” Turner explains, so she planned to remove the addition and remodel the existing house.
Consider adding a bedroom to your basement
Floor Plan Layout
(HGTV)
David and Tyra would like to have three bedrooms in the house, but Turner doesn't think that's a good idea.
“Three bedrooms seemed a little cramped for the 990-square-foot lot we were dealing with,” Turner says, but then she realized she had 600 usable square feet of space in the basement. She came up with a plan for a bedroom and bathroom in the basement that seemed to work for her real estate agent.
“It's okay to have two bedrooms and a great bathroom upstairs, as long as it connects to the downstairs, so it feels like one space,” says Tira.
Reversing based on facts, not emotions
Resellers change plans
(HGTV)
Insert loud record scratching noise here: After all this planning, David and Tyra meet Turner for coffee and tell him they want to take the plunge and go ahead with their original plan. Turner politely declines, as he doesn't see a way to make a profit.
“It's just a resale. It's not a home you're going to live in, it's not a legacy home, it's not a home you're going to pass on to your kids. You're really just doing it emotionally,” she tells them.
But these fins stand firm, so off Turner goes.
“I totally disagree,” she says of their plan. “I've seen people let their emotions get the better of them and it really breaks my heart. I wish them the best, but this is not a plan I can be a part of.”
Should I sell or rent my property? Let the numbers help you decide
Anthony and Anton's latest page turner
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“When one door closes, another one opens,” Turner says. A few weeks later, she was called back to Eagle Rock by the same fishermen she'd helped in Tujunga, Anthony and Anton.
They bought the two-bedroom, one-bathroom home for $650,000, plan to spend $100,000 renovating it and then rent it out rather than sell it.
Again, Turner does the math.
“I would be the first to encourage people to buy and hold income property, but after researching David and Tyra's resales, it's clear that there is a high demand for these tiny homes and I don't think this is a rental property,” Turner explains.
She figures rent will probably be around $3,500 a month, a rate she'd need to rent for years to make the same amount she could by selling it now.
“In Eagle Rock, rents aren't exploding, but home sales are,” Turner explains. “If you sell it for the high price of $1.2 million, you're left with $450,000 in cash here. So I think it's more worthwhile to cash out this property, get the $450,000, and buy a rental property that will generate more of a monthly return, like a two- or three-story property.”
Anthony and Anton saw the logic in this and agreed to prepare the house, which they had already renovated, for immediate sale. They made a deal with Turner to help them with this task in exchange for 10% of the profits.
White walls work well for renters, but buyers want more personality.
Living room available for sale
(HGTV)
With their tenants in mind, Anton and Anthony redecorated the house, painting everything a clean white, including the fireplace, although it does look a bit drab.
“Plain white walls are fine for renters to doodle on or hang a big screen, but buyers are looking for something a little more unique,” Turner says.
So she convinced the remodeler to paint the fireplace black and add a cedar mantel and shelves. She also made the big white living room wall look more appealing by adding wood arranged in a checkerboard pattern and painting it the same color as the wall. These are small fixes that go a long way.
Can Page Turner fix these flips?
Just a few days later, Anton and Anthony received an offer of $1.1 million in cash – minus Turner's 10% cut ($35,000), leaving them with $315,000 to cheer about.
So what happened to Tyra and David's Eagle Rock project? Six months later, Turner returned to the property to find it in exactly the same condition as when she left. This is a good lesson that when flipping a home, it's always best to adjust your plans with the end goal in mind: making a profit.