LifeEdited founder and micro-living guru Graham Hill bought two apartments in SoHo to renovate and resell.
Television shows like “Desert Flippers” and “Flip or Flop” are giving viewers across America a taste of the real estate pie.
In New York City, where the sales market historically prevails, house-flipping can be an exceptionally enticing investment.
While careful not to minimize its difficulty, buying and selling real estate in the Big Apple is not as risky as other ventures, like startups, that lack the same track record of growth, noted Grant Hill, founder of the design firm LifeEdited.
That being said, “you’re not going to lose your shirt,” he warned, “unless you really overextend yourself and lose everything.”
Known for his Ted Talk on micro-living, Hill recently renovated two tiny condos in the trendy downtown neighborhood of SoHo.
He bought two apartments at 150 Sullivan St. in 2009 for around $280,000 each and sold the 450-square-foot unit 33, dubbed LE1, in 2014 for $790,000.
LE2, the building’s 350-square-foot unit 33, is now on the market for $750,000.
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Dealing with such small living spaces can be a challenge, noted Ray Sturm, CEO of the real estate investment firm AlphaFlow, but it can be made up for with their lack of landscaping.
Unlike properties with their own ponds, acres of land, or even driveways and front lawns, apartments “tend to be more cosmetic rehabilitations,” Sturm said.
And the opportunity to resell flats isn’t just in New York – flippers are doing well in downtown Dallas, Texas, Marina del Rey in Los Angeles and Miami Beach in Florida, along with other urban markets, he said.
But before you jump into the deep end of the urban resale pool, here is some advice to help you stay afloat:
Watch your spending. Like any investment, the key focus with buying and selling real estate should be your finances. Aim to earn at least a 15 to 20% return on your investment, Hill said. To do this, avoid spending a lot of money upfront. The labor and materials for a $2 million space will be the equivalent to that for one that cost $500,000, he said.
While planning for a renovation, set money aside for the unexpected, advised Stephen Kliegerman, president of development marketing with the brokerage Halstead. “Even watching the ‘Property Brothers,’ they’re always saying, ‘we thought this was going to cost X, now it’s going to be Y,’ – in New York City it’s usually Y times two,” he said.
And during the renovation, it’s conserving on “the little things that honestly matters,” Sturm added. “Don’t put an $8,000 jacuzzi tub,” in the bathroom, he said, “there’s probably one that’s just as good for $1,200.”
Pick the right neighborhood. When choosing a location to buy property, stick with areas you’re familiar with, Sturm advised. “People get out of their own market and quickly fall on their faces when they get beyond their expertise,” he said. “Invest where you really know the real estate and you understand the customer.”
In New York City, some areas poised for growth include Jamaica, Queens, upper Manhattan and eastern Brooklyn, Kliegerman noted.
Once you do pick a place, invest as much as you can there because, “as soon as people see the value then you’re not going to be able to buy [property] at cheap prices anymore,” in that neighborhood, Hill cautioned. “You have to be gutsy but you have to go in pretty hard.”
Don’t rush to sell. Though flippers on television seem to sell properties before their new coats of paint are dry, our experts said the best way to make money in real estate is to be patient. Wait even a few years for an area to become popular and then sell when the market is hot, Hill said. There are ways to make properties affordable while you wait for a market to appreciate, such as by refinancing or renting them out to cover the mortgage. “If you can hold onto it through a market cycle it’s worth it,” Hill said.