The art of the flip

Asheville’s hot housing market makes it a flipper’s paradise: Just buy an old house, fix it up and then sell it for a hefty profit.

House beautiful: Successful real-estate flippers Susan and Derrick Edwards show off a transformed home in North Asheville that they were able to sell for a hefty profit. photo by Jonathan Welch

OK, so it’s not that easy—nor are profits guaranteed. But in Asheville and surrounding towns, it’s not only possible to generate some extra coin by renovating and reselling houses, it’s actually a viable full-time job for many people. To succeed at it, of course, takes some know-how and a lot of hard work.

Xpress sat down with north Asheville residents Derrick and Susan Edwards recently to learn how they turned an avocation into a successful business.

Mountain Xpress: What led you to this line of work?

Susan Edwards: We began renovating houses in 1999, when we bought the house next door to our [former] home in West Asheville. It was a 1924 bungalow that we purchased for $32,000 and was in need of complete renovation. It took us one-and-a-half years to renovate, as we were trying to do a lot of it ourselves while we worked full-time jobs. We did two more houses on a part-time basis. [Then] we both lost our jobs at J. Crew four years ago, when the call center in Asheville was closed. When I asked Derrick what he wanted to do next, he said, “I want to do the house thing full time.” We have a friend that had been renovating houses for about three years and was doing very well at it. We figured if he could do it and make good money, then we could too.

MX: What are the ingredients for success?

S.E.: It takes a lot of money and a lot of time. You either have to have lots of money to hire the work out or lots of time and skill, if you think you can do it yourself. You also need good subcontractors. … On our first house, we had multiple subcontractors that would come to look at the job, tell us they could handle it with no problem—and then we’d never hear from them again. We have built up very reliable contacts that we use over and over again now. You need to have a good lawyer, real-estate agent, and home inspector as well.

MX: How good is it financially?

S.E.: The profit margin is narrowing because of the increasing prices of real estate here in Asheville. One of our most difficult tasks is to find a house at a price that is low enough for us to complete the necessary rehab, resell, and still turn a profit. We … will take the time to find a project that is a sure thing. We try to choose projects that we feel we can make $40,000 to $50,000 on, and our time frame for turnaround is about six months. We also get a paycheck about every six months, so that can be pretty stressful.

MX: Have you ever lost money on a transaction?

S.E.: Only one transaction. We paid too much for the house, because we overestimated the area it was in. We went over our renovation budget by $10,000, and it sat on the market for a long time as a FSBO [for sale by owner]. We ended up listing the house with an agent, and the commissions paid consumed [more than] our profit. We ended up losing about $10,000.

MX: What are the pluses and minuses of this work, personally and professionally?

S.E.: The biggest plus of this job is that we are working for ourselves, calling the shots as we see fit. We don’t have to punch a time clock and work for somebody else’s profit. We have two young children, and our flexible schedule allows us a great amount of freedom to accommodate our family’s needs. … We feel so fortunate to be able to put our family first and our jobs second. The downside of this occupation is the way the money works. … We have to have enough money to start a new project (for our current project, we had to have almost $100,000 of our own money to put into it)—and enough money to live on for six months. We have to pay our usual monthly expenses … cover any unexpected expenses, as well as service the debt on our project.

Derrick Edwards: A great part of the satisfaction for me is taking and recycling great old homes and keeping them going for 50 more years. Making money is great, but taking a house and making it beautiful again—sometimes more beautiful than it ever was—is what makes it special for me.

MX: How many properties have you sold so far?

S.E.: We average two to three properties per year. Smaller houses usually have a faster turnaround for resale but are just very difficult to find cheap and make a good profit on.

MX: How much work and resources does it take before you’re ready to resell?

S.E.: For our last several projects, we’ve had renovation budgets upward of $100,000. Our restoration at 15 Hillside St. cost over $125,000. It would not have been a worthwhile project except that it had a lot that we were able to build on. New construction has a much higher profit margin than renovation.

MX: What’s your best advice for someone thinking of doing this kind of work?

S.E.: That’s easy: Have lots of money or lots of time to invest. Have good credit. Be flexible and patient. It takes a lot of time and effort to restore a house: Those shows like Flip That House are incredibly misleading. … You should always overestimate your budget by 25 percent: It’s better to be realistic and have more money budgeted and available than to run short. Once you start taking a house apart, you never know what you’ll encounter. These surprises can kill your budget and time frame. … Remember that you have to style a house in a way that will be pleasing to many people, not just a few. Your own personal taste may not be what the average buyer wants, and this can hurt you when it comes time to sell. An investment property is not the time to try out flashy new paint colors: Keep it simple and clean.

MX: You seem to object to the term “flipper.” Why?

S.E.: One of the negative connotations of the term is that while there are laws governing real-estate transactions, there are looser guidelines about moral behavior. Some flippers obtain property with ethics cast aside. I know many stories of people really being taken advantage of by flippers; usually it entails a property being obtained by the flipper at a price far below market value. Not all flippers follow these practices, but there are enough of them to lend a negative view of the term.

MX: How do you typically finance a resale property?

S.E.: We have great credit and have an established history of making money in this business. We have an interest-only, commercial-type, short-term loan for our projects. I wouldn’t recommend trying to do any creative financing, because it takes a chunk of money to start any project of this type. I haven’t really found anyone in the business—lenders, Realtors, etc.—that has too much [leeway] to bargain terms. Most of the conditions are pretty straightforward. In my experience, Realtors, especially those working at large firms, have little room to negotiate their percentage of commission.

MX: How does this compare to a regular job?

S.E.: This career is satisfying on many different levels. It is not stress-free, but I have yet to find a job that is. If you can live in Asheville, work for yourself and sustain yourself, then you should consider yourself very lucky.