House flippers are back in new reality TV series

In an era of rising home prices, making money flipping a house seems like a slam-dunk.

But buying, remodeling and quickly selling a house at a profit is an art practiced successfully by only a few, even as many of us dream that we could do it ourselves.

The sweat, anxiety and hard work that go along with quickly turning over a house can be seen in a new reality television series based in the San Francisco Bay Area. The show is billed as "the ultimate house war," and follows six teams of investors and real estate agents as they bid on foreclosures at the courthouse steps and then race to outdo one another in profits and speed to resale.

"It's not for the faint of heart," said Beau Eckstein, a Walnut Creek, Calif., real estate broker and contestant on the new HGTV series "Flip It to Win It," which airs Tuesdays. "If you're trying sell a $4 million house in a $2 million neighborhood, you're going to lose your shirt, and you don't want to build the ugliest house on the block, either."

Eckstein and teammate Greg Cromwell bought four houses for the show, including a two-bedroom, one-bath home in Berkeley, Calif., for $438,000. It was remodeled for $93,000 and sold for $800,000. In Concord, Calif., they bought another for $305,000. After spending $98,000 fixing it up, they recently sold it for $485,000.

"It was a complete remodel from start to finish," he said. They put on a new roof, opened up the walls, redid the bathrooms, restuccoed the house and landscaped the yard.

The Bay Area's soaring home prices "definitely helped," Eckstein said. "If you got in at the right time, you've got $60,000 to $100,000 on the upside." He has continued to flip houses since the show, recently buying and remodeling another Concord home. He intends to donate 10 percent of the profit to a local cancer foundation.

He has a word of caution for would-be flippers:

"People see all this money getting made, but at the end of the day, with the interest you pay, the selling cost and the repair cost, you really need to know what you're doing."

Buyers at auctions typically don't see the inside of a home until they own it, according to Michael Kaufman, a Los Gatos, Calif., real estate investor who was a contestant with his business partner, Todd Hill.

"We never bought a property without physically laying our eyes on it, but you can't get inside," Kaufman said. "Sometimes one might be vacant and you can look in the window, but in most cases you can't get inside."

He said that one day before the auction, his team researches 25 to 30 properties that will be sold. "We need to come up with an after-renovation value, an estimated construction budget and a maximum bid price by the day of the auction," he said. "It's a tremendous amount of work that has to take place all in a day. It's crazy."

Doing a volume business in flipping – they've done more than 200 in the past three years – helps cushion the impact of the houses that don't make huge profits.

"If we have a property that doesn't perform as well, it's offset by one that does. Somebody who is going to take their life's savings to go buy a house and flip it, that's very risky," he said.

Rick Kaluza, a real estate agent with Coldwell Banker in San Francisco, teamed up with Novato, Calif., contractor Vinny Sebastiano.

The keys to success? "It's knowing your market, finding the right deal that makes sense in the right market," Kaluza said. "I do stuff in San Francisco or the Peninsula, where I've grown up and know the ins and outs of all the neighborhoods. We don't flip properties in Omaha."

In San Jose, Calif., real estate agent Alisha Karandikar put her expertise at remodeling investment homes to work with teammate Josh Michaelian, a San Jose real estate investor, buying and fixing up six homes, two of which are hitting the market this week. The rest have already been sold at a profit.

"One was kind of a shell, and the others hadn't been well maintained," she said. "They needed complete rehab and renovation. They had really old bathrooms and kitchens, very dated and sometimes trashed inside. One of them, I think they were breeding rabbits in there. That was our guess," said Karandikar, a San Jose native who has been in the real estate business for the past 17 years.

The home that was a shell was completely rebuilt, she said. "It's got dark hardwood floors, granite counter tops, darker kitchen cabinets, high-end tile in the bathrooms, nice baseboards and an open family room-kitchen-dining room."

People who don't do flips professionally often make the same mistakes, she said.

"They try and go super-cheap and super-fast because they want their money back quickly, which is a problem, because then when you show it to buyers, they can see the shoddy work," she said.

Forget enlarging the bedroom, she added.

"One of the best things you can do is put in a new kitchen," she said, standing in front of a contest home now hitting the market, a complete remodel in San Jose. "You want to make your common area kitchen-family room very, very nice and with the open concept everybody loves. You don't want to be in the kitchen with a wall right here so that when they're all watching the Warriors game, you're stuck in the kitchen cooking and you're kind of out of it."

Not every house was sold at a big profit. Most made money, but on two houses, two teams broke even.

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