If we were ever going to get into the flipping business, we’d certainly opt for a strategy similar to the one featured in today’s House & Home section of The Times. John Alvarado and Blair Gordon seek out run-down, below-market properties in high-end neighborhoods and then renovate and style them as if they planned on living there the rest of their lives. This strategy has been extremely successful for the pair over the twelve houses they’ve bought and sold over the past four years (though it’s only fair to say that even flippers with bad taste and little attention to detail have also flourished in the booming market). However, by focusing on “aspirational” communities with limited supply of housing, the duo think they are hedged somewhat against a cooling market. They figure that their current profit margins of 40 to 50 percent might go down to 30 percent if the market levels. Personally, we think it would be a blast to do what they do for a living, but we aren’t as optimistic that about what would happen to their profit margins if the market actually went down. We certainly think quality renovators like these guys are adding value that is rewarded in the market–but we think this value creation is far overshadowed by the direction of the overall market. Of course, that kind of caution is why we’re sitting here in a dingy cubicle and these guys just put over a million bucks in the bank from their most recent project.
Flipping With a Twist [NY Times]