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TAREK: Flipping houses is a risky business.
I'm Tarek, this is my wife, Christina,
Nice to meet you.
Ever since the housing market crashed, it's been a rocky road.
With a family to support, we're starting a new business,
and we're flipping foreclosures,
short sales, and bank-owned properties.
We pay for these houses in cash, sometimes sight unseen.
CHRISTINA: All this needs to be replaced.
TAREK: Some of the houses are easy fixes...
but others are total teardowns.
Turn the water off!
And you never know what you've got
until you walk through that door.
Here we go.
-- Captions by VITAC --
Closed Captions provided by Scripps Networks, LLC.
Finding anything good?
TAREK: Here's one I saw earlier.
Do you remember the one we looked up that we liked?
It's in Cypress.
4 bedrooms, 3 1/2 baths, built in the late '90s.
It's a big house -- 2,750 square feet.
It came back on the market as an R.E.O.
R.E.O. stands for "real estate owned,"
which is a foreclosure that goes to auction but doesn't sell.
This house didn't sell for the $600,000 opening bid,
and now it's on the market for $475,000.
If you look at this house, at the peak of the market,
it was valued at $900,000.
This house is in a pocket of newer construction
surrounded by a wider area of older homes.
That makes it tricky to determine the exact comps.
But if you compare that house to recent sales in that wider area,
it could be worth around $700,000.
Let's just say our max bid was $480,000.
We put $20,000 into it.
Say $25,000, $30,000 closing costs,
break even would be $530,000.
If we sold for $700,000, that's 170K profit.
That's based off $20,000 rehab,
which I don't imagine it being more because it's newer.
Are you familiar with that area?
It's in Cypress.
This house is, say, right here.
It's a small niche tract of homes.
It's a small little neighborhood where they're all newer
and they're all similar and they're really nice.
But if you go out that tract, like 150 feet out,
you're looking at small, old, single-level homes.
The front looks really nice.
Yeah, the front's really nice.
I mean, it looks dialed, at least from the outside.
If the inside looks like the outside,
you know, this could be a score.
So right here is when officially the beautiful houses start.
So luckily, we're in the middle, not on the corner.
Oh, Israel's here.
Here it is.
Our contractor, Israel, is here to help us figure out
if we should move forward with this flip.
So, it's 2,750 square foot.
It's definitely bigger than usual.
4 bedroom, 3 1/2 bath.
BATTRES: Outside looks in good condition.
The outside's awesome.
Here we go.
CHRISTINA: Oh, God.
How is it that a nice, big house like this looks like this
when you open the door and the outside's perfect?
Seriously, this is disgusting.
BATTRES: There's a lot of drywall work here.
Here's the thing -- I mean, it's just dirty,
but, you know, salvageable.
Well, kind of.
Look at all this wallpaper.
BATTRES: Wallpaper's not easy to take off.
TAREK: When a contractor says something is labor-intensive,
that's code for, "This is gonna be really expensive."
CHRISTINA: Look how dirty.
You got travertine. That's a good deal.
Well, why is it so, like, discolored?
I mean, can you guys fix that?
Yeah, we'll try to polish it off,
clean it up, but it's beat up.
Realistically, do you think it's gonna be able to get cleaned up?
Well, I mean, you got cracks right here,
and all these holes got to be filled and stuff like that.
We could try and clean it.
If not, we're gonna have to replace the whole thing,
which would be what -- how much -- like 4 grand?
Yeah, you got about a good --
'Cause it runs all the way to your bathrooms.
We'll do a little section here, clean it up.
I mean, overall, this space is a pretty good size.
I mean, the family room's decent.
TAREK: Ceiling fan's nice. A lot of things are nice here.
It's just -- You know, it's been abused.
The house hasn't been taken care of.
Something's happening up there.
Something definitely is happening up there.
And what's up with this?
That's water damage.
Eww. Water damage.
That's even over here in your living room.
What do you think, it's from the sink?
Whoa. There you go.
TAREK: Oh, my God.
BATTRES: So there's standing water there.
Eww. It's like black water.
The piping, you could see, it's running to that wall over there,
so we might have a leak here and there.
I mean, look at the cabinets. It's, like, all brown.
I mean, do we have to replace all the cabinets?
Yeah, if it's bad enough, you got to replace it.
Whoa, whoa. All the cabinets?
If it's bad enough.
We got to open this up and see where it's at.
If we have to replace this whole kitchen,
I mean, you're looking at $4,000 or $5,000,
and that is absolutely not gonna be in the budget
if we buy this house.
Yeah, there's ants everywhere, too.
All right, well, moving along.
TAREK: All of a sudden, we're seeing water damage everywhere.
This could end up being superexpensive.
This is where we think the leak was coming from.
Yeah. Obviously, there's a leak.
We don't know how long it's been going on.
