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Selling without dwellingIn the house-flipping game, the stakes are getting higher as the market slackensBY SHAWNA VANNESSSpecial to Newsday June 16, 2006 House flipping looks so easy on television. On an episode of A&E's "Flip This House," the Charleston, S.C.-based real estate company Trademark Properties swoops down to buy a bargain-priced, dilapidated house in a choice suburb at a bargain price. In a matter of days, rooms are razed and hardwood floors are laid. Enter new appliances, polished landscaping and fresh paint. Suddenly the gussied-up property is back on the market and quickly fetches a six-figure resale profit, and team Trademark is already moving on to the next flip. It's only one chapter in the high-stakes game of house flipping, where investors in real estate markets all around the country wager whether a home's purchase price plus the cost of repairs will turn a worthwhile profit or ring in a stunning cash loss. One thing's for certain, Long Island flippers say: It's a gamble. And the stakes have gotten steeper as the costs of materials and workers - many diverted to the South after last year's hurricanes - rise, and the local housing market slackens. Suddenly it's that much harder to find the right property that will turn a worthwhile profit. "Sometimes you can make a lot of money, sometimes you make some money, and other times you just break even," says Todd Gringer, 44, a Lloyd Harbor mortgage broker who's been moonlighting as an amateur house flipper for eight years. "It's a big expense, a lot of work and a big responsibility." One of Gringer's first flips, a fire-damaged 7,000-square-foot house in Northport, called for a staggering $180,000 in renovations but wound up netting him more than $200,000 in profit as Long Island's market began to heat up in the late '90s. Projecting profits Far more typical these says, Gringer says, is a flip that nets $50,000 to $100,000 after repairs, closing costs, interest fees and commissions. He's just finished up a "major gut" of a house in South Bellmore purchased earlier this year for $475,000. After sinking about $75,000 into improvements - new bathrooms, plumbing, floors and a custom kitchen with granite countertops, tile and high-end stainless-steel appliances - he's listed it at $679,000. Another local flipper, John McGovern, "got bitten by the bug" a few years ago after fixing up his second home, a three-bedroom, two-bath saltbox in the Hamptons. "I didn't necessarily intend to flip it," says McGovern, 41, who works as an Internet consultant in Manhattan. After spending a year making basic improvements on the weekends, he sold the property for $437,000 ($102,000 more than he paid) and used the profit to invest in a serious fixer-upper in East Hampton that landed him more than $125,000 in 2005. Now he's using his flipping profits for keeps - to build a contemporary four-bedroom, five-bath waterview dream home off Three Mile Harbor. But the stories aren't always as dazzling. Gringer says he's been shackled with a flip in Levittown for almost a year. He paid $320,000 for the four-bedroom, two-bath expanded ranch, and has shelled out another $90,000 in interest, fees and updates such as a commercial-grade kitchen and oak floors. It's been on the market since November. "I'm starting to get nervous about it," says Gringer, who's now hoping he'll at least break even. Great Neck resident Rob Sedaghatpour, who works in construction of new homes by day, says he has been running a briskly profitable side business as a house flipper for five years, specializing in updating houses built in the '50s and '60s. "Sometimes I purchase the home on Tuesday, and by Friday of the following week I have an offer," says Sedaghatpour, 28, who makes quick work of painting, clean-up and adding a new bath. Yet, he's been sitting on a finished flip in Lake Ronkonkoma for six months after expanding it from three to six bedrooms. "I can't sell it," Sedaghatpour says, citing the new non-traditional floor plan as a turnoff to potential buyers. "It's like a maze. It's not a tasteful layout." Sedaghatpour's latest project, a three-bedroom, two-bath ranch with a pool on a dead-end street in Patchogue, called for $45,000 of renovations. It's listed for $419,000. As the inventory of homes for sale increases, so does the competition for flippers. Despite brokering several successful deals over the years, Gringer and Sedaghatpour both say they're starting to feel a pinch. "The cost to renovate has increased about 20 percent because of the increase in gas prices and insurance," Sedaghatpour says. "Money doesn't go so far." Risking a handyman special And with mortgage interest rates on the rise and Long Island's recent yearly double-digit rise in home values slowing down, it could get tougher still. "If you bought a handyman special a few years back, you could do quite well as the market shot up," says Pearl Kamer, chief economist of the Long Island Association. "There's a danger in doing that when the market starts to flatten out as it has today." To assess the risk, "you have to understand what you're getting into," Kamer says. "How much can you improve the house and still get your money back out of it?" Experts say this is the most critical aspect of house flipping: determining how a property's purchase price and cost of repairs will play into its resale value, given market conditions. "You don't want to over-improve the house for the neighborhood," warns Gene Hamilton, who wrote "Fix It and Flip It" (McGraw Hill, $18.95) with his wife, Katie. And be realistic about the financial undertaking, as well. "No matter who you are, it always takes twice as long and twice as much to do the work," says Ilyce Glink, a syndicated real estate columnist. "Every month is going to cost you a lot of money." Gringer says he always hires a real estate appraiser (typical fees are $300 to $350 for a single-family house) to help establish a budget and realistic resale value. "It makes it so much easier," he says. The idea is to do the highest quality improvements you can afford that the buyer will appreciate. Once the work is nearly finished, Gringer, Sedaghatpour and McGovern say, they always use real estate agents experienced in the complexities of listing a flipped property. "It's almost always a dealbreaker," says Maryanne Robinson of Prudential Douglas Elliman in Southampton. When a potential buyer finds out, typically "they feel they're overpaying." Indeed, several amateur flippers contacted for this story declined to be interviewed, saying it could kill current sales. "That's a natural feeling for the buyer," McGovern says. "I just focus on the work that's been done." 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