Can a flip with high end finishes be sold at a premium?

3 Replies

Newbie to investing and real estate  here, so sorry in advance if the answer to this is painfully obvious to experienced investors.

I'm trying to educate myself on the possibility of flipping houses in the greater Boston area, an area from what I gather is generally very difficult and competitive to find a good deal in, and an area generally with very high acquisition costs (e.g., high risk, high reward). 

There are many, many properties that are in tired or rough shape that are being sold to owner occupants with little room (in terms of resale value) for spending money on rehabbing. 

What I wonder is if there is a small niche market of folks who would pay a premium (I.e., significantly above comps) for very high end finishes, particularly in a town that is known for historic preservation. And by high end, I mean rehab money spent on architectural details that are in keeping with the historic charm of the surrounding neighborhood. 

I ask this because I recently saw a small 1500 sq ft 1950's cape bought for $630k and sold for $940k after a very well known architect had his fun with it. Not only did it sell for $940k but is was gone after the first open house.

Just trying to wrap my head around how much "over rehabbing" is more of a liability than an asset in markets like these.

Any thoughts or experiences are more than welcome!

Originally posted by @Benny Cash :

Newbie to investing and real estate  here, so sorry in advance if the answer to this is painfully obvious to experienced investors.

I'm trying to educate myself on the possibility of flipping houses in the greater Boston area, an area from what I gather is generally very difficult and competitive to find a good deal in, and an area generally with very high acquisition costs (e.g., high risk, high reward). 

There are many, many properties that are in tired or rough shape that are being sold to owner occupants with little room (in terms of resale value) for spending money on rehabbing. 

What I wonder is if there is a small niche market of folks who would pay a premium (I.e., significantly above comps) for very high end finishes, particularly in a town that is known for historic preservation. And by high end, I mean rehab money spent on architectural details that are in keeping with the historic charm of the surrounding neighborhood. 

I ask this because I recently saw a small 1500 sq ft 1950's cape bought for $630k and sold for $940k after a very well known architect had his fun with it. Not only did it sell for $940k but is was gone after the first open house.

Just trying to wrap my head around how much "over rehabbing" is more of a liability than an asset in markets like these.

Any thoughts or experiences are more than welcome!

 Sometimes it works, if you are a famous architect. ;-) Most of the time, people look at how much you paid for it and how long ago. If you bought it 3 months ago and now you are asking $200k more than you paid for it, people want to know why. Others won't even look at the property thinking they are getting ripped off. It isn't fair, it isn't logical but it is human nature. The other thing to consider is that interest rates are going up so people can now afford less house. You might want to think through how long it will take to rehab (6 months is common) and where interest rates and prices will be before you jump in.

It is a knish market and to succeed you must have a well known name and reputation to attract the elite that will pay based only on being able to drop names among their world of elites. If you are a nobody your property will not be worth more than market.

@Benny Cash Boston, especially inside RT 128 (aka I-95), is hyper expensive, so your budget will be your guide as to what towns you can afford. 

If you're looking for a town where there are historic preservation efforts, you can't swing a dead cat around here without hitting a town that traces it's roots to the 1600s.  (PS - don't forget the influence of the local Historical Commission, aka the Hysterical Commission)

That said, renovations make the most sense when they are similar in the level of finishes to the homes around them.

For example, Brockton (especially center-east) is an area that you would expect Kenmore or Frigidaire.  Cohasset warrants Wolf and Sub Zero.

But within Cohasset or Hingham, is there a sub-section that will pay for the highest-end finishes?  Probably.  But would I bet a super-high end rehab on it?  Probably not.

Like you said - high risk, high reward.