I have a background in architecture and a real interest in design. My dream is to flip houses, but I want them to be unique and thoughtfully designed. I love the idea of making something better. I watch all the flipping shows, and they often have a set list of finishes they use, only varying the shade of granite every now and then when they're feeling frisky. As a designer, that kind of makes my stomach turn.
So my question is, does one-of-a-kind design have a place in flipping houses? Is there money to be made if you spend a little time to design, and you use different products each time, or go out on a limb with a design element that makes a space special? I totally understand that you want a flip to be neutral so that it can appeal to more buyers. But the neutral finishes that I am seeing on the shows reminds me of the cookie cutter McMansions I see everywhere. I don't mean to criticize those who do this, as it is probably why you are successful and I am spending weeks to pick out the trim color on the exterior of my house. (Sidebar: we are in no rush on our house, and I do realize that time is money in the biz.)
Am I being an idealist or naive? My gut tells me that a house that is unique and thought out will sell quickly. Am I missing something? Is this a business killer?
I worry that my downfall as a flipper will be my lack of a business mindset. I am working on changing that!
Sorry, but you're falling into a deadly trap for fix and flipping - doing what you like. You're not the one who's going to be living in the house. When fix and flipping or building from the ground up you absolutely want to appeal to the maximum number of buyers. You want to spend as little as possible. So any dollar you spend ABSOLUTELY MUST return you more than a dollar or its wasted.
If you do a unique house you will have to find exactly the right buyer. That's hard to do, so you will end up with a buyer who will settle for your unique house. "Settle" means "buy at a discount".
That said, extra touches will help sell the house. You need to go look at the competition in the area where your flip is located. If you can be a little nicer is some neutral way you can put your property above the competition. Maybe you get a slightly higher price (though an appraisal may kill that) or fewer days on the market.
Uniqueness in general is bad for fix and flips. That makes appraisals tough, which means they will come in lower than you think. Cookie cutter houses are the best fodder for fix and flips. Its easy to come up with a value, easy to know what to do with the house and there's a big market.
If you want to do unique work, offer your design services to homeowners. I think most people really don't want a truly neutral house. I don't. Our living room has terra cotta paint and my office has three different shades of blue. Trouble is what appeals to one person will turn off a dozen other folks. And you want all those folks in your pool of buyers.
in some hip neighborhoods there could be room for expressive design, but it will be risky. In east Austin, you can push the limits. I really haven't seen builders get burned, but I'm sure it happens.
As Jon says, the safe (make money) thing is to conform, conform, conform.
Agreed with Jon and Jon...
The one opportunity would likely be doing large-scale rehabs (additions, guts, etc) for higher-end properties, where the buyers are going to demand more custom finishes. But, even there, you don't want to be too custom or limiting of your buyer demographic.
Be creative in the deal, and leave the structure to the renovation.
I used to sell homes as a realtor in Naples, FL ... and I sold one particular rehabbers homes 2-3 times in one year because I knew it was his flip from the front picture. I could tell you the kind of granite, the type of tile floors, and the fact they did an awesome job. And I could sell my client on the house before we even walked in. They were just a bit nicer than most of the other rehabs ... and priced will for the market, and fit perfectly for what almost any buyer wanted.
Hi Raven and welcome to BP!
From your description, this sounds like YOUR BRAND. An interesting concept of "Custom Flipping!" I think there's money in it for you. The only hurdle I see is finding a Custom Buyer. They're out there. I don't think it's a deal killer in this game and I like your idea. I'd say "Go For It!" Why shop at Wal-Mart when they can buy your brand? It's unique amd that's what you're talking about.
While I have to agree with Jon, Jon, and J, I can relate in many ways with what you are saying. We just arent all wired the same, and success is not always measured in profit alone. The bottom line is that if one does not thoroughly enjoy what they are doing, they likely wont invest the time, energy, and resources necessary to succeed.
I have spent the past 35 years looking for balance. While I have always been motivated by the satisfaction I garner from what I create, and thru it, making my customers happy by going the extra mile, giving them something they wouldnt likely get from others, and providing value for their hard earned dollars, ive had to find where to draw the lines so that I can make decent money a well.
I would encourage you to pursue what brings YOU satisfaction. And you are at the right place to learn the proven techniques and strategies that can help you find balance, allowing you to put yourself into your work without creating unmanageable risk.
Wish you all the best in whatever path you choose!
@Jon Holdman - great points. They seem to come from a very business-centered place, which, as I said, is not how I naturally approach things. It's really helpful to get that kind of advice. You brought up a good point, saying that I should not be designing this for myself; doing what I like. However, I can't totally give up on the idea of offering a well-designed product, but I do think I can offer it in a neutral way on a budget.
@Jon Klaus - There are neighborhoods here in Louisville that creative design would be more appropriate, and almost necessary. That's a good point - I definitely need to read the neighborhood.
@Nathan Brooks I like the idea of offering something "just a bit nicer" than the others. Give people a reason to choose yours, but not price them out of the house. Thanks.
