Season 2 Episode 1

In this episode, Tarek and Christina bought a house on a hill in LA county, biding at a foreclosure auction. The house has 1300 sq and the bid opened at 350k. Comps were about 550k and although no inspections were allowed, the deal sounded great. Their initial plan was to put 30k into the rehab and go up to 415k as max bid, on a 30 days flip. Although there were instantaneously outbid throughout, they eventually got it for 410k.

Online, the house was totally put together. However, most of the things (including the flooring!) inside were gone and the house was left gutted. Other than the foundation and the walls, nothing was left behind.

As they never bought a house in LA county before, they asked a flipper/real estate agent in the area for help. After being told that buyers in that area wanted a vibe that the house is unique, Tarek and Christina decided to change their normal flipping model, based on using modern and neutral, but not top quality, materials. In Orange county they had to go with something different – visiting a comp being sold for 725k – they have realized that materials like pergo (laminate) should not be used in this particular flip. In short, the conclusion was that they had to spend money in order to make money.

As usual, they started by opening some walls, which gave the house a nice – and modern – flow. As usually, flippers, keep this in mind! You should start your flip by looking into walls: which walls should go? You're not directly increasing the actual space of the house, but people inside will have the impression that the house has gotten way bigger!

Although Matt – the local flipper - told Tarek and Christina that buyers wanted real wood instead of pergo, they decided to go with high quality pergo as the real wood was too expensive. Keep in mind they needed between 700 and 800 sq of wood flooring. As for the rest, they went with really standard materials. I personally don't like flat cabinets for the kitchen, which they used in this flip. A few other things stood out in the breakdown of the budget. They spent 20k on landscaping – this was 67% of their initial budget. The sub-floor was not even in this house. They had to pay 2k to even it out. This is usually one of the things flippers forget to check (in this case they could not, as they weren't entitled to inspect the house). The final rehab was 123k, thus quadrupling the initial budget.

Comps ranged from 519k to 599k. Their break even was 560k, which was extremely high taking the comps into account. They took a risk and listed the house for 649.9k. They got multiple offers that drove the price up to 685k. This generated a huge profit of 117k.

Although this generated a huge profit, I think it could have been larger. They spent way too much money on specific things on this one, including overly expensive landscaping. As they turned out to have huge profits, they did wise investments. I will be curious to see what I would have done (and what profit I would have made) in this case. Congrats guys for the very successful flip!