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TAREK: Flipping houses is a risky business.
CHRISTINA: Aah!
I'm Tarek, and this is my wife, Christina.
We're real-estate agents.
Ever since the 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.
Sold to this gentleman right here.
Some of the houses are easy fixes...
That's not bad.
It's just cosmetic -- paint, flooring.
...but others are total teardowns.
[ Groans ]
I thought this house was perfect.
And you never know what you've got
until you walk through that door.
CHRISTINA: Uh-oh.
You're missing half the kitchen.
-- Captions by VITAC --
Closed Captions provided by Scripps Networks, LLC.
There's nothing at auction today?
TAREK: Do you remember that one a few months ago in Whittier?
Remember, it didn't sell at the auction for $765,000?
Single-level with a pool, right?
Yeah.
It just came back as an REO at $530,000.
REO stands for Real Estate Owned,
which is a property that didn't sell
at foreclosure auction.
After the auction,
the bank puts the home back on the market
at a deep discount.
What are the stats on the house?
4-bedroom, 2 1/2-bath, 2,456 square feet, 26K lot.
This house is awesome.
I mean, that's an amazing price at $530,000.
That's like all of our savings
with like all of our past profit.
I mean, isn't that cutting it a little tight?
We have the money for an offer.
We just have to find the money to fix the house up.
What are the comps?
Comps are $600,000 to $750,000.
This is definitely worth at least $650,000 to $700,000.
We have to go check it out.
It's a nice neighborhood.
Oh, check it out. There's the realtor's sign.
Here it is right here.
Look how cool it is. You drive up.
It's all set up on this hill by itself.
Wow. This view is insane.
When I called the selling agent,
they said they just got another offer in today.
We can still get this place if we act quickly
and we pay in cash.
But with a property this costly,
there's no room for error, so before we put the offer in,
we're meeting our contractor Izzy
at the house.
Uh-oh. Tarek, look at the kitchen.
They stole the cabinets.
Yeah, you're missing half the kitchen.
I can't believe someone would actually steal kitchen cabinets.
If this is a sign of things to come
for the rest of the house,
we're definitely gonna have to pass on this one.
Do you think we can match the other half?
Okay.
So, this is such a nice place, we have to go high-end.
So what do you think it would be to do
all-new granite and custom cabinets in here?
You're probably looking at about the $16,000 range.
To do the kitchen?
That's an expensive kitchen.
16 grand is twice what we usually spend on kitchens,
and that doesn't even include the appliances.
When we design the kitchen, if we get the house,
can we just make this big, bar-height island level?
Yeah.
A little island, beautiful view.
Mm-hmm.
Let's check out this room.
CHRISTINA: I love this place.
I mean, basically, all it needs is paint,
and the house is what, 2,500 square feet?
How much would it be, roughly, to paint the whole house?
'cause all the interior needs to be repainted.
About $5,500.
$5,500?
Check out this space. Pretty nice, right?
Mm-hmm.
I mean, for someone with a large family,
it'd be great to have two separate entertaining areas.
This house is great.
This is the master.
Oh, they have built-ins.
There's not much closet space in here.
CHRISTINA: Today's high-end buyers will
never go for a master suite without a walk-in closet.
If we buy this place,
that is the first thing we have to work on.
How's the master bathroom looking?
The bathroom's really nice. Oh, my gosh.
Hopefully everything works,
but, I mean, check out this tub, shower door.
Wonderful.
Bedrooms need just carpet and paint, basically.
What makes this house special is the layout, the pool,
the landscaping, but we need to bring it back to life.
Might want to consult a landscaper.
I guess with a pool guy we'll look at the pool equipment.
Okay.
Israel, based on everything we just talked about,
what do you think, ballpark total?
Ballpark, what we just walked -- $30,000.
And that's not even including the grounds?
Yeah.
CHRISTINA: The landscaping, fixing the pool --
All that stuff's gonna be at least another 10 grand.
What's the timeline, do you think?
45 days if there's no changes.
Okay, we got to think about it
and decide if we're gonna buy it or not,
All right. Thanks.
Thank you. Talk to you soon.
If we can get this place for $530,000
and spend $30,000 on the inside of the house
and $10,000 on landscaping,
that means, after closing costs,
our break-even will be $615,000.
TAREK: Let's think about this.
The comps are $600,000 to $750,000.
Right.
Well, I mean, I think with this view,
with this yard, once it's totally done up,
I mean, I think we will be on that more high side.
Yeah, and with an awesome custom-kitchen remodel,
a fresh coat of paint for the inside of the house,
new carpet in all the bedrooms...
And don't forget that walk-in closet for that master.
This place could be really nice.
So, we're gonna have to borrow a lot of money
against the credit cards.
Are you okay and comfortable with that?