I can't link to @D'Mark Poole for some reason, but that's what I was hoping for. That it could be my brand. I am curious what the others think of this. I am not here to squeeze every cent out of the deal and build an empire. And I know this is probably counter to what most aspiring investors feel. I need to find the balance between business and design, and @Randy F. 's comment is really speaking to me. The reason I am wanting to leave architecture is because I am not doing what I love. So I wake up every morning dreading work, and spend the entire day renovating imaginary homes in my mind, while listening to Bigger Pockets Podcasts, of course!
We are doing a slow motion rehab of our home (nights and weekends), and it is our test flip. Obviously doing it quickly is an important aspect that we are missing here, but we are moving slow and steady building toward real estate investing. I have been choosing neutral palettes, with the idea that we want to sell as soon as we're done. I am attaching a poor quality cell phone photo of the downstairs den bar area (it's a tri-level). This is what I mean about going out on a limb, or more one-of-a-kind design. The rest of the room is all painted that greige color, white trim, super basic. But I like the idea of pops of excitement. A little touch of uniqueness scattered throughout. What do you all think? Is it too much?
I think it depends on your area and pricepoint. A full custom design on an inexpensive home in a conservative area is going to be a complete waste of money. On the other hand, if you're flipping a million dollar home in NYC or San Francisco, I think a custom design makes more sense and could have a great return. Also, if it's a buyers market it might make sense to do 1 or 2 custom design features to make your flip stand out from all the other cookie cutters. It might not get you a higher sales price but it could get a quicker sale.
Here's the thing... as a flipper, you ideally want EVERYONE who walks through the front door to be able to see themselves living in the home. With every "unique" decision you make regarding design, you potentially limit the number of buyers..... HOWEVER, (and I speak from recent experience) if you can tastefully add a bit of unique design flair, You will potentially add a feature that sets you apart from other rehabs on the market and it will be a "must have" for a few of the masses without being a complete turnoff for the rest of the buyers...
@Raven Parmer - welcome to BP!
I'm pretty familiar with the Louisville market and I think what you're interested in would work in the Highlands and just about nowhere else. There are no cookie cutters here and a wide variety of properties to "comp" to. I imagine this is similar to the east Austin area that @Jon Klaus mentioned.
As with any type of flipping, you have to focus on $/sf values of comps. If you can find good properties and work with a good exit price, doing a more custom home in the Highlands should generate a lot of demand and sell quickly for top dollar. The hard part is finding a house that needs rehabbing that you can purchase cheap enough to make a buck. Best of luck with the adventure - feel free to contact me if I can help in any way.
great points -thanks for the response. The Highlands would be a great area for custom work, but definitely hard to find a deal in. We looked there when buying our home, but weren't able to pull the trigger. I do need to become a little more familiar with the market there so that I feel more comfortable when I find a deal. I was thinking places like Butchertown, Germantown, and Crescent Hill could also support that type of work. However in Butchertown and Germantown, I'd have to keep it on a tight budget, and I think those areas might be better for buy and holds. We lived in a rental in Butchertown before we bought our home and absolutely loved it.
A little design is a good thing, too much will get your margin. Our project manager likes to add what she calls "foo foo" but they are small things like window shutters and flower boxes, or perhaps an island counter top. If we were flipping (we hold), we might add an accent wall, but you want to keep it relatively simple otherwise you're going to have a hard time making the numbers work unless you're selling really high end homes.
The term one-of-a-kind is problematic. From a financing point of view it can be a kiss of death if an appraiser states a property is 'unique'. On the other hand, creative touches can add value if you know your market. My gut tells me you would do fine in any of the neighborhoods you mentioned. They are good areas for flipping. The problem is finding a good buy. Good luck.
P.S. Do you know anywhere in town where I can get a spiral staircase?
@Raven Parmer As others have said, don't go too far down that road. But, little touches, tastefully added, can make a difference. Make your flips stand out by having just a little more elegance, a little touch of class, something unique at that price point, but maybe common in the next step up in price. That unexpected little thing that is not normal at that price can get you a quick sale, or a slightly higher price. Unusual, not so good. Then it takes a buyer with that unusual taste.
@Andrew Syrios - I need "foo foo" to be part of my every day vocabulary. Love it.
@Brett K. - You said, "from a financing point of view it can be a kiss of death if an appraiser states a property is 'unique'." Can you elaborate on that more? Is that like a Realtor euphemesim when they call a space "cozy" to mean tiny, or "vintage charm" to mean that it is totally outdated?
As for a spiral staircase...not off the top of my head, but my fiance is a GC and I'll ask him. We both do commercial work, so we don't run into spiral stairs very often. Are you planning on having a custom stair fabricated?
@Walt Payne - I like that advice. I will definitely dial back my excitement, and save the big ideas for my own home. I love the idea of offering just a little more.
I worry you aren't getting it. So don't take this as mean, but I want to be direct.
You are not offering "more." You are offering your taste, which is not to everyone's taste. You are in a very real way offering LESS if you create something unique. For example, if I am walking through that den bar and considering buying the house, I am mentally calculating how much of a discount I need to get so I can tear out that backsplash.
