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TAREK: Flipping houses is a risky business.
CHRISTINA: Aah!
I'm Tarek, this is my wife, Christina,
and we're real-estate agents.
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.
Sold to this gentleman right here.
Some of these houses are easy fixes...
Just cosmetic -- paint, flooring.
...but others are total teardowns...
Whoa, whoa, whoa.
This thing is rotted.
...and you never know what you've got
until you walk through that door.
Oh, gosh. What the heck?
How could it go from $60,000 to $100,000?
That's a huge spread.
-- Captions by VITAC --
Closed Captions provided by Scripps Networks, LLC.
Did you find anything good?
This short sale looked pretty cool.
It's listed at $389,000. It's in Fullerton.
It's 2,500 square feet, four bedroom, three bath.
It was built in '65, probably needs a lot of work,
but, I mean, I guess that's why it's probably priced so cheap.
A short sale happens
when a bank allows a homeowner in financial trouble
to sell their home for less than they owe on the property.
The most recent comps are right here. Look.
They range from $550,000 all the way up to $600,000.
If we got $390,000 and put $30,000 into it,
that's a break even of $420,000, $20,000 in closing costs,
let's just say $450,000.
So, if we sold for $550,000, that's 100 grand.
I mean, based on that $389,000 and the comps
and all the numbers we're looking at,
I mean, I think we need to jump on this right away.
Yeah, it's definitely worth checking out for sure.
You want to call contractors?
I'll text them right now
and find out if they're available.
It says that the H.O.A. is $585 a month.
That's super high.
CHRISTINA: This is a nice, woodsy neighborhood.
The H.O.A. covers a private lake,
an equestrian center, pools, tennis courts, and landscaping,
but $585 a month is still a lot of money.
TAREK: Buyers do not like H.O.A.s.
Yeah, that's super high.
I mean, that's like a small mortgage payment.
Oh, look -- Israel's here.
This house is a dump.
TAYLOR: No!
What up, Issy?
BATTRES: Hey. Morning.
So, this is it, the short sale.
Man.
We have to paint the whole exterior.
All the windows need to be replaced.
The wood-shingle roof is, like, literally falling off the house.
CHRISTINA: How much do you think it would cost for a new roof?
About 12 grand.
12 grand for a roof?
Damn.
The H.O.A. apparently covers all the landscaping front, back,
so the owner doesn't need to take care of that.
All right, let's check it out.
TAYLOR: No!
Oh, man.
The entrance is gross. Look at this floor plan.
They haven't updated this place since it was built.
Look how ugly it is. It has no, like, appeal.
Baby, come on inside.
Well, the worst thing right away is this.
I mean, this fireplace is blocking the whole room.
TAREK: It's an eyesore for sure.
Well, I mean, maybe we can drywall it and paint it.
Yeah, drywall this up, this section right here.
Put some stone on there,
some tile right here on the face.
So, this is a family-room and the dining-room combo.
This is a weird layout. I mean, check it out.
Here's the kitchen right here.
It's completely closed off
from the rest of the house.
It'd be nice if we could just blow this wall out
to make the kitchen open to the family room.
Imagine if this was all one height
with, like, a really large, you know, granite island.
TAREK: Could we even open up this wall so it's open when you come down?
I mean, is a bearing wall?
Yes.
Great. Sounds expensive.
How much would it be to blow this out and open it?
$10,000.
$10,000 just to open this up?
Mm-hmm.
$10,000 to open up this wall
doesn't even include cabinets, appliances, and flooring,
which would be another 15 grand, at least.
You don't want to spend 10 grand
to make this feel like a nice, open, spacious kitchen?
I mean, if we open up the wall, we lose all the cabinets.
If we keep the cabinets, the appliances, and the floor --
The tile's nice -- We'll save, like, $8,000.
Well, let's just bid it out and see where we're at.
This is awkward.
I kind of think that this should be the dining room
and that giant room over there should be one big family room.
Yeah, that's a good idea.
All right, let's check out the bedrooms.
[ Chuckling ] I'm excited.
The bedroom's a good size.
It's actually nice.
