Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
I have a client who does about 12 flips a year and he uses us for the rehab financing. His work is excellent and he has tremendous success.
Recently he called me and said he is thinking of doing higher-end flips. Right now he does flips in the range of $100K to $250K. He is looking to get into the $350K to $750K range.
Is there a huge leap in learning curve from one range to the next? Are there any red flags or lessons on the larger flips that someone would share?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
I'm just starting to do higher-end work, and the bulk of the learning curve is in the customization of houses for the different type of buyer demographic. In the $100-200K range, buyers don't care if their house looks exactly like all the others, so long as everything is new.
Higher end buyers want some customization and differentiation. In some place, you may also need to adhere to specific styles and maintain design elements that are already part of the house. But, if you can do those things, moving up is really just about knowing what the new demographic of buyer is looking for and giving it to them.
Tacoma, WA · Member since 2010 · 203 posts · 93 votes
13y
I too have been doing some higher end stuff. One big thing I ran into was everything costs more. $10 light fixtures become $50 and up. I'm used to doing kitchens for around $7000, I'm completing one now that cost $30,000+. Be prepared to do your rehab budget. And then significantly increase that number.
Lake City, CO · Member since 2012 · 118 posts · 15 votes
13y
Corey, J. Scott is right on the money and so is Bryan to a point(fixture do cost more). As with any rehab or fix & flip, if you buy it at the right price then you have room to be more flexible. The main thing to consider with high end flips is you better know what your budget is or what you rehab cost are going to be before you buy. You still need to buy in that 50 cents on the dollar margin if at all possible. With high end flips you have more margin for error. For instance: I bought a property in Austin back in the beginning of 2008 for $300K. At this time the market was hot and I paid basically the cost of the lot. Gutted the home and spent almost $200K on the project, about $100K more than we originally budgeted. But we had a huge profit margin in this property so the extra $100K didn't hurt to much. The house was going to go on the market for $720K when the market crashed and the bottom fell out.
So the moral to this story is no matter how much profit you have in the deal, if your in a bad location or can't sell then what's the point. You have to be extra careful when doing high end properties or you can loose your shirt, arm & leg in heart beat. It's great when it works but really sucks when it doesn't. Good luck !!!
Electrical Contractor · Vail, CO · Member since 2010 · 40 posts · 10 votes
13y
Another thing to consider is manpower and contractors. There is a huge difference in craftsmanship from lower to high end and his regular contractors may not cut it. There's usually no hiring off craigslist or the Home Depot parking lot with high end construction.