Flippers provide the canvas. Homeowners (or their designers) paint the picture.
@Richard C. - ouch! :) I do get it. But it is a real effort to take everything I have learned in my schooling and my job and to set it aside. It's not in my nature to, as was said above, to "conform, conform, conform." That said, I am here to learn, which is why I am asking the questions and listening to the podcasts. I think that several of the commenters have said it can be a good idea to offer a little extra touch, and while I may not choose an accent wall as I did above (I hate for materials to be wasted), perhaps I can offer something else that might appeal to more people. You (and many of the others who have taken the time to comment) are telling me to keep my taste out of it. I am trying to find a niche and a business plan where I can use my skills in this business. From listening to the podcasts (I am in the 40's now), one thing is apparent to me: this business can take on as many different forms as there are people, and hopefully I can find my niche. But I do appreciate your comment and your direct-ness. And I think your last line is a tweetable tweet for sure. Very catchy!
I'm the one who said conform, conform, comform. What I actually said is, "the safe thing is to conform..." Perhaps you should work in neighborhoods where conforming means exercise creativity. Here's a spec house I build last year in a progressive neighborhood. http://brucebeaty.com. We made money. I would have lost money if I built it in my own town.
"But the neutral finishes that I am seeing on the shows reminds me of the cookie cutter McMansions I see everywhere."
Do you know why you see these finishes in the cookie cutter McMansions everywhere? Because it sells. Home builders spend large amounts of money on design research to find out what is attractive to home buyers. An old sailor once told me "It's easier to adjust your sails, than to change the wind".
"I don't mean to criticize those who do this, as it is probably why you are successful and I am spending weeks to pick out the trim color on the exterior of my house. (Sidebar: we are in no rush on our house, and I do realize that time is money in the biz.)"
Unless you are independently wealthy and rehab homes for fun, and a community service, you better be in a rush. Carry costs will eat you alive. If you ever use hard money, you'll be working like a meth addict! Then there is opportunity cost. Those weeks spent picking colors will probably result in less profit than if you spent that time rehabbing more homes.
I don't mean to come across harsh, I fall into the same trap. I love art and design. Often I catch myself going "Wouldn't it be cool to..." Then I have to real myself in and ask "Are you willing to donate this feature to the home buyer?". Because while they may like it, they probably are not going to pay as much for it as it cost me to put in. Whatever features that you install must pay for themselves though a higher price and/or faster selling time.
@Jon Klaus a few things:
1)That house is gorgeous. Fact. Spec houses are a distant dream for me. Love what you did there and that you had the interest to do something so unique.
2) In my podcast marathoning, I got to your episode today. Thoroughly enjoyed it.
3) And you are right - I took your comment the wrong way. Conformity can be a positive thing for me, depending on where I am. My glass-half-empty self read that part the first time :)
I think if you have a client looking for a custom property or looking to customize their own property. Then you could exercise your creativity in design knowing that you're going to get paid when completed. You can still be a little creative on basic rehabs by putting your own little twist on a project, but yet remaining neutral. I can tell some of the jobs from rehabbers down here by something simple as door color, light fixtures, house color etc.
@Raven Parmer It depends on your market. We are in Orange County, CA, and are building s "spec" house in San Clemente, where vacant lots are extremely hard to come by, therefore; "new" construction is rare. Cookie cutter houses in gated communities are common. Believing there are people that want something different, and can afford to pay for it, here's our offering. These are architectural renderings. House is currently being built. It will be 3045 sq. ft. with 4 Bdrms 3 Baths, and view of ocean. We have another lot in Capistrano Beach, where we will build another house, different style. It will be 4 Bdrms. 4 Baths, Rooftop deck, and folding glass doors opening to courtyard.
As @Jon Klaus suggested, it's important to know the market where you are building, what people will pay, and what buyers want. Another great site to check out, is @J Scotts The Scott Pad great ideas on his site.
@Karen Margrave - that house looks really nice. California's market is an enigma to me. Several of the shows I watch are based there, and in some of the areas, the possibilities seem endless. And folding glass doors are not cheap, will be a great feature in the California climate!
Also, thanks for pointing me to The Scott Pad. Really interesting stuff!
We do have our own jargon. Of course every property by definition is a one-of-a-kind. We (appraisers) use the word to mean there aren't any comparable sales or even vaguely similar properties, listed, sold, or otherwise, to compare it to. That's bad news for a borrower because a conforming loan won't work on an unproven design. Unless you got extreme with an remodel it wouldn't apply. Unique is the guy that built an expansive ranch overlooking a private lake on an attractive multi-acreage tract in Simpsonville. The house had a large round living room in the center and 2 wings of the house branched off from opposite sides. This was over a decade ago and he had about $450k invested. When his business faltered and he had to sell his dream home he didn't get near what he had in it. I think it went for about $225k. Classic example of creating something with limited appeal.
P.S. Any word about that staircase? I'm remodeling a camel back and I really wan't to put a spiral staircase in it.
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