Flipping a house doesn't have to cost a lot to yield a high return on investment, HGTV host Tarek El Moussa told Homes.com.
In an interview, the real estate investor and host of HGTV's "The Flip Off" recommended that sellers focus on properties that need only those easy, cosmetic fixes. “Most people don’t understand that the houses that only need $10,000 to $15,000 of work are the ones you can get a bigger return through things like staging or furniture or painting,” El Moussa said.
If flippers want to do renovations on a budget, El Moussa said, they should prioritize spending money on a good contractor and less on a home designer. Then, shop for discounts on, and keep track of, material costs, he said.
It is very difficult to flip a house if you have no experience, he added. There are many tasks to perform, such as pulling permits and finding a competent contractor.
Red flags to look out for in properties are cracks in walls, termites, drooping rooflines and water damage, he said. “Trust your eye. How would you want this to look if you were buying?”
El Moussa has done more than 1,000 flips and has hosted several HGTV series, including "Flip or Flop," "Flipping 101," "The Flipping El Moussas," and "The Flip Off." He is the founder of Tarek Buy’s Houses, a wholesale and fix-and-flip real estate company; Homeschooled by Tarek, a real estate education company; TEM Capital, a real estate investment company; and Homemade Production, a production company. He began his real estate career as a successful agent and switched to flipping homes after the Great Recession.
'It was trial by fire'
To be sure, El Moussa is known for renovating high-end homes with luxury materials, but he didn't get his start that way.
“It was trial by fire,” he joked. On his first deal, El Moussa bought a condo by bidding $150,000 at a courthouse auction. He invested $13,000 and made a net profit of $34,000.
“I never looked back after that,” he said.
What is the most important lesson El Moussa said he has learned in his real estate flipping career? You get what you pay for, he said. "At the beginning, I hired many random people who said they could do tile, paint, install cabinets. After the work was done … it was apparent they lied and had no idea what they were doing, they just needed fast cash."
The next important lesson? Get everything in writing. “Many times I made verbal agreements trying to save money, and I got burned."
Also never pay ahead of schedule or without verifying the work. It happened to me "many, many times until I learned never pay in advance."
El Moussa recently used his business strategy for a client in Texas. The client was advised to list a home for $570,000, he said. With El Moussa’s help, the client invested $19,000 and then listed it for $619,000. The property sold in the first week at $641,000, he said.
The Texas project was part of a new business El Moussa is launching on TikTok. The business, which El Moussa will publicly announce after finalizing the details, will help homeowners fix up homes, connect with licensed real estate agents, and stage properties.
HGTV star is optimistic about the housing market
El Moussa said he believes mortgage relief is on the horizon — and with it, a wave of opportunity for buyers and sellers alike.
“Every time rates drop, a whole new category of buyers appears,” he said. “If you go from 7.5% to 5%, it is an exponential difference in the number of people who can buy."
“I am getting ready to buy a lot."