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For US house flippers, reality meets reality TV
WATCH enough HGTV and flipping houses starts to look easy. Just talk to Joshua Levitt, who spent the better part of 2014 sitting on his couch in South Orange, New Jersey, watching shows like Flip or Flop and taking notes as the charismatic stars frenetically bought distressed properties and, with the right mix of anxious looks and Carrara marble, successfully flipped one by the end of every episode.
At the time, Levitt, now 41, had recently sold his tech company and was taking care of his wife, who was on bed rest with a difficult pregnancy, and their toddler. He had no background in real estate, design or construction, yet watching all that television convinced him that he could make big money buying, restoring and reselling dilapidated properties. Then a neighbour introduced Levitt to his brother and sister-in-law, Graham and Krista Blundell, who were flipping houses in the area.
By April 2015, Levitt was at an auction with Blundell, 44, who previously worked in investment banking, bidding on a vacant house in South Orange. A few weeks earlier, Levitt had tried to gather information about the property, driving past it after a snowstorm to see if the mail had been collected and the snow had been shovelled, or any other evidence that someone might still live there. He peered in the window and saw standing water in the basement and piles of trash and belongings scattered inside. "It was like a combination of Storage Wars and Flip or Flop," Levitt said. "It was a disaster."
He and Blundell won the house, paying US$318,000 in cash and hiring a locksmith to let them in. And so, with a cashier's cheque and a leap of faith, Levitt joined the growing ranks of small-time real estate investors who model themselves on spunky TV personalities. Enthusiasm for flipping, the practice of buying property to renovate and sell at a profit, is surging. In 2017, Americans flipped 207,000 single-family homes or condos, hitting an 11-year high, according to ATTOM Data Solutions, a real estate data company.
And real estate brokers, designers and contractors credit the popularity of reality TV, specifically scrappy, do-it-yourself flipper shows, with encouraging this new generation of investors. "There are definitely more people interested in flipping because they watch these shows on HGTV," said Elizabeth Kee, an associate broker for CORE real estate, who frequently works with buyers of investment properties and now regularly fields calls from people with no real estate experience who are interested in investing.
Home improvement shows have for some time played a role in America's relationship with real estate. After the housing market collapsed in 2008, HGTV was criticised for fanning the flames of an overheated market, encouraging a culture of rampant investment that contributed to the eventual bust. Today, the cable network is among the most popular on television, reaching 1.11 million viewers in May.
Levitt and Blundell sold the South Orange house in February 2016 for US$650,000, making an US$80,000 profit. Their next purchase, of a US$196,000 four-bedroom in Bloomfield, New Jersey, did not go nearly as smoothly. They underestimated transaction fees and financing costs, walking away with only US$20,000. The shows "make it look very easy", Levitt said, pointing to deceptively short timelines and unrealistic cost estimates.
Where a show might describe a six-week renovation schedule from start to finish, the real world moves at a slower pace. "You could spend four weeks with an architect before you even get started," he said. "Then you have to pull permits and that can take another month." During that time, an investor is paying property taxes, insurance and interest on a mortgage or construction loan.
Chip Wade, a carpenter on HGTV's Designed to Sell and Curb Appeal: The Block and a Liberty Mutual consultant, describes the information gleaned from these aspirational shows as no more useful than what you might find on a Pinterest board. "You're not seeing pricing. You're not getting full spectrum of the process," he said. "You're looking through a very small lens."
If anyone should understand how far television often is from reality, it would be the producers of home improvement shows - the ones who spend months following celebrity flippers around with a camera, setting up the drama and delivering the Big Reveal, the moment when the homeowner gets to see the ugly duckling re-emerge as a beautiful swan. But having that insider knowledge didn't dissuade Max Weissman, whose production company, Departure Films, produces shows like Flip This House for A&E and Vacation House for Free for HGTV, from getting into the flipping business.
In 2015, Weissman enlisted two Departure employees, Timothy Robbins, 52, an executive producer, and Jennifer Di Lullo, 40, a senior producer, to help him start a new venture off screen. Di Lullo left her television job to become the project manager for the houses that Weissman would buy. The first, a five-bedroom in Maplewood, New Jersey, lost money. The next three netted between US$10,000 and US$20,000 apiece. "I certainly thought it was going to be easier," said Weissman, 51, sitting in the living room of his latest investment, a seven-bedroom colonial in Maplewood on the market for US$1.7 million after a gut renovation. Weissman bought the dilapidated house in November 2016 for US$710,000, invested more than US$700,000 in it and hopes to net a six-figure return.
Renovating the 6,500-square-foot house has been an enormous effort. Di Lullo has 12 spreadsheets for the 1912 centre hall colonial that now has five full bathrooms, two half baths and a chef's kitchen with Calacatta quartz countertops. "It's hard to remember we aren't doing this for TV," she said, surrounded by upended furniture that arrived earlier in the day for staging.
For television, producers need to finish only what viewers will see within the frame. For one episode that Departure Films produced, the crew painted just two sides of the exterior of a house to get the perfect shot. (The owners didn't like the colour and planned to repaint it once the filming was done.)
But when you are listing a property for sale, everything down to the outlet covers needs to be done before the open house. On the shows, the producers, not the homeowners, call the shots, dictating the finishes and materials that will be featured on screen.
Not everyone, of course, wants to mimic the HGTV look. When Sydney Blumstein, an associate broker at Corcoran, decided to invest in real estate in 2014, she was determined to avoid the monotony. She watched the shows religiously, particularly the ones about flipping property, mainly for a lesson in what not to do. Reality TV producers may agonise over the details of things like cabinets, to make sure no kitchen looks like a rerun, but the overall effect tends to be a made-for-TV look, leaving viewers with a nagging sense of déjà vu, one that is often repeated in real life renovations and new construction.
"What I find fascinating with every renovation show is everybody does the exact same renovation," said Blumstein, 34, who has witnessed a homogenisation of design in the city's real estate, too.
So when she found a dated one-bedroom in the East Village, she saw an opportunity to reimagine it with an anti-HGTV look. She would expose the brick walls and reveal the beams and joists in the ceiling.
Her parents, both real estate brokers, agreed that the property was a great investment. In 2014, she bought the 650-square-foot space on East 12th Street for US$749,000, and planned to continue living with her parents on East 11th Street during the renovation.
Four contractors estimated the work would cost around US$120,000 and tried to steer her toward a more traditional look, raising concerns that creativity could cost her buyers. The fifth contractor, however, shared her creative vision and offered to do the work for half the price. "So, obviously, I hired the US$65,000 contractor," Blumstein said. "That was a huge mistake." Other mistakes followed. She hired a second contractor to fix the mistakes made by the first. The renovation ultimately cost US$120,000, exactly what the other contractors had estimated.
By the time the work was done in 2016, Blumstein's life was no longer the same as it was when she bought the apartment. She now had a fiancé, Brett Lichtman, so instead of selling the renovated apartment, they moved into it. But the space where Blumstein had once seen only potential felt cramped. So in January 2018, Blumstein sold the apartment for around US$1 million, making a US$90,000 profit, "but not enough money to pay for the mental torture of the experience," she said. NYTIMES