Take this house and flip it

The house in Bethpage was the kind of property that would give most house shoppers nightmares.

“The ceiling was caving in. The basement was filled with things from four generations,” said Charles Weinraub. “It needed a whole renovation. To most people, this would not be ideal.”

But to Weinraub, a prolific house flipper and CEO of Handsome Homebuyer, a real estate investment company based in Farmingdale, this house was perfect.

“Anything that makes the hair on somebody’s neck stand up and makes them run is what I want — anything that needs renovation that can an add value,” Weinraub said.

House flipping — a term that makes buying, renovating and reselling homes sound deceptively simple — is risky, often expensive and filled with twists and turns. Flippers typically look for properties others avoid, escaping bidding wars and, after months of renovations, hope to resell at a profit.

“We’re looking for houses that need work,” said Jamell Givens, owner of 24/7 REI LLC, a real estate investment firm based in Amityville. “We buy it, renovate it, modernize it and sell it for a a profit, hopefully.”

About 33,000 single-family homes and condominiums, or 2.7% of total sales, were flipped in the first quarter of this year, according to real estate property company Attom Data Solutions. Median sale prices were $231,500, up from $222,000 a year ago, and gross profit was $63,500, up from $62,000 a year ago. New York metropolitan area gross profit was nearly $167,000, according to Attom.

“It’s not what it looks like on TV,” said Chris DiJorio, owner of Sayville-based North Haven Builders, who has flipped houses. “You need to understand the market, the market value of that home, the renovation process and surprises that come with it.”

Training required

Ask experienced flippers how they learn and you get different answers. Helena Veloso became an expert on houses as a regional manager at Douglas Elliman, and now gives seminars on flipping and investing. Weinraub learned by getting coaching through the East Coast Real Estate Investors Association and recommends getting involved with such groups, which can “educate and connect investors, from those who have never done a house to those who do 100 houses a year,” he said. He spent four years training with a mentor before his first flip and also has a master’s degree from New York University in real estate development.

He recommends YouTube videos, podcasts and books on the topic as well as real estate investment site Biggerpockets.com.

Finding flips

Flippers typically target specific territories, which they know well, from school district to trends. Weinraub uses TV, radio, contacts, social media and private marketing to let people know he’s in the market for homes. Attorneys sometimes have clients who want to sell a house fast, or an investor may let a flipper buy a house for a small fee, he said.

Givens said his firm sends about 10,000 pieces of mail a month. “We look for homeowners who owned ther homes for a long time, absentee homeowners, recently inheritied properties,” he said.

Beating the market

Would-be flippers do well when working with real estate agents, Veloso said. “Tell them what you want,” she said, and make offers. They know the market and might know of properties before they hit the market, key to getting deals.

DiJorio said mortgage brokers also can give tips, sometimes for properties available due to divorce, estate sales or foreclosures. Estate sales can lead to candidates for flips not as widely circulated as some others. “They may be looking to liquidate,” DiJorio said.

Investors also buy distressed houses owned by banks, known as REOs (real estate owned), once the bank goes through foreclosure due to unpaid mortgages.

Where to search online

Websites like Craigslist.com, OneKeyMLS.com and other real estate listing sites are good places to search, along with sites like Auction.com that offer bank-owned properties, Weinraub said. Nesconset-based Long Island Profiles provides real estate and foreclosure information, while Geodataplus.com has information about property and comparable sales.

Cash and financing

If you find a prospect, be ready to fund the purchase. The number of homes flipped in the first quarter initially bought with cash rose to 59% from 58% in the prior quarter, according to Attom.

Weinraub said the worst houses can be the best prospects. “Those houses are not mortgageable,” he said. Veloso recalled buying a house in Southampton that had been through a fire and was too damaged for a mortgage. “The banks would not lend them money,” Veloso said, “but I laid out the cash.”

Financing still fuels flipping. According to Attom, 41% of homes flipped in the first quarter initially were bought with financing, up from 40% a year ago.

If you have a track record, DiJorio said, it’s easier to find investors. He worked with an investor who provided funds in exchange for a percent of profit. Real estate brokers, attorneys and mortgage brokers also can link flippers with investors.

The right house

Flippers avoid certain things. Veloso said “two-bedroom homes do not sell,” so she targets those with three or more. She also avoids houses with backyards facing main roads or big restaurants, and tries to keep taxes low, because she may hold the houses for many months.

Foreclosed houses sold at auction may sound ideal, but flippers typically buy without being able to go inside, increasing risk, DiJorio said. “You’re essentially buying the home sight unseen,” he said.

The most important thing with flipping a house is the price, and whether flipping it will yield a profit. “If you have the right house renovated the right way at the right price, it’s going to sell very fast,” Weinraub said.

Calculating costs

The biggest mistake flippers make is miscalculating ARV, or after repair value. “You can get too aggressive with your after repair value,” DiJorio said.

While houses are…