Rising Market Brings out High End Flippers

Soaring prices in Brooklyn for move-in-ready brownstones are attracting high-end flippers who renovate problem properties from the ground up with structural reinforcements, change C of Os from SROs, add central air, and restore or re-create historic details. It might be more accurate, in fact, to call them developers rather than flippers, since construction can last as long as a year.

In neighborhoods such as Carroll Gardens, Park Slope and Cobble Hill, where a 19th century brownstone with state-of-the-art mechanicals, kitchens and baths combined with historic detail in the formal rooms and bedrooms command prices of about $1,000 per square foot, a high-end renovation will sell faster and for a better price than a standard flip job, said developers working in these areas.

Take, for example, 377 6th Avenue in Park Slope, a HOTD here last year. The Anglo-Italianate brick row house with a bay window was listed, went into contract, and closed within two and a half months, according to StreetEasy. The ask was $2,975,000 and it sold for $2,847,500, according to PropertyShark.

Developers Nick Faselis and William Ruggiero reinforced the structure, repointed all the brick inside, changed the C of O from a two-family to a single family, and added herringbone floors, gothic marble mantels, built-ins, a marble bath, and other top-of-the-line finishes usually seen only in custom renovations.

The final sale price worked out to $972 a square foot, even though the house is less than 17 feet wide.

Most of the projects undertaken by Seth Brown of Aspen Equities are modern, but at 392 Dean Street he rebuilt the mid-19th century wood frame house to look as it might have once, adding a slate mansard roof, a stoop to replace the one that was missing, and salvage marble mantels of the type likely in the house originally. (Above, he showed us one of the mantels while the house was under construction.) The bathrooms and kitchens are modern.

He kept one unit for himself. The other one went on the market in April, and by July was in contract, according to StreetEasy. It closed in October for $1,800,000, Brown told us.

He recently bought 111 Clarkson, a famously dilapidated Victorian in Prospect Lefferts Gardens the AIA guide described as “berserk eclectic,” where he plans to build a green apartment building. The original building has severe water damage, and he is not sure it can be saved.

On the same block as 392 Dean are townhouses that have been restored to their original appearance, a couple of Fedders-type buildings, and a somewhat Flemish-looking building with lots of balconies that appears well made but out of place in Brooklyn.

“Sometimes I think developers should be licensed,” he said half jokingly.

Alex Barrett of Barrett Design and Development has been doing high-end condo conversions in old brownstones and commercial buildings in Carroll Gardens for almost a decade, and has recently branched out to other areas. At 240 Carroll Street in Carroll Gardens, he restored the brownstone facade and preserved original details such as the staircase and elaborate plasterwork in a hall ceiling, while modernizing the kitchens and baths. He typically spends $150 to $200 a square foot on renovations, depending on the state of the building. When he started in 2005, selling prices averaged about $600 a square foot.

A lover of row house architecture, he was inspired to get into the business because he saw “the quality of small-scale real estate development was pretty low” in the area. “We believed that with an emphasis on good design we could do better,” he said. “We’ve found that our work resonates with people seeking a home in Carroll Gardens, many of whom are in creative industries themselves, and are at a similar point in their lives as we are.”

The trend is waving out to other neighborhoods, and pushing up asking prices there. Developer Jonathan Schippers of Steering House Design and Development bought 1234 Dean Street in Crown Heights when it was an SRO and completely restored it as a one-family. He removed the paint from the brownstone and brick exterior, exposing the house’s terracotta details. He restored the marble sinks in the passthroughs, gutted and restored one bathroom with its original sink and tub, and gutted another and redid it with a new marble tub and sink.

He opened up the back of the house to the garden using a steel beam for reinforcement and created an entirely new kitchen around the original stove from the 19th century. (For pictures, see below and our story about the Crown Heights house tour this year.) He restored the pocket doors and the light fixtures, most of which he found in the basement. He upgraded the mechanicals and installed new old-fashioned push-button light switches throughout the house. He even added Victorian-style hinges. He is in the process of converting the house from its SRO status. The ask is $2,195,000, and the house has received several offers since it went on the market in late August but is not in contract yet.

Schippers is also working on similar projects in Clinton Hill and Cobble Hill.

Although high end renovations that preserve historic details do better in expensive neighborhoods than cheap flips that remove them, nonetheless, such projects are more a labor of love for developers because they are so small. It’s something they want to do that the market makes possible.

“Commercial projects are needed in any developers portfolio,” said Faselis. “They give you the financial means to do the projects you love, but won’t get rich from.”

The biggest challenge at the moment for these types of projects is finding property at a price that makes sense. A homeowner occupant can always afford to pay more since they are dealing with a longer investment horizon, said Barrett. Low inventory and rising demand, plus added competition from investment-backed firms looking for rentals and able to pay cash, have pushed up prices in the last year or two.

Developers have turned to other projects as varied as renovations for homeowners so their teams don’t sit idle and developing properties in the Middle East.

High prices and the lack of inventory are also spurring new townhouse development in Brooklyn, both modern and vintage in style.

The desire among buyers for new mechanicals combined with original details is even influencing flippers at the low end and in the mid-range and causing them to modify their formula slightly. Now instead of ripping everything out, they’ll keep the mantels and expose some of the brick.

Those are selling quickly and for high prices too — although not as high as a top-of-the-line renovation in the same neighborhood. Take 900 Lafayette Avenue in Bed Stuy, for example, a recent House of the Day. It closed for $950,000 in October. “Identical houses were going for $600,000 last year,” a neighbor told us.

A low cost flip does not have to mean losing historic details. In Oakland, Calif., developer Mila Zelkha, owner of Mint Condition Homes, is known for low-budget flips that preserve and in some cases restore original details, such as Craftsman-style windows. Typically early 20th century bungalows, they sell for under $500,000. But so far, to our knowledge, no one has done this in Brooklyn.

Above, a restored light fixture at 1234 Dean Street in Crown Heights. Almost all the light fixtures at 1234 Dean Street are original to the house and were found in the basement.

A bathroom at 1234 Dean Street was completely gutted, replumbed and retiled. The tub and marble sink are original.

Above and below, a mix of architectural styles on the Park Slope block where 392 Dean Street is located. The blue house with the mansard roof below at far right is 392 Dean Street.