THE HOUSING NICHE: Kelly Johnson and Wess Walker flipped this central Springfield house from an overgrown mess, below, to a sellable property.
Opportunity Knocks: House flipping trend slow to catch on locally
With multiple shows on HGTV and across cable TV, flipping houses is all the rage in America’s metropolitan areas, but move into the Heartland and the picture gets fuzzy.
However, the potential is there. Wallet Hub ranked Springfield the 19th best city out of 150 nationwide to flip a house in 2016. Cities were ranked based on house-flipping market potential, renovation and remodeling costs, and quality of life.
So where are all the flipped houses?
Charlyce Ruth, CEO of the Home Builders Association of Greater Springfield, said the industry is nonexistent among members.
“The people I knew that had done it several years ago said they’re really not doing it anymore because they’re unable to find the deals that they need to make it work,” Ruth said.
But Wess Walker, owner of Ozarks Real Estate Investment Consultants, flipped close to 100 houses in the Springfield-area in 2016. Ruth had never heard of Walker’s company. So though inconspicuous, house flipping is happening right under Springfield’s nose, and it’s starting with Walker.
Walker has worked in real estate for 14 years. He started Ozarks Real Estate Investment Consultants in 2014 centered on two aspects: investing to rent and investing to flip. Through the funds of investors, Walker purchases foreclosed houses directly on the courthouse steps then either renovates them to flip, aka sell, or renovates them to rent. Eighty five percent of Walker’s houses are flipped and 15 percent go up for rent. Houses that he purchases can cost anywhere from $20,000 to $1 million.
“Missouri is a trustee state, so what happens is when you quit paying your mortgage they hire a lawyer to force the sale of your property literally outside the courthouse,” Walker said. “They put in a starting bid and what I do is buy it out from the bank as the bank is trying to get it back. Then I have to immediately wire that money to the trustee.”
How it works
After Walker purchases the house, he performs the rest of the legwork – plans renovations, directs his eight employees for renovations and lists and sells the house.
“It’s a really intricate business because of the way the foreclosure is handled,” Walker said. “You have to do your own due diligence, and it’s a lot of time and energy.”
Walker’s mother, Isabelle Walker of Eagle Management & Realty 1 LLC manages the rental houses. Recently, his fiancee Kelly Johnson became Walker’s real estate agent. She holds her license through Isabelle’s company. Johnson closed over $4 million in 2016 sales.
Wess Walker said there is opportunity in the market for house flipping. He’s created his own livelihood by it.
“If anyone goes to the courthouse steps, no matter what, I’ll be there,” he said. “I’ve assembled a group of investors together to be able to buy any and everything that comes across the courthouse steps. We might buy five houses in a week and still try to buy everything the following week.”
Walker said he works 10-14 hours seven days a week to maintain his company.
HBA’s Ruth said the builders and remodelers that are members of the HBA are so busy building new homes and remodeling for customers they don’t have time to do the legwork required.
“If you just have a business that all it does is flip houses, it makes perfect sense to me,” Ruth said. “But if your day is already chock-full meeting with your customers that you’re building new homes for, and that’s what you have your passion for, that is where you’re going to put your focus.”
The profit plan
Walker calls his investors “flippers,” though many of them never see the houses he purchases. They provide the cash for purchases, then reap the benefits when the house is sold or rented. Walker said all profit goes to the investor, and he gets paid a fee based on the value of the property, usually 5 percent of the purchase price, or on profit sharing with the investor. Profit is dependent on how much they purchase the house for and how much they spend on renovations. Walker said it’s really difficult to put a price on renovations because it changes so much from house to house.
“Sometimes it’s $8,000 to $30,000 to $50,000,” he said.
Walker said renovations span from painting the walls and replacing flooring to lawn care and putting in new roofing. He roofs about 35 houses per year.
“You take someone’s depreciated house that they lived in for a while and been struggling to pay for and then you have somebody else come in with a fresh perspective and pour money into it and take the rough house on the street and make it the nicest,” Walker said.
Walker flips houses across the Springfield area, including currently in the Oak Knolls, Sherwood Forest and Ravenwood South neighborhoods.