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Are serial renovators a danger to society? Do they drive up real estate prices, make unconscionable profits, scoop up the bargains before the rest of us can get there, and crowd the aisles at the Home Depot? Have they made trading places the most rewarding game in the Hamptons?
For some people moving around for profit becomes a way of life as well a way to help make a living. I met a woman who has lived in four houses in the past six years, each in a different part of the Hamptons.
She seeks out houses that are undervalued—a relative term in the world of real estate. This usually means that the house is not up to today’s standards and in tune with today’s tastes. Until a few years ago that commonly meant 1950s or 60s looks: pastel baths, avocado appliances, orange carpeting and a few other outstanding indicators of age and lineage. While we are starting to exhaust the supply of feeble ranch houses, there are still plenty of alarmingly unacceptable looks from other periods in this trendy society we live in.
The next step is of course to get rid of the unspeakably dull, drab and dingy, the frumpy, bedraggled and passé, all that is dowdy, démodé and square. Throw all that is unstylish in the dumpster and replace it with today’s prescribed good taste. In other words, renovate for the market. Pile on the upscale, regulation details, the columns and French doors and wainscoting, the Waterworks sinks and Restoration Hardware lighting.
After that, the formula goes, you resell for a hefty profit and move on to the next project. There is a whole subculture of people who pursue this in the Hamptons. And they are not developers because they actually live in the houses. Include the clever decorators and architects, of course, but also lawyers and accountants and farmers and real estate agents.
Does it pay? Do serial renovators come out better at the end of the process than their more settled neighbors? Are the rewards enough to justify the routine horrors of packing and moving?
While the presumed answer is yes, it turns out to be less self-evident and more nuanced than that. Let’s take the case of the lady who has moved four times. She makes a profit on each house, but what appears to be a massive gain is, after all the expenses of financing, closing, commissions and moving, more a moderate and reasonable profit than a killing.
Four sequential rehabs will have put our lady ahead of the game but probably by a slimmer margin than she thinks. And those extra profits actually came from her skills as a renovator rather than as a real estate investor. Her big bottom line benefits come from the escalating value of real estate in what has been a boom market.
Had she remodeled and held onto the first house and sold it six years later, her total proceeds would certainly have been less—but only marginally less—than the consecutive sales. The snappy pace of prices helps those trading places—but only during the time they are in possession of a property—and it helps those of us who are less mobile just as much.
But there is another dimension. People who flip houses are motivated, I think, by more than just money. There is the challenge of finding the right properties and being creative in overhauling them, not to mention the fun (for them) of living, briefly, in so many neighborhoods.
But what do I know? I’ve moved twice in last 32 years, and covered a distance of four miles.