It's a great kid's room.
Hey, there's a deck off here.
TAREK: Whoa, whoa, whoa.
This thing is rotted.
BATTRES: Yeah.
How much money we talking?
Minimum -- Just minimum, minimum -- $3,500, $3,800.
No way. For a patio?
Yeah. It's supporting weight. You want to make it safe.
The master's decent sized.
CHRISTINA: The closet's kind of small.
Look how big the bathroom is. I mean, it has potential.
Oh, and there's another closet in here.
I mean, in here here we could deck this out --
new cabinets, granite counter, new mirrors, new door.
The space in this house is awesome,
but 2,400 square feet
is twice the size of houses we usually flip.
Every square inch of this house would have to be updated,
and even a basic cosmetic rehab is gonna cost a lot of money.
Okay, how much would it be if we didn't open up the kitchen
and we didn't redo the cabinets
and we left everything, as-is, existing
and just cosmetically made it look nice?
BATTRES: Lowest, $60,000.
In and out, 30 days.
So, if we go for a big remodel, open up the kitchen wall,
change out the master bath, how much are we talking?
All the way to $100,000.
So, it's like we might as well
spend the extra $40,000 and really deck this place out.
She talks about spending an extra $40,000.
I'm not convinced that if we put 100 grand into this house
we'll get our money back.
With four bedrooms and three baths to remodel,
plus all the rotted wood on the decks and roof,
if we're gonna put an offer on this place,
we have to play it safe
and go with the less expensive $60,000 cosmetic rehab.
CHRISTINA: Driver's seat? Drive?
They're asking $389,000. What should we offer?
Let's offer $380,000 and see what they say.
Hey, Greg. This is Tarek.
I talked to you earlier about the property in Fullerton.
We are very interested.
We'd like to go ahead and move forward
and write an offer with you,
so give me a call back when you can.
Thanks.
I'm excited.
I think we got this house for a super good price.
[ Chuckles ] Yeah.
The bank countered our $380,000 offer with $386,000,
and we accepted.
Now it's time to get moving on our 30-day cosmetic rehab.
So, we rock 'n' roll today, demo day.
Demo day.
HENDERSON: Hey, guys.
Hi.
Good. How you guys doing?
Good. We just bought the house.
You got the same house as us, just kind of reversed.
Nice to meet you. Oh. We do?
Yeah, yeah. It's the same inside, but the other way.
I saw a bunch of work trucks here.
What are you guys doing?
We just did the kitchen and the bathrooms and stuff.
If you guys want to see what we're up to,
Sure.
Awesome. Thanks.
Getting to peek inside a neighbor's home on a remodel
with the same floor plan as us is a serious score.
It's like seeing a possible "after"
before we even start construction.
TAREK: Okay, so this is pretty much the same house,
but the floor plan is flipped,
Right. Right.
This is amazing.
Yeah, so we completely took out all the load-bearing walls.
CHRISTINA: This is exactly how I want to do our kitchen.
It doesn't even feel like the same house.
This feels like a $700,000 house.
Ours feels like a $400,000 house.
Uh-oh. You're in trouble.
I want this kitchen for that house.
[ Chuckles ]
TAREK: This is awesome.
And you said you did some stuff to the master bathroom?
Did some stuff to the master bathroom. Yeah.
So, this is the master bathroom that we totally redid.
TAREK: Wow.
Wow.
So pretty.
So, in ours right now, this is a closet.
So, you guys got rid of the closet and added this?
Right, we got rid of the closet,
and then we dropped a tub where the old closet was
and then put a new shower in,
and then we raised the ceiling.
Oh.
Because this ceiling was --
TAREK: Oh, the ceilings are, like, right here.
The remodel on this house is amazing.
Now that we know that our bathroom
could look like this bathroom
and our kitchen could look like this kitchen,
how could we not do it?
Thank you.
Thanks.
Wow.
So, what do you think?
I mean, seeing it makes me think
that we should go big on this house, too.
No, I agree. I mean, the house looks amazing, right?
At the same time, if we put $100,000 into it like you want to,
we're gonna be in it for $486,000,
and it will probably take three months longer.