I'm definitely not comfortable with it, but...
[ Sighs ]
You know, it's a sacrifice we have to make for this house.
This is the scariest flip decision
we've ever had to make.
We're gonna have to drain our bank accounts,
max out our credit cards,
but if it works, we can make a huge profit.
So, let's make a decision right now.
You want to move forward or not?
I think we need to buy this one.
Okay, so, we're gonna buy this house?
Yeah.
Better hope we don't go broke.
They countered us at $540,000?
NICK: Yeah.
Hold on one sec.
I mean, that's all the money we have.
That's it.
Nick, if we pay all cash,
do you think they'll do a two-week escrow?
Let me find out.
The bank accepted our offer for $540,000,
and two weeks later, the house is ours.
But all our money is tied up in this, and we need
to get our renovations started right away.
The old kitchen cabinets are coming out first
to make way for a brand-new custom kitchen.
And Christina needs to finalize a plan with Izzy
for our new master walk-in closet.
Originally, you know, Tarek and I were thinking
that we'd just blow out this wall and kind of take over
the other side of the closet in the guest room.
But I'm thinking that's gonna be too small, you know?
So our goal is to get a 6-foot-deep walk-in closet.
ISRAEL: Okay.
6 feet will finish you off right here.
Can't wait to see it.
CHRISTINA: We're creating a large walk-in closet
for the master bedroom because I think
someone buying this house at this price point
is gonna expect it.
TAREK: If we want to get top dollar for this place
in this upscale neighborhood,
it's gonna have to have awesome curb appeal.
So I'm bringing in my friend Jesse
to come up with a good landscape plan.
I just hope his estimate comes in under
the 10 grand that we budgeted for this.
Really?
ESCALERA: You don't want to block the pool out,
and especially once that hillside right there
gets all done and it looks all cute --
I said cute.
Put some color in there and make it look tropical,
and then, with the concrete,
we'll do a nice almond or like a rusty color.
Rich-looking acid stain over the whole thing.
CHRISTINA: Yeah, that'd be cool. All right.
All right.
Looks like your pool equipment's pretty good.
400,000 BTU heater.
CHRISTINA: It looks old, but it looks expensive.
It looks like it's been tampered with,
but you don't have a pump.
Someone just stole the pump.
That pump was here the other day.
Yeah.
Lookit. It just got cut out. You can see where it was cut.
Are you sure?
Yeah, 100%.
Your cartridge filter's gone, too.
[ Sighs ]
We try so hard to keep our costs in line,
and then something like this comes out of the blue.
But that's one of the dangers of flipping.
Who's to say they're not gonna come back and steal it again?
Right.
Okay, this big ugly hill.
Yeah.
This is all bare, and it's full of weeds.
So, throw some numbers out at me.
I think, to be honest with you,
that, considering the property,
something this big and as nice as we want to make it,
20 grand's gonna be like a really conservative figure.
TAREK: We don't have 20 grand.
[ Laughs ]
Start collecting cans. [ Chuckles ]
So, we're gonna have to borrow some money, probably.
TAREK: I'm really overwhelmed with the amount of money
we're gonna have to spend -- the $20,000 on landscaping.
Right now I don't know where we're gonna find the money.
TAREK: Christina and I spent all of our life savings
on a bank-owned home in Whittier, California,
for $540,000.
We've maxed out our credit cards to pay for the $30,000 rehab,
and that doesn't even include
$1,000 to replace our stolen pool equipment
and another $20,000 in landscaping
that we just found out about.
My mom has helped us out in the past,
so today, I've asked her to come by.
I hope she'll fall in love with this house
and offer to help us out again.
Hi.
Ready to see the new house?
Yeah.
Well, you're gonna love this house.
It's actually the biggest one we've bought.
It's $540,000 we spent.
Yeah, it's a big one.
That's a little expensive.
It's a little bit of a gamble on this one.
Wait till you see the view.
Oh, wow. I love it.
I like the wood floors.
It's nice the kitchen has a view, too.
And the courtyard actually has the pool in it.
Kind of green, huh?
We'll fix that.
[ Chuckles ]
Yeah.
Overall, what do you think about the house? Do you like it?
Yes.
Good, 'cause we need to borrow some money.
Eh?
Yeah, we need to borrow some money.
And where am I supposed to find that money?
I know you have an equity line on your house.
Here's the problem --
We're running out of money to do the rehab costs.
We've already borrowed against the credit cards at 18%.
We're capped.
So I need to borrow some money from you.
What if you can't sell it?
I can sell anything.
I'll sell it.
All we need is money to make it happen.
You will make money, and the equity line --
I'll make the monthly payment on it,
so you have nothing to worry about.
You're gonna make the monthly payment on it?
Yes.
Hmm.
I'll invest in you guys. Okay, you guys can...
