Lucrative New Life for the Obsolete: House Flippers Are Back Post-Bubble

Standing on a sloping, Astroturfed porch in the historic section of Anacostia, David Garber pries a plywood board off a gaping doorway and enters a crumbling rowhouse. Inside the cave-like interior, chunks of ceiling and debris litter the floor, and a hole in the wall forms an eerie portal to the equally dilapidated townhouse next door.

The space is suitable enough for the dead rat on the ground and the family of feral cats that has taken up residence in the backyard, but Garber, 27, envisions inhabitants of a different sort: humans who love granite countertops, crown molding and a chance to live in what is perhaps Washington’s next up-and-coming neighborhood.

Between October 2009 and October 2010, the Washington metropolitan area had higher price appreciation than any other area in the country, according to the real estate industry’s S&P/Case-Shiller home price index. On average, local home values increased by 3.7 percent over the course of the year. For individuals rehabilitating homes in a post-bubble world, this news is especially welcome, since it means neighborhoods in transition — such as H Street, Petworth and Anacostia — are that much more suitable for flipping property.

Also contributing to the flip-friendly atmosphere in many parts of D.C. is our “fairly large stock of housing from the beginning of the 1900s,” according to Adrian Hunnings, president of the Greater Capital Area Association of Realtors. Some of Washington’s aging properties are what Hunnings calls “functionally obsolete” — elegant but not practical for habitation without renovation. Cue the ambitious rehabbers.

Garber, who is in the process of purchasing the two adjoined properties built circa 1905, left his desk job at a real estate company two-and-a-half years ago to become a full-time house flipper. He now buys properties in the Anacostia neighborhood (which he lived in for three years and blogs about at Anacostianow.com) and transforms them into sleek, modern abodes.

“One of my favorite parts about the project is seeing a house go from … totally disgusting to being something that a future owner can be proud of and [that] can be better for the neighborhood,” Garber says.

For his last project, he purchased what would become a three-bedroom, 2.5-bathroom, 1,200-square-foot house in Anacostia for $88,000. He spent approximately $120,000 on renovation and sale costs, and then sold the place for $236,000. Much of the $28,000 profit will go toward future projects.

“At this point, I’m kind of just doing one investment house at a time, and so I’m putting in a ton of money to [buy] the house … and renovate it,” Garber says. Until each house sells, he lives frugally. “It’s not a stable thing; it’s very up and down. But, obviously, right now is not the best time to be looking for other employment.”
It is, however a good time to be purchasing property.

“Based on the fact that interest rates are relatively low but starting to climb and that D.C. home prices bottomed out in late 2009, buyers are finding now to be the best time to buy in this area since 2004,” Hunnings says.

Tim Barley, a 27-year-old full-time real estate agent, shares that appreciation for today’s market. Across the river in the H Street NE neighborhood, he’s in the middle of his own renovation — the third house he’s flipped on his own. He tracks saw-dust across an unfinished wood floor as he walks through the property he and his business partner/wife recently purchased for $265,000, located on a tidy block of trendy rowhouses. It’s early in the morning and a crew of workers trickles in to complete the makeover that is well under way in the two-bedroom, two-bathroom house with an in-law suite basement. Barley hopes to spend between $100,000 and $200,000 on renovating the property and to eventually put it on the market at $499,000, creating the potential for a range of profit margins.

“Because interest rates are historically low, the cost of entry into the market is low,” he says, which helps beginners make their first purchases and enables repeat flippers to progress to pricier properties.

Although houses can sometimes require near-gutting, Barley was able to save the H Street space’s floors and banisters, searching for matching stair rails at local architectural salvage stores. He also found and added Capitol Hill casing molding of the same style that would have been in the house when it was built.

Just a mile away in the Kingman Park neighborhood, Jennifer Macomber is selling a house of similar size and quality in the high $300,000s — her sixth flip. It’s a three-bedroom, 2.5-bathroom, 1,800-square-foot space with a finished basement.

Macomber paid $130,000 for the property and says that she put between $150,000 and $250,000 into its renovations, which included gutting its deteriorated interior.

The neighborhood doesn’t have quite the same eclectic aesthetic as Barley’s — row after row of red-brick, identical two-story townhouses line the Kingman Park streets, creating a certain monotony. But the interior, just like its cousin in the H Street neighborhood, looks ready for furniture from West Elm or CB2, two catalogues that Macomber drew inspiration from when creating the interior design.

Couches, chairs and beds help furnish the space. The carefully staged appearance is just one of the many additional costs that creep up after a rehab. Realtor fees, taxes and carrying costs are others. Macomber’s D.C.-based company, Great Space Development — which she co-owns and runs out of her house with her husband — uses a builder, architect and subcontractors, too. Macomber, 40, does the interior design.

The art of good house-flipping has some obvious musts, she says, such as classy kitchens and elegant bathrooms. But a current trend, according to Macomber, is the open floor plan in which living room flows into dining room, which flows into kitchen, in one seamless continuum of space. It’s a layout that she’s employed at the Kingman Park property and one that Garber used in his last flip in Anacostia.

“To be honest, I fought it at first,” Macomber says. “I like some walls. But I’ve come to really appreciate the kind of beauty and the kind of social, communal feeling that those big, open spaces can provide.”

Macomber also fights the term “flipper,” which she thinks harks back to the cheaply flipped turnarounds that flooded the housing market around 2005.

“Flipping is about quick profits and cosmetic improvements,” she says. “My company is about completely rehabilitating homes, making them beautiful and contributing to the neighborhood. We are in it for the long haul.”

Garber, however, is OK with the professional moniker; rather than dashing the word from public memory, he hopes to improve its connotation by placing a premium on high-quality improvement over personal profit in all of his projects.

“I’m buying the house with the intent to just sell it after I renovate it, which is just flipping,” he says, “so I’d rather reform the word.”

In the end, it’s not so different from what he’s doing with his houses.

Written by Express contributor Becca Milfeld
Photos by Kevin Dietsch