So, the question is, I mean, are we gonna get the money back
if we make our house as nice as that house?
Well, here's the real question.
If we spend $60,000 here, how much do you really think
we're gonna sell this place for if we make it mediocre?
And what if we make it super nice like that house?
I mean, someone's gonna walk in and be like, "Wow," you know?
That "wow" factor.
It's a huge risk, a huge risk.
TAREK: We're flipping a house in Fullerton, California,
that we bought for $386,000.
After seeing how a neighbor opened up the same floor plan
and decked out the kitchen and master bath,
we decided to do the same.
So, we're taking our rehab budget from $60,000 to $100,000
and adding another three months to the renovation time frame.
We've hired an architect to draw up plans
so we can get city approval
for the structural changes to the kitchen.
So, because I want to open up this wall,
it's opening a can of worms with the city.
It's structural, Tarek.
It took three weeks to get the green light
from the city to move forward...
"Approved."
...and now we're busting open the kitchen,
replacing the load-bearing wall with a support beam,
and gutting the master bath in order to change the layout.
[ Grunts ]
Israel.
BATTRES: Hello.
The wall is gone.
The wall is gone, sir.
Wow. Look at that.
It's open.
Man, you guys jam, dude.
CHRISTINA: Wow. Crazy. It's all gone.
It's a different house.
I can't believe it, man.
It's huge in here.
The structural changes
are really making this house feel more open.
But now that the house is gutted,
we have some serious design work to do.
CHRISTINA: We need to pick a paint color.
Yeah, that's the hardest part and we always screw it up.
This house looks really nice right here.
Well, we have to ask the H.O.A. guy,
'cause we can't paint it the same color
as the neighbor, right?
We have to get our exterior-paint colors approved
by the homeowners association.
We know they want neutrals, but we're thinking about
maybe a bright front door to add some color.
What's the darkest color we have?
How are you guys doing?
Hi. How's it going?
I'm Patrick Cornejo.
Oh, Patrick.
There's a little bit of paint on there.
Oh, you're the president.
Oh, awesome.
Come check out our paint colors.
Yeah, I want to see that, see what you guys are doing.
I need to get an approval from you.
Yes, you do.
What do you think about, like, the blue for the doors?
Uh, we're trying to avoid that.
It's really frustrating to buy a house
and not be able to do what you want to the house
because the H.O.A. tells you you can't.
Okay, so do you -- Like, that combo's pretty nice.
CORNEJO: Um, okay.
You don't seem too excited.
[ Christina chuckles ]
I was gonna ask you about the landscaping,
because it's pretty bad all around over here.
This area in here is yours to do with how you please.
Correct.
For how far?
On this model, it comes out 14 1/2 feet.
TAREK: When we bought this house,
we were told that H.O.A. covers landscaping.
Nobody told me they didn't cover
the first 15 feet of the property.
So, now I have to spend a lot of money
to make the landscaping nice.
So, we'll talk about it and put a plan together.
Awesome.
So, what do we have?
We have master-bath tile,
kitchen cabinets, granite counters, carpet.
Hardwood floors.
We have to do the layout, the design.
Our contractor's original bid included low-cost cabinets,
ceramic tile, and laminate flooring,
but now we're feeling like that's just not gonna cut it.
We can't spend all this money on the structural changes
and then put cheap materials in,
'cause that would be counterproductive.
These samples...
[ Rapping ]
...they're too cheap.
[ Knocking ]
Look at the difference.
It's solid.
This is custom?
Yeah, the quality's so much better.
This is what we have.
So, this is our granite. These are our cabinets.
These are the paint colors.
I think that looks perfect.
Perfect. Okay.
Hey.
Hey. Morning.
[ Chuckling ] What is this?
We got some big changes.
Design-wise, we're going -- in the kitchen, this granite...
Okay.
...this cabinet.
So, this looks a lot more expensive
than what I bid out.
How much more is it gonna cost?
Are you serious? Really?
Yeah, 'cause now you're moving from a standard flip deal
to now semi-custom.
