Flipping Houses: Not for the Faint of Heart

Meet two seasoned house flippers who are always looking for the next hidden gem.
3:00 | 03/29/14

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Transcript for Flipping Houses: Not for the Faint of Heart
Test Text1 italics Test Text1 plain Tonight, you're going to meet women taking BIGS risks. What does it take to take a home wreck and make it into a dream home. For the last few months, cam and I have been redoing a house together that we're going to flip. I have to say, it's going great. Take it from "Modern family" trying to flip houses is not for the weak hearted. Now we know why David couldn't afford any clothes. It turns out, clief does imitate art. This is the only bathroom? It is the only bathroom. It's Monday morning and we're in Charlotte, North Carolina, following a pair of real house flippers. Do you know anything about the electrical or the pluming? I don't think it's been updated. Two women who have been in real estate for decades looking for their next big score. But this property looks like a home buyer's nightmare. 1,100 square feet of hidden horrors. I saw from the exteriors, the windows would have to be replaced. There's definitely a good bit of wood rot. Wood rot, dated bathroom and a special surprise in the master closet. I don't imagine this is just kind of put paint on it, fix it up. This is a major redo. With the housing market improving since the crash of 2008, home flippers are taking advantage of the turnaround. What did you think of this one? Well, it's a lot of work. But it would be a great proper city to flip. Flips in North Carolina are up 35% in the last year with flippers averaging $37,000 gross profit per property. Kim and maria say this $175,000 property with the right renovations and additions could sell for as much as $500,000. But there are no guarantees. You're looking at 35 to maybe 40. Thousand? TV shows about flipping are everywhere, from "Flipping Vegas" to rehab addict." They make it seem like it's an investor's playground if you know what you're doing. Across town, Lisa, a stay at home mom and her friend armela and her sister are first-time flippers trying to get into the game. A lot of people say you should never get into business with friends and family. We did both. And they're hoping there's still money to be made. We definitely missed the heyday of really cheap housing, but then we were worried we would have trouble reselling it. After losing out on six other proper R properties, they bought this modest three bedroom for $150,000. What did it look like when you pulled up? Awful. It was awful. The kitchen floor was sinking in. You walked in and you were kind of crooked. The yard was a jungle. The surveyors still can't figure out exactly where the property line is. They put $60,000 into the project, figuring things out as they went. That looks like a standard. What do the husbands and the kids say when you told them we're flipping? He was a little nervous. Then when we took out the mortgage, he was a little more nervous. Then when we had to put in money, he was a little more nervous. Because it's never a sure thing. That's where the first rule of real estate comes in -- location, location, location. Some of these properties are vacant. You would really rather be safe than sorry. Not every market is as friendly as Charlotte. We have to figure out if we want to tear it dun on rehab it. He's flipped 60 properties across the country. His latest acquisition in Dallas is a 91930s bungalow. And it's become quite a challenge. It's not worth the effort. And this yard sucks. It sucks. He knows it takes a tough skin and a tough dose of reality to be successful in the flipping game. This can't be a first project, a second project, not a fifth project. You've been doing this for five year, then maybe you can start to look at something like this. This isn't something someone should dive into. He helps first-time slippers dive into the market around the country. No money down, I'm going to make $100,000 in two weeks, I think people oversimplify it and they don't take enough time educating themselves. Back in Charlotte, Kim and maria realize making a profit can be tough. To make this work as a liing, you've got to be working four to five to six. In a year? With 12 flips you should their belt, Kim and maria are scouting this up and coming area. They already have one home going up on this block. The people that owned it and lived it in for 40 years were actually here to watch it go down. 313 McDonald will be no more. Of this used to be a 1,200 square foot home. But for $240,000, Kim and maria tore it down and are completely rebuilding a 3,800 square foot house that they recently put on the market for $950,000. I think the toughest thing right now is finding the deal. Two years ago, you were able to find this kind of property over and over and over again. They aim for an average return of 25% to 30% on each rehabbed property. It's not easy. Most people lose money on flips. I know a lot of people they can do a lot of the work themselves and then when it becomes complicated then they have to hire other people and they haven't B factored that cost in. We need the lighting for sure. And they bargain hunt for everything. Because every dollar saved is another dollar in their pocket. When rehabbing, the key is to fix it up, not glam it out. Not every house needs to be rehabbed to the level my wife might want to live in. It needs to be rehabbed to the neighborhood so it will sell as any comp in the neighborhood. The first-time flip was finally finished after tearing down a wall, removing the chimney, gutting the kitchen and surviving a snake encounter. Twice. Two different ones. Reporter: This past November, they listed the property for $275,000. What did you really think of this one? I think personally for me, we want something we can grow into. I think it's priced well. But even after a successful open house, they still don't have any offers. And that leads the women to seriously assess their finances and how long they can keep the house on the market. I think we're okay to hold till January. But every time we have to make a mortgage payment. January came and went. The house sat unsold. When we listed it, we had the same dream everyone else has, selling it in 30 days. It didn't quite happen that fast. Now four months later, it's under contract for $233,000, not quite the $275,000 sale they were expecting. They'll be splitting the $25,000 profit three ways. We didn't want to lose money on the deal. We definitely wanted to see if we could work together without killing reach other and we wanted to learn a lot along the way. The fact that we made money is sort of icing on the cake. I think we're likely to do it again. Our thanks to Rebecca Jarvis. Next, behind the scenes with the

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