Client wants us to be Chip & Joanna Gaines...sort of

[Charles May]

To all:

I recently finished a flip, after it was done I had a friend who saw what we did told her sister (who apparently is in the market for a new house this summer) and now the sister wants me to do the same for her. Basically a Cleveland version of HGTV's Fixer Upper. She wants me to find the house, purchase said house, rehab it (to their specific wants/needs), then sell it back to them at market value.

Now, bear with me as I have yet to sit down with these people and know next to nothing of their budget, area, etc....they just wanted to know if would be interested. I am here to find out if anyone on BP has done this type of work for a client, and if so, what are/were the guidelines you used in the deal. I am intrigued at the possibility of doing something like this but it also scares the hell out of me. My concern is we do all this work, the deal falls through for a myriad of reasons and I am stuck trying to sell "their house". So....again if anyone has any useful input as to even what kind of questions should be asked when we sit down I am all eyes. Thanks for your time.

[J Scott]

Originally posted by :

It's just that I don't want to be a G.C. for their rehab project when I can just do my own and put more money in my pocket.

You have to choose between the above (putting more money in your pocket) and minimizing your risk -- you can't have it both ways.  If they purchase the house and you renovate it, you're essentially playing the role of GC -- this reduces your risk and your payday.  If you purchase the house and act as the "builder," you obviously take on more risk (if they back out, etc), but increase your margins.

If you haven't flipped a house before, I highly recommend not doing your first as a custom renovation.  There are too many things that can go wrong, and even with a bunch of experience, it's highly likely that something WILL go wrong.  Perhaps the buyers will change their minds, perhaps they won't feel you gave them exactly what they wanted, perhaps the market will drop, and if you've done renovations that aren't marketable to a wide segment of buyers, you may have to do a new renovation to resell.

If you do move forward as the "builder," I highly recommend you work with a knowledgeable attorney to get a rock-solid contract, get a big deposit, and make sure the numbers work in your favor at all points in the process.