That puts our rehab budget at over $135,000
and our total investment over half a million.
If we don't sell at the high end of the comps,
this could be a total loss.
We're flipping a four-bedroom house
that we bought in Fullerton, California, for $386,000.
This is by far the most expensive rehab we've ever done,
now totaling over $135,000.
So, this is it.
We got hit with, like, $25,000 in decking and roofing,
and now we're gonna have to do something about this driveway.
Yeah, you got to do something.
I don't know what to do, 'cause it's old and cracked.
CHRISTINA: I think it'd be nice if it actually looked like a driveway, like cement.
Yeah, it needs to be concrete. This is very old-school.
I mean, you know, 30 years ago, people were doing this.
So, it would look new.
It'll look nice.
WYATT: 12 bucks a foot.
Total?
For the whole thing, yeah -- demo and installation.
CHRISTINA: How many feet? Looks like a lot of feet.
$12 a foot.
That's like -- Wait a minute.
Real quick... 800 square feet?
Huh.
10 grand?
About 10 grand.
10 grand?!
Driveways are double thickness.
You got double the amount of concrete.
That's insane.
TAREK: This is a big hit.
But with the amount we've already invested in this house
and the overall lack of curb appeal,
we got to bite the bullet.
BATTRES: Yes, sir?
The ugliest thing in this house --
I mean, the ugliest --
are the stairs, the railings, and the fireplace.
These are really ugly.
In my personal opinion, they're dangerous.
This seems like the gaps --
Well, they're not to code, that's for sure.
Yeah, if someone has a kid...
I want to do wrought iron.
Is there a way to frame this somehow
and have the wrought iron come out of the actual slope
without having it hang down?
That's hideous.
Am I being crazy?
Is this, like, gonna be way over budget?
I mean, how much does that run?
No, that's -- Where you're gonna spend all your money at
is the kitchen and in your bath.
Yeah.
We're styling the rest of the house out,
so we can't chintz on these railings.
They're the first thing you see when you walk through the door,
and you can't put a price tag on first impressions.
Oh, wow.
The diamond pattern looks fantastic.
Looks like a spa in here.
How do you feel about the size of the shower?
A lot better than it was before.
It just looks so super high end
that I don't think someone's really gonna notice.
So, you like it. Happy wife, right?
Yeah. Love it.
We're ripping the old wood-shingle roof off the house
and prepping for new asphalt shingles.
Yep.
TAREK: Always, I'm just drawn to the darkest
because the darker it is, the more it will blend
and that way won't be so noticeable.
TAREK: The H.O.A. approved the neutral khaki paint color,
and now we're painting the house.
Finally, our kitchen cabinets are going in...
...and it's time to install our granite countertops.
I got that.
You got that end?
Yeah. Just keep it in the middle.
Come on, ladies.
Hold on. Hold on.
Oh, this is gonna look awesome.
[ Gasps ] Looks so good.
It matches the cabinets perfectly, right?
I like it.
Okay, so today they're finishing up the cabinets.
We still have to do the bathroom vanities,
the flooring, bunch of stuff to do.
How much longer do you think we have,
and what else do we have to do?
We're looking at about two weeks more or less
just depending on --
After the vanities, we'll get the tile installed...
Tile floors.
...and then we start working on all the flooring downstairs,
and then the carpet will be last,
and then the driveway will be towards the end.
Oh, the driveway, and we still have landscaping.
It is a lot of stuff.
TAREK: We're almost to the finish line with this house,
but we still have some details to wrap up,
including laying new carpet in the bedroom...
...installing hardwood floors downstairs...
...and we're tearing up the old asphalt...
...and pouring a new concrete driveway.
I mean, how much are we even into this house for right now?
TAREK: So, we paid, say, $390,000.
Rehab -- $150,000, approximately.
When we go to sell it, closing costs -- $25,000.
To break even.
Okay, so right here we have $575,000.
It's four bedroom, two and a half bath.
I mean, it looks similar to ours in size.
It has wood floors, granite kitchen.
$585,000.
It has a pool and a Jacuzzi.
I mean, it looks pretty nice.
