FLIPPING HOUSES: LEXINGTON STYLE

By Kathie Stamps
01-Sep-2019

 

Realtor Rusty Underwood has been with Milestone Realty Consultants since 2012. “I sell real estate for a living,” he said. As a Lexington native, he knows the area inside and out. He prefers the word “restoration” over “flipping,” and he has had involvement with several ventures in downtown Lexington, Chevy Chase and Ashland Park. He always takes on restoration projects with a partner in a limited liability company, or LLC, as opposed to doing it under his personal name. Through companies he has owned, he and his wife have remodeled 16 houses they are renting out, and have restored another ten homes for sale.

“As a realtor, I have helped clients all over Central Kentucky to accomplish the same goals in rehabilitating homes,” he said, adding that the restoration process is “half science and half art.” His dad and maternal granddad were both builders, so he grew up absorbing knowledge on the contractor side. “I do not work for any of them and never have, but it’s definitely in my blood,” he said. 

If a real estate client is looking for a home near downtown at a budget of $350,000 but they don’t like some of the cosmetic or construction choices made by owners, Underwood can look for a neglected house on a vacant property. “I’ll give them ideas, like take this wall out and make the kitchen bigger, or turn this bedroom into a master bath,” he said, “and have multiple contractors come in and bid.”

Underwood has relationships with a broad range of general contractors and subcontractors. “I can say to my clients that’s a big part of the value add,” he said. For small projects, he can put clients directly in touch with, say, a hardwood refinisher.

As for real estate trends, Underwood sees newer generations not as hung up on an open-concept kitchen and appreciating outdoor spaces more. Location has always been important, but now “people are migrating closer to higher density areas,” he said, so that they can walk to stores, parks and restaurants. 

Underwood enjoys all aspects of real estate. “It’s a relationships-based job,” he said. “I love it.”

“An investment property and flipping are different,” said Melia Hord, a realtor with Keller Williams and the co-owner and listing agent of Dis- tillery Heights. “A flipper makes their money when they buy it; they get a good deal on the front end. An investor gets a good deal that shows a good return rate.”

Buying a house to rent out is an example of investment property because you will have money coming in regularly with those rent checks. Flipping, on the other hand, has the goal of seeing a profit in one lump sum when you fix it up and sell it.

If you paid $200,000 for a residential investment property, you would want to rent it for $2,000, or 1%, per month, according to the “one percent return” goal in real estate. If you buy an $80,000 house and put $40,000 in renovations into it, the 1% rule would suggest a rental price of $1,200 a month. Or, if you wanted to flip that $120,000 outlay and make a 30% profit, you’ll consider all expenses, including the realtor and marketing fees, and aim to sell it for $165,000. But will that price work for your location? Also, think about your liability afterward. “Did you use a licensed electrician, a licensed plumber? Is it structurally sound? Did you file your permits? It’s a lot to think about,” Hord said. But it can be gratifying.

There’s a dance to the timing of everyone coming in, from the dry-wallers and framers, plumber and electrician and the specialty subcontractors for cabinets, granite, flooring and painting. “If you know the people and you can be the general contractor, you can save costs,” she said. “But if you’ve never done it before, that’s not going to work.”

She has been the real estate agent for people who have flipped houses and often puts them in touch with great contractors. “It’s been fun watching them do it,” she said. “It’s a small community. It’s a good community for sharing.”