A fresh coat of paint to fix up a distressed property and sell it for a profit just won’t cut it anymore.
“My homes go through extensive rehabilitation,” said Fairfax Station real estate investor Shawn Daghigh. “We have to tear down walls and make a lot of changes. And all the materials we use have to be first class.”
Investors like Daghigh are holding onto properties longer and putting more money up front to reap greater profits later. Quick cosmetic fixes that turned amateur investors into real estate tycoons during the real estate boom are no more, real estate experts say.
“Flipping was different then because it was a quick dollar. It isn’t anymore. An investor now needs between five and 20 thousand dollars to invest,” said Jill M. Landsman, with the Northern Virginia Association of Realtors. “The changes will take several months as opposed days, but the end game is the same.”
During the height of the real estate boom in 2004, homes in Northern Virginia spent an average of 19 days on the market. In 2010, that number was up to 52, according to data from the Northern Virginia Association of Realtors.
Daghigh purchased a 7,000-square-foot home on Clifton Hunt Lane about seven months ago for $630,000. The home will be put on the market in the next few weeks for more than $1 million, said Realtor Ellen Robinson.
“We aren’t flipping houses,” said Shawn Daghigh, of Fairfax Station. “What I do is rehab and remodel the house completely.”
Daghigh began remodeling homes about four years ago with the help of Robinson. Robinson, who works with Re/Max and also identifies herself as a distressed property expert, directs Daghigh to run-down homes in sought-after neighborhoods. Robinson purchases the homes with cash and, months later, the home is back on the market. He has worked on three homes so far, each making a healthy profit.
The home on the 12600 block of Clifton Hunt Lane was built in the 1980s, and Daghigh said the fixtures showed it. Daghigh, who owns Euro Stone Craft, a granite fabrication company based out of Herndon, has outfitted the home with hardwood floors, marble in the foyer, and Bosch kitchen appliances. Everything from the kitchen, bathroom tiles, and fireplace is brand new.
“What I do is really high-end stuff,” Daghigh said.
Daghigh hopes to sell the home quickly once it’s up for sale and take advantage of the relatively healthy Washington D.C. housing market. In May, homes in Northern Virginia sold an average of for an average price of $496,943, according to the National Association of Realtors.
The Washington D.C. metro area is the only market tracked by the S&P/Case Shiller Home Price Index to report a 4 percent annual growth rate in home sales. The index measures the national residential housing market.
Though the potential profits may be alluring, the high up-front costs of the rehabilitations may prevent the average amateur investor from reaping those rewards, Daghigh said. Also important, Daghigh said, is intimate knowledge of the construction industry, where to find the best materials, and a seasoned real estate professional who knows the market well.
“I think that this level of the remodeling is better left to the experts,” Daghigh said. The scope of the job is very expensive and the investment is very high.”
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