The bad side is that it could be underneath,
in between the floors.
So it can be leaking in the walls, then?
Yeah, and we just need to see
what kind of damage has been done.
Well, we can't do that until after we buy the house.
The water damage in this house is really scary.
All we see is damage. We don't know what the problem is.
We don't know how extensive the repairs are.
It could be thousands of dollars,
and we're not gonna find out until we tear the place apart.
All right, Izzy, let's check out the master.
Positives -- this is a huge master.
This tile we can save.
We're gonna stain them or anything? Just leave it?
Depends on how much these other issues cost.
If the plumbing's costing thousands,
we're not touching anything.
If it's not costing us anything to fix the plumbing,
What we find behind these walls will determine
how far we go with the upgrades in the bathrooms and kitchen.
The water damage is scary but doable.
As long as we have enough cushion in the profit margin,
I'm all for making these rooms nice.
We have a barbecue.
Yeah, there's an upside here.
The spa looks like in decent condition.
Patio cover looks pretty deteriorated.
BATTRES: Dry rot here.
What would it cost if we had to replace the whole thing?
At least 4,200 bucks.
With all the detail and the trimming and --
Based on the visual that we're seeing,
it looks like it's mostly patchwork.
It's just a lot of patchwork.
Uh, not patching -- replacing.
Yeah, we're not patching anything.
We'll be replacing stuff.
You can't patch that right there.
What's all the black stuff on it?
That's -- Those look like mushrooms there.
Israel, so, what are you thinking?
What are we looking at, price-wise?
It's a lot of house.
There's a lot of investigative work that needs to be done,
So, we have to --
You have to get into the walls and check the plumbing.
Mm-hmm. See what's happening with all the water damage.
We've got to do more exploring, but at least about 20K.
Okay, well, I think either way, we should do okay.
We have a little bit of cushion,
based on what I think we're gonna sell it for.
If this water damage costs $10,000 or even $20,000 to fix,
on top of Izzy's bid,
we'd still be in the black
because my instincts are telling me
this house is worth around $700,000.
So, we're gonna go for it
with an all-cash offer for $475,000.
No risk, no reward.
One of you guys wants to start on that restroom,
and then one of you guys can start on this restroom
You got everything?
The bank countered at $490,000, and we closed the deal.
That's 15 grand over our offer,
but if we can flip this house for 20 grand in 2 weeks,
we'll be okay.
BATTRES: We turned on your water at the main,
and it was off, so it was off for a reason.
Doing a little leak detection.
I hear dripping water.
That doesn't sound good.
CHRISTINA: Oh, my God. Uh-oh. Big uh-oh.
My God. [ Gasps ]
Oh, my God, it's raining in the living room.
Um, right here.
Turn the water off!
TAREK: It's Day 1 of a rehab on a house we're flipping
in Cypress, California.
We paid $490,000 for it,
and the budget for construction is 20 grand.
But that might go up because we discovered a major water leak.
CHRISTINA: Nice way to start this Day 1.
It's raining in the living room.
BATTRES: I'm gonna have to turn it off at the main.
My concern right now is what's going on behind the walls.
I mean, if there was a lot of water in the walls,
more than we think -- I mean, it's literally raining.
The water's off.
Uh, I'm guessing there's, like, dozens of gallons of water
in the walls, and that we're overflowing.
I mean, think about it.
It's going through the ceiling, going through the fan.
It's raining outside. It's all over the bathroom floor.
It's all over the living room floor, and it's still dripping.
Is that more water?
It's, like, clumpy.
What is that?
Your drains, your plumbing's leaking.
I got to find the source.
TAREK: This is a nightmare.
We need to figure out where the water's coming from
so we can fix the plumbing.
Eww, babe, look. It's, like, all squishy.
Replacing drywall is a cheap fix,
but if cabinets in the kitchen and bathrooms
have to be replaced,
our costs will skyrocket.
It might be major.
While Izzy investigates the source of the leak,
demo is moving forward.
Christina and I are pitching in
to make up for some of the cost overruns.
And finally, Izzy finds the water damage.
So you see a pinhole there and a pinhole there.
That was in your kitchen.
It takes years of wear and tear to corrode a copper pipe,
and these pinholes are in the upstairs bathroom
and the kitchen pipes.
This looks like vandalism.
Now we can replace the pipes and finally move forward.
Why is the whole thing taped off,
machines, everything is cut up?
I didn't know about all that.
That's mold right there.
That's black mold right there.
This is where that leak was at.
Man, it just ran all through these cabinets.
It spread through all the cabinets?
Yeah, we just took out one piece of the toe kick,
and we just seen everything.
When your contractor says the word "mold,"
especially "black mold," your blood runs cold.
Mold can destroy an entire house.
It can cut your walls down to the studs.
This is a major problem with a huge price tag,
and it has to be dealt with if we're gonna sell this house.
