In this episode, Tarek and Christina bought a house on probably one of the best neighborhoods in the whole show. The flow of the house was awesome, but a lot of work was foreseen when Tarek and Christina inspected the house. Lots of wallpaper, old fashioned materials (including cork walls). They estimated the rehab to cost 80k and take 6 weeks. The problem is that they had all their money tied up in other flips, so they had to take out a hard money loan. The house was eventually bought for 625k, and the load cost them 200 dollars a day.
During the rehab, the contractors found mold in some divisions,which was caused by deterioration of the roof. The toxic removal cost about 15k and the roof cost another 10k, which altogether is really a lot of money. Keep in mind that there were million dollar houses in the neighborhood, so Tarek and Christina gave this a go because of the target selling price. At some point, they looked to 25k doors for the main door. Think about it, 25k for a door and 25k for a toxic removal and a new roof, thats enough for a condo in Europe!
They asked a local contractor for a custom kitchen which cost them another 15k. At this price point, buyers expected no less. They changed the stair rail and with their super expensive door, they made a petrifying entrance.
As the things were shaping up, they took a look at the pool, which was a mess with broken concrete. They arrived at a cheap solution (7k) to fix up the pool.
Comps ranged between 859k and 950k. They decided to list it at 949.9k. They eventually got an offer for 940k and if the deal goes through they stand to make a profit for a little over 80k.
Analysis:
I think that Tarek and Christina over did a few things. No question about toxic removals and fixing up roofs, thats were you should cut no corners and yeah, its kinda difficult to realize before you agree on buying the house. Putting that aside, I see major expenses which were not absolutely necessary and, in my view, they didn't contribute to getting more or higher offers. First off, I would not spend 15k on one single (even if it is the entrance) door. Think about it, the house is worth 940k. So, 15k is 1.6% of the house. If the house was worth 350k, which is way more in the range of prices Tarek and Christina sell houses for, we would be looking to a $5600 door. This is insane!
Now, we should keep in mind that they spent 25.6k in hard money loan fees. When taking this into account, a 15k door doesn't look that expensive, does it? But why to spend so much money on a door when you can do great things with the pool? And why should one door be worth as much as one kitchen?
As for the rest, I think that the custom kitchen was awesome and really adequate for the type of house they flipped. The cabinets with the crown looked awesome! The stair way was great, but I think they had too many vanities (at least 6?) and way too much granite. We've seen way better shower tiles / showers. At the end, great profit, but they could have gotten way more. I think that the key was the low purchase price point.
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