Patience plays key role to turnarounds in buyer's market
Williamson A.M. • June 13, 2008
FRANKLIN — As the housing market has cooled, so has the once-hot idea of house flipping, which was a high-wire act even in the days of a sellers' market.
Flipping, for the uninitiated, involves buying a tired house, renovating it and then selling it for — theoretically, at least — a nice profit.
Flips have not, however, disappeared from the local real estate scene. Even a casual check of what's for sale in Franklin will turn up a few examples.
It's just that now more than ever, only the savviest flippers survive.
Some, such as Wayne Evans, are simply laying low. Evans, who owns ProServ and ProNet Residential Services of Franklin, has nine houses that he could try to flip, if he wanted to.
Instead, he is renting them out, waiting for the market to turn back more favorably for sellers.
"I tend to sit on the side of caution," said Evans, who flipped his first house in 1993. A big part of his survival strategy is timing, he said.
"Market timing is key. Knowing when to sell," he said. "It's also knowing what to buy."
Evans believes it's a better time for flippers to invest rather than try to fix and sell. "Now is a good time to buy and, if you can, hold it," he said, adding his belief that prices might become even more favorable for buyers later this summer.
Few taking risk
Fellow flipper Dale Stumbo agrees. "Some people are going to be able to get some good deals this year," he said.
Stumbo just listed a house he renovated at 326 11th Ave. in Franklin. His planned key to success is the fact that he did most of the work himself, which allows him to keep his asking price competitive.
"You have to get in there and do it yourself, put in that sweat equity," he said. "A 60-hour work week for me is a quiet week." He estimated that "maybe a couple of dozen" people are flipping real estate in the Franklin-Brentwood area right now, but then he added, "That may be way high. But two years ago, there was about a hundred."
His most current project is a house within walking distance of downtown Franklin. It's near the streets filled with historic homes, but Stumbo's is a brick ranch built in 1950.
He has taken it from 950 to 1,420 square feet. Formerly a two-bedroom, one-bathroom home, the house now has a new master suite. A small side porch was enclosed to create a small but flexible indoor living space, perhaps for a home office.
In the kitchen, he added new appliances, granite countertops, fresh paint on the walls and cabinets, and a new hardwood floor. Elsewhere in the home, there is new paint on the walls and there are new finishes in the bathroom off the hall.
The brick exterior has been painted a buff color, to blend the addition (which includes a laundry closet) and mask the dated appearance of the original brick.
"It was ugly, ugly 1950s red brick that was just horrible," he recalled. Stumbo paid $214,000 for the house and is hopeful that it will flip at $369,000, because that price is competitive for the neighborhood.
"I'm not trying to make a killing on this thing," he said. "I wanted to make a nice profit, and I do want to move onto another flip."
Flippers such as Stumbo also seem to survive by having an eye for details. For example, he wisely chose to keep the big, 1950s farmhouse sink in the kitchen. Instead of replacing it, he reglazed it and gave it a new faucet. He also preserved a quaint telephone wall niche that today might make a handy cell phone recharging station.
Market tests fortitude
"There has been a subtle shift in the market, of people who are doing the flipping," observed Michael Thomsett, a former flipper who now writes real estate and business books, including Getting Started in Property Flipping.
"It has become a much more sophisticated concept now than it was 10 years ago," he said. Right now, he said, flipping is more speculative than ever, it is more difficult to make a profit and "you need a longer horizon for flipping the house" because it is taking longer for homes to sell.
Thomsett said if he were still flipping, "I would definitely be buying right now." He added, "Prices are down and everybody is scared, and that's the time to buy."
He says those who are afraid to buy now should remember that even though the economy has slowed, "the demand hasn't gone away."
"People still need houses. It's just that they are all scared," said Thomsett, who claims that the longer the market stays soft, the more this pent-up demand will grow. "And the longer the demand is pent up, the faster it comes around" when economic conditions improve, he added.
But the window of opportunity could be small.
"One of the rules of these cycles is that you will know it when you see it," he said, "but by then, it will be too late."