We had to move fast.
Contain the area, pull these bad boys out.
Everything's gone. Can I go in there?
I can't go in there?
You can't go in there. Don't go in there, man.
First they sealed everything, sealed all the vents.
Brought everything out,
all the cabinets that you see out there.
We put in that air scrubber in there
so that way it cleans all the spores.
And then the blue machine there is just drying everything up.
This is probably the worst thing that could have ever happened.
Do I need to buy a new kitchen?
The face frames we could keep,
which is, like, the doors and stuff like that.
The boxes I could build.
How did it spread? Every single one is shot.
It just -- Once water gets in there, that's it, man.
The good news is, we don't have to re-pipe the whole house.
The remediation is gonna cost like 4,800 bucks.
That's like 25% of the budget.
And then to put back these boxes together
is gonna be another $1,800.
[ Cellphone rings ]
CHRISTINA: How does it look out there?
That leak that Israel called about
is actually a lot, lot worse.
The entire house was sealed up, machines are going.
It was a leak that caused mold.
We had to rip the entire kitchen apart.
We have to rebuild the lower cabinets.
Oh, my gosh.
This is a nightmare.
TAREK: We're flipping a house in Cypress, California,
that we bought for $490,000.
So far, we've spent over $26,000 on the rehab.
That's almost $7,000 more than we expected
because of water damage that led to black mold.
Once water gets in there, that's it, man.
And now an inspector is here to verify
that the mold is completely gone from this house.
Looks good in here.
Big day today.
Israel! Look at you working today.
Tell me we have good news and the mold is gone
and we passed the air test.
We did. We put all our machines in.
Our inspector came in, did his air test, and passed it.
Passing the mold test is huge.
If this house had mold, we'd never be able to sell it.
Now we can move our attention forward
to another potential expense.
So, what I'd like to do is a test on the worst area.
And that way we can see if I like it.
We've got over 800 square feet of travertine --
dirty, cracked, chipped travertine.
You've seen it worse and you fixed it?
If we can refurbish this floor instead of replacing it,
it will save us a ton of money.
First thing, we just got to clean it off first,
get the grout cleaned off.
To refurbish the stone,
first we need to clean the tile and grout,
then fill the holes with epoxy and buff that out.
Once that's done, we polish it.
BATTRES: So what do you think?
He's gonna seal it, too, right?
ALARCO: Oh, yeah.
This stone, it's gonna look amazing.
It's making a huge difference.
When I walked in, I didn't think there was any way to salvage it.
It was so disgusting. For the money, I say we do it.
Yeah, just schedule it. We're gonna have to do it.
TAREK: Awesome that this is working.
Travertine is a huge selling point for this house.
And by spending $1,500 to revitalize the stone
instead of replacing it saves us at least $5,000.
It's coming out really well.
Made a huge difference, so I can't wait to see it done.
It's like a war zone.
So much better.
Much, much better.
Wow, Look at everything that had to be replaced.
Oh, my gosh.
TAREK: I mean, it's a very expensive covered patio.
So I mean, it was worth the investment to fix the dry rot.
It's so plain in here.
Yeah, it needs some, like, oomph.
It needs something.
Normally, we do something nice, or, like, tile,
and we decide to leave it, but --
These, like, seams...
Yeah, but it's newer construction, you know?
...they're so ugly.
We're trying to sell it for like $700,000.
Don't you think a buyer in that price range --
it's an expensive house --
is gonna expect a nice master bathroom?
We did something nicer. We did the granite.
I think, you know, we should maybe talk to Israel
and see how much it would be to do the glass door.
So, how do you guys like it up there?
It looks good. It looks so much better.
But a few changes.
The shower door in the master bedroom --
I'm concerned. I mean, it's really corroded and rusted.
Are we gonna be able to repair that?
You want to go frameless instead?
I would love to go frameless. It's so ugly.
What's that gonna run, though?
A frameless shower door?
I got to take some measurements.
I seriously doubt $300.
It's not gonna prevent someone from buying the house.
It's just ugly.
Once again, we're not trying to sell this house for $300,000.
We're trying to sell it for like $700,000 or $650,000.
I don't think it's gonna make it --
Yeah, I know.
Even though we're $11,000 over budget, Christina's right.
Nice touches to the bathrooms and kitchen
will add to the overall draw of this house.
It's what buyers will be expecting at this price point.
It's already Day 18, and we wanted to be done in 2 weeks.
Every extra day of construction eats into our profits,
and we still have a lot to do
before we can get this house on the market.
We're installing the granite...
That's gonna go perfect with those cabinets.
...laying the carpet...
...finishing up on the pergola.
We're also cleaning up the hot tub so it looks brand-new.
How you doing?
Good. How about you?
Hey, Tarek. Nice to meet you.
Hi, Christina. Nester.
TAREK: Getting information about a property
doesn't stop at listings and comp sales.