Thank you.
Christina will be very happy.
I'm doing it for Taylor.
I'm scared about losing my mom's money
because my mom's the most giving, loving,
compassionate person you'll ever meet,
and there's never any guarantees in this business.
Thank you for helping.
How are you doing?
Can I help you?
We talked to someone on the phone about cabinets.
That's me. I'm Sam.
Sam. Tarek.
Tarek, nice to meet you. Nice to meet you.
These are some of the door styles
to start you off.
We're kind of looking for something like a Shaker.
A Shaker door is this door.
It's probably one of our biggest sellers.
I like this,
but in like that color, or even darker maybe.
Can you do something like that?
Definitely. These are custom.
Everything's done by hand right next door,
so I can match the color for you.
We can play around with the hardware.
And then, with the countertop,
maybe something kind of modern, like quartz?
Yes.
Oh, that is quartz. That looks cool.
Like this, but not so gray. Maybe like more white.
This does look really cool.
I'm excited.
Okay. Awesome.
CHRISTINA: By Day 5, the master bedroom walk-in closet is
beginning to take shape,
and the kitchen is almost ready
for custom cabinet and countertops.
Okay, well...
We can kind of get an idea
of what it's gonna look like now.
The view is really pretty.
Outside, we're draining the pool
and landscaping the hill behind it,
ripping out the horsetail grass along the front walk
and tearing down the patio cover next to the pool.
[ Grunts ]
Don't get hurt.
Aah!
That was exciting.
Oh, my God. Careful.
Yeah, there you go, there you go. All right.
Luckily you're not wearing sandals today.
Well, it looks better.
It's much more open now.
TAREK: Yeah, the yard looks like twice the size.
[ Machinery whirring ]
Tarek, we got a problem here.
[ Sighs ] Now what?
Your slab is sinking.
What do you mean? Where?
Right here. Check it out, man.
It's separated like 2 inches from your wall.
And you got a bow there in your roofline.
TAREK: It's bowing like 6 inches.
We need to get this problem checked out right away.
If this place starts turning into a money pit,
it will ruin us.
I thought this house was perfect.
[ Groans ]
TAREK: Christina and I spent
every dollar we had in our savings
on a $540,000 flip in Whittier, California.
To pay for the rehab,
we maxed out all our credit cards
and even borrowed against
my mom's home-equity line of credit.
We've already dumped 55 grand into this house,
which puts us $15,000 over budget and climbing.
Now a potential structural problem is
putting us behind schedule,
and my chief investor is breathing down my neck.
So, I just found out from the contractor...
What?
See the big gap in the concrete there
and the big gap in the concrete there?
[ Groans ]
Yeah, it's over here, too.
That doesn't look too good.
What if it's a major structural issue or something?
Uh...I mean, it could be.
I mean, worst-case scenario...
yeah, it could get expensive.
I don't have that much of a line of equity, you know?
I always feel nervous when borrowing investors' money,
especially with my mom, because no matter what happens,
you always have risk, and this is a huge project.
We've submitted some soil samples for testing
and hired a structural engineer
to come take a look at the sinking concrete slab.
We hope that this will be a simple fix.
Please let this be a simple fix.
What we got here is a situation where we have
highly expansive soil.
When it gets wet, the soil's gonna expand,
but when it dries out, it's gonna shrink.
What happened here is
water penetrated behind the slab,
and when it got wet, it expanded.
Since this pole is embedded into the concrete,
it's pulling your roofline out.
CHRISTINA: So, what can be done about this?
Well, what needs to be done is this slab needs to be taken out.
In order to do that,
you're gonna have to shore up this roofline
to make sure that the column is not gonna collapse
when you take this slab out.
This is freaking me out.
These structural issues need to be completely resolved
so it doesn't happen again in the future
to whoever buys this house.
What we did here --
we had to pour a pad footing
12 inches deep and 12 inches thick,
and then we had our rebar come out
that ties into the existing home.
TAREK: So there should be no problems ever again?
There should be no problems when it's done right.
Well, saved a bunch of money.
I was scared there for a while.
Let's get some more concrete
because I think it's gonna take a lot of trips.
After the delay caused by the concrete-slab fix,
we're scrambling to get back on schedule.
I think we have a leak. [ Chuckles ]
Jesse's guys are planting the hillside
and applying an acid stain to the concrete.
[ Sighs ] It's almost done, right?
Better be, 'cause we're trying
to get on the market, what, in a week?
Yeah.
Uh-oh.
Something went wrong. Look.
It's like water got on it or something.
Look right here.
Oh, God.
TAREK: Yeah, it looks horrendous.
What's up, Jesse?
So, what do you think
of the acid stain on the concretes?
Still needs to be sealed, but...
I hate it.
What don't you like about it?
