The 'F' Word: Flippers

A declining or depressed market sees no spec development, and certainly no quickie-remodeler flippers.

We had one of those down markets here from roughly 2008-2010.

Spec builders re-entered the Manhattan Beach market as of early 2011 with the "Speedy Speckies" (see "Speedy Speckies Sprout," April 2011). High-quality spec projects have begun in earnest over the past year-plus, and some have sold.

The O.G. Flipper

So where are the flippers?

Friday's LA Times piece on multi-million-dollar flips got us asking that.

To define the term "flippers" here, we're talking about folks who buy a place in dated, imperfect condition and bring it up more toward modern tastes, then quickly resell it.

In most any stable market, you should be able to make some money if you buy low and do the work efficiently. In a rising market, you might get some extra profit out of the hold time – the several weeks or months it takes to do the work might coincide with a rise in the resale price. (Lots of people considered themselves brilliant for succeeding with flips in a ballooning market last cycle.)

In recent years, flippers generally took an older house and installed new flooring, a slick kitchen with stainless and granite, and new baths, maybe boasting travertine marble. Outside, they might attach some stacked stone veneer. Of course you got new paint, usually an overall vanilla-fication of the property.

We haven't seen many of those kinds of by-the-books flips yet. Yet.

On the remodeling front, a few recent sales come to mind:

1605 Harkness

1605 Harkness (3br/2ba, 1500 sq. ft.) is a very special transformation of a 1950s original cottage, where they added square footage and gussied up the home with great style. (See "Transforming an LV Cottage.") The finished product sold for $1.095m. But this was a custom project with flair, not a typical flip.

2001 Pacific (3br/2ba, 1070 sq. ft.) sold earlier this year for $990k. It's a project with the same great "modern beach cottage" feel of Harkness (same investors doing the work), but it was left to the new owners to add square footage. If you drive by, you'll see now that they're well under way with that job, adding on in the back.

3005 Palm

3005 Palm (4br/3ba, 2075 sq. ft.) is more like the traditional "flipper" project you'd expect to see. It's a late-1960s home bought at a foreclosure auction in Sept. 2011 for $805k.

With that low acquisition price, a flipper looked to profit by undertaking a re-do of the place – albeit one we called "uneven." That's typical – flippers do the big stuff but often leave dated details behind here and there. The place looks polished, but needs work at the same time. (For more see "Rockets in the Trees," June 2012.)

Whatever our gripes about Palm, it sold quickly at a substantial boost over asking ($1.299m) at $1.420m. That was sure profitable for the flipper. (The agent representing both parties on the sale also indicated he was the flipper; an LLC is the short-term owner of record.)

But that Palm sale was also in June, underscoring our point – true flips have been scarce so far.

Still, we've seen a few homes in marginal condition trading, and we may see some come back. Generally we expect owner-users to be the ones grabbing homes to customize for themselves, but perhaps the return of the flipper is nigh. Squeek squeek, click, squeek.