Sometimes meeting neighbors can help give us insight
to what we should list the house for.
We're not from the area,
and this location is surrounded by the older homes,
a little bit smaller.
We're having a really hard time to figure out the price.
So do you have any knowledge of sale price, appraisals?
I actually went to the assessor's office
just about a month ago.
The assessors assessed it at $725,000.
How many square feet is this one?
Mine is about 2,800 square feet.
So it's the same -- Is it the same floor plan?
Well, not quite -- almost.
It just turns out that these -- This was a model home.
That one and the third one over were the model homes.
Oh, this was the model home?
That was a model home, yeah.
So this is really comparable to this, then.
Similar square footage, previous models, both of them.
I'm pretty confident that our house is worth about $700,000,
but it's scary
that nothing on the block has sold in three years.
TAREK: We've invested over $30,000
in this house flip in Cypress, California.
There are no recent comps in the area,
but based on our next-door neighbor
having his house assessed at $725,000
and that ours is totally upgraded,
we are taking a chance and listing this house at $749,000.
We are also having the house staged
to make the rooms really pop.
I'm kind of nervous about the price.
I think we're a little high.
Well, we might be $50,000 over price,
or we might get some offers.
We don't know yet.
But if we don't get any offers first two weeks,
we're probably gonna have to drop $50,000.
Whoa. Look how different.
It looks brand-new.
You know what?
It's so weird. I never even noticed this before.
It was so dirty, like, I never even noticed it.
The mosaic is beautiful.
This house came together awesome.
What a difference. Oh, this looks pretty.
Oh, lookit. It looks really nice.
I like the granite a lot.
Look at the difference. Look down there.
Everything's gone. The mold's gone.
It's all replaced, new wood.
CHRISTINA: Yeah, that was really scary.
Between the mold scare,
and remember that giant issue we had in here
with the water coming out of the ceiling fan?
Yeah, it was raining inside.
You can't even tell, right?
Yeah, they cut it up. They patched everything.
It looks beautiful, right?
It actually does look beautiful. I'm shocked.
Compared to what it was.
The brand-new carpet, it looks so much better.
Remember how nasty it was?
TAREK: Here was our big concern, was the master.
Check that out.
The granite in here looks awesome.
I'm so glad we did granite in here.
I know. It looks beautiful.
It's really quiet in this house, too. That's why I like it.
It's nice. It looks nice outside.
Thank you very much.
It's a 4-bedroom, 3-1/2-bath house.
A lot of work's been done.
New granite, paint, lighting, new carpet.
And the new carpets and everything.
I like the color.
I like the downstairs bedroom.
I do, too.
I really like the downstairs bedroom.
It's hard to find in a two-story house,
and especially with a lot of the baby boomers getting older,
that's becoming a more popular feature.
TAREK: Hey, Nester, how you doing?
We finally finished.
Yeah, it looks good. It looks great.
It's very modern.
And the floor is beautiful.
WOMAN: It looks like travertine flooring.
This is beautiful. You got a lot of natural light in here.
MAN: What do you think of the price on this?
This $749,000 seems very high.
You know what's cool? The hallways are really wide.
In a lot of houses, they're pretty narrow.
WOMAN: Nice granite in here.
What do you think of the price? Do you think it's --
I think it's a little high for here.
The floor plan -- love.
There's so much room here.
But it's the pricing that concerns me.
I think it's gonna have to be under $700,000
to be kind of more realistic.
Look at this.
Oh, my gosh.
I think they did great.
I mean, amazing transformation.
It's really nice.
So outside, there's a built-in barbecue area,
and around the corner, there's a cute covered patio with a spa.
It's a nice home. Beautiful.
TAREK: So, what did you guys think?
You know, it's a very nice home.
What I feel difficult with this property
is that it is a $750,000 home,
which probably in a better location, would be worth it,
because it's done very, very well.
The question I have -- The price seems very high for the neighborhood.
I'm gonna give it a couple weeks,
get feedback from buyers and agents such as yourself.
And if I keep getting the same feedback,
then I'm gonna go ahead and lower the price.
What would you two think it was worth?
$675,000 to $700,000, but then again,
it's a beautiful home, a lot of square footage.
So the value may bring it up.
My guess is, it'll sit for a little while.
Well...it wasn't the best open house.
I'm a little bit nervous. We didn't get much traffic.
CHRISTINA: I know. The only people that liked it were the neighbors.
Yeah. The traffic we got was a little bit negative.
I think we should drop the price and move on.
We're gonna have to.
TAREK: After the open house,
we dropped the list price to $699,000,
and that was a month ago.
This house is still on the market,
and every realtor knows,
the longer a house sits, the harder it is to sell.
So after paying $490,000 for the house
and putting almost $35,000 into it,
we're in the red for over half a million dollars
until this house sells.