I don't know if the sprinklers were hitting it
or what happened.
I mean, you can see where there's water lines here,
and it's totally not what I was expecting.
Okay. Um...
These watermarks -- those can be fixed.
I just hit it with muriatic acid and blend it out of there.
But this is what it looks like before you seal it.
Personally, I think it looked better before.
This is supposed to be a high-end home,
and if buyers come in and see this junkie concrete,
nobody's gonna want to buy this house.
That could spell disaster for us.
TAREK: Christina and I have maxed out all our credit cards,
drained our life savings,
and even borrowed money from my mom
to sink more than $600,000 into a flip
in Whittier, California.
It took the landscapers an extra day,
but a horrendous-looking concrete stain has been fixed.
CHRISTINA: I'm glad we stained the concrete.
I think it actually looks really nice.
And we finally found a way to save some money
by buffing and waxing the hardwood floors
instead of refinishing them.
Okay.
It's going the wrong way.
Oh, that was a genius --
[ Grunts ]
[ Grunts ]
You try it.
Oh, that easy, huh?
I will never be buffing a floor again
for the rest of my life.
We're in the final stretch.
The guys are installing the custom kitchen this week,
which cost us $18,000,
plus an additional $10,000 of my mom's money
for stainless-steel appliances
to help this home appeal to high-end buyers.
I put my entire line of credit in this thing,
so I'm very, very nervous, but I know my son,
and if somebody can pull it, he's the one.
CHRISTINA: So, what do you think we should list this place for?
TAREK: I mean, this house is a gamble, right?
Going into this, we looked at the one comp --
why we bought the house -- was pending at $750,000.
The new one that just came up,
pending as well, bigger at $899,000.
Pending $899,000?
Pending, but it doesn't have the view.
I would say swing for the fences --
I mean, this is a high-end home --
and try $849,000.
I think $849,000 sounds a little high.
We'd make like 200 grand if we sold it for $850,000.
We have a lot of money tied up in this.
We have some of your mom's money.
I think you might be being a tad bit greedy.
What makes this house special is
someone's gonna fall in love with it.
You have the pool in the courtyard.
It has special characteristics
that no other home in this county has.
All right, husband, you're selling me.
We'll start at $849,000.
Better hope this staging comes out amazing.
By the time the staging day arrives,
we're more than $30,000 over budget,
and we're almost three weeks behind schedule.
Today's the open house, and I'm really nervous.
We'll see what buyers have to say about $849,000.
We can always drop the price later if we need to.
Wow.
Geez, the kitchen -- I mean, honestly...
That looks amazing.
I love these countertops.
We spent a lot of money in here, but check it out.
Look at the sink, the cabinets, the poles, the backsplash.
It all ties together, and it looks insane.
I just need someone to fall in love with this house.
We have a lot invested into it.
[ Doorbell rings ]
My mom's here.
What's up, mamacita?
Wow.
You put furniture in here.
Wow.
That looks amazing.
Are you gonna make any money?
I think so.
We invested $70,000 into the house --
way more than we thought.
$70,000?!
[ Gasps ]
On a high-end house like this, once you start,
it just keeps going and going and going and going,
but, as of right now, the house is done.
Your investment's still secure.
I just don't know how much we're gonna make.
All I can say is good luck on this one,
and this is where I put in my money,
so take good care of your mama.
TAREK: Maxing out our credit cards and borrowing my mom's money
makes me really nervous,
makes me really concerned about our price,
and if it doesn't sell for months,
I have no idea what we're gonna do.
Got a pool.
Oh, isn't this pretty?
You'd have to put a fence around there
Oh, I know.
So, you guys did a lot of upgrades to the home, huh?
CHRISTINA: Yes.
[ Gasps ] Ooh, exciting.
You have sliders on both sides,
so you get a lot of natural light in here.
Nice. Good-size closet.
I like the recessed lighting.
It's real nice.
This is the master.
I think it's a little small.
Let's see the master bath.
And what do you guys think about the price?
[ Sighs ]
Well, I think it's a little high.
I mean, I know you're paying for the view, right?
My issue was just the driveway.
It's cracked. The pavement is old.
Yeah.
I mean, if you guys are interested in making an offer,
I mean, it's something we'd definitely take care of.
How do you feel about the price at the $849,000?
We feel it's a little high for the area.
I went along with Tarek on this,
but his listing price is definitely too high.
No one's mentioned an offer.
Aren't you nervous?
Eh, it's not going so well.
TAREK: After a month on the market, the house didn't sell,
so we dropped the price 100 grand,
and every day that goes by without a sale
puts us further into the red.
At this point, any offer over $699,000
would be worth considering
because we can't pay my mom back until this house sells.
And with all our savings tied up,
we won't be able to buy another house to flip.