This is a much nicer neighborhood
than the comps we're looking at.
But our house also comes
with a much higher monthly H.O.A. fee,
which buyers will factor into what they're willing to pay.
So, it's really hard to say
if we've invested too much into this house.
What do you think you want to list for based on this?
Bottom line, if we don't sell for over $600,000,
this was a complete waste of time and we're screwed.
TAREK: We're flipping a four-bedroom house
that we bought in Fullerton, California, for $386,000.
We've already spent over $150,000 on this rehab,
so what's another 6 grand on landscaping?
These are gorgeous. What is this called?
This is kale. It's kind of like a cabbage.
I love the color.
This is tea right here.
It's called tea plant.
And then, these are kangaroo paws right here.
I like the height that those will add.
Having this, like, pop of color for the plants
is gonna make such a big difference.
CHRISTINA: Now that we're done with the house,
it's time to stage.
Because of the open floor plan,
staging will really help to define the living spaces.
I'm glad we did the driveway.
I'm glad we did everything.
Remember the roof?
TAREK: The house is on the market for $749,000,
and today is our first open house.
The curb appeal's great.
Our bottom-line, break-even on this house
is about $590,000 to $600,000.
Anything below that's a loss. Anything above that's profit.
Oh, my gosh. This place looks insane.
I know. It's amazing.
I kind of feel like it's a loungy retro hotel, right,
the way they staged it with, like, the pops of orange.
Looks really cute.
CHRISTINA: Taking out the kitchen
was totally worth it.
All the upgrades we did here really give the house
that "wow" factor that will impress buyers.
The weather's really nice.
I think it's a good day for an open house.
Nice curb appeal.
Yeah. It's really, really nice.
Hi.
Please take a look around
Okay, great.
Can you see, like, a really cool something here?
I don't know what, but something.
That could be a good spot for some of your art work.
I really love the floors.
They're nice, aren't they?
MAN: I do, too. Great color.
It's that distressed look, which I like.
Good volume on the ceilings, right?
Oh, my god. You could do really strong colors.
WOMAN: Are there any H.O.A.s here?
TAREK: There is an H.O.A. It's a little bit high.
It's a little under $600 a month.
Okay.
...which is higher than most H.O.A.s.
but it does cover landscaping,
pool, trash, water, tennis courts.
[ Chuckles ] Yeah.
The landscaping's gorgeous.
The only thing is you can actually hear the cars.
Yes.
$749,000 as a purchase price -- I think it's a great deal,
especially when you look at the upgrades
and what has been done to the property.
So, they've done -- The granite countertops look lovely.
Oh, look how they match on the fireplace.
I do, too.
Great views again.
I like that there's a view out of every bedroom.
This is nice, and I like having a big view.
Oh, they're self-closing.
Oh, I love those!
Aren't those nice?
Over here, the slider with this bedroom's great.
WOMAN: Oh, wow. I really like this.
Wow.
There's enough space.
Oh, this is cool.
MAN: Oh, yeah. That's nice.
There's a lot of interest in the house.
I mean, honestly, we could get a bidding war.
That would be amazing.
What do you think?
♪ Taking a shower ♪
[ Chuckles ]
I know it's a flip, but it's just been done so beautifully.
Yeah, they did a great job.
A lot of flips
use cheap craftsmanship and materials.
This is not a cheap flip.
The beautiful wood floors, the cabinetry, the granite --
Everything is really high quality.
So, what did you guys think?
I think that
we have a lot of talking to do.
Yeah, really great, real nice open floor plan.
You see yourselves living here?
I definitely do.
I do, too.
I think it has pretty much everything
we've been looking for.
I don't want to think about it anymore.
I think we would probably put an offer in on this.
We are gonna put an offer on it.
Okay. That works.
Yeah. We're gonna do it.
Thank you. We'll be in touch.
Bye.
TAREK: Within a week of the open house,
we got a full-price offer for $749,000.
But it fell out of escrow
because the loan didn't come through.
In the meantime,
over half a million is tied up in this house.
Plus, we have to carry the H.O.A. fee ourselves
until it sells.