Put “Flip or Flop” on human growth hormones, add a heaping dose of financial panic, and you’ve got “The Deed”—the latest reality TV show that reveals just how hard it is to make money in real estate.
Our tour guide through this bleak reality check? Sidney Torres, a New Orleans entrepreneur who flipped his first home at the wee age of 20 with a loan from his grandma. Since then, he has forged over $250 million in real estate deals, from condos to hotel complexes. Hoping to pass on his wisdom to others, Torres swoops in to rescue real estate developers who are foundering by offering to lend his insights and advice—for a cut of the profits, of course.
“You should always give back what’s been given to you,” says Torres. “All the success that I’ve had, all the failures that I’ve had—I believe it’s important to pass that information along to help other people who are struggling.”
In the show’s first episode, “Sold Them a Dream,” would-be flipper Nicole Webre comes to him with a residential project that is threatening to sink her and her parents, who have invested their life savings. She’s bought a huge parcel of land that once held a bakery in an up-and-coming neighborhood in New Orleans. She’s built two spec homes on the land, and plans to sell the rest of the lots in a community she calls “Bakery Village.”
The problem is, neither the homes nor the lots are selling, and she’s already a couple of years into the project. It’s costing her $11,000 a month just to pay the bank, and there’s no more cash to develop further.
Desperate, she asks Torres for $3.2 million to build eight more spec homes on the remaining lots.
But Torres knows that Webre needs a lot more than money; she needs advice and assistance. Here’s how he helps her turn around a project that seems destined for disaster.
Lesson No. 1: Price to sell
The two spec homes have been sitting complete and vacant for over a year now, and priced at $650,000 to $730,000, they’re way over the $500,000 comps in the neighborhood. Coincidence? Nope. Even though she might not make as big a profit as she’d hoped, Webre needs to pay off some of her debt and get the project moving.
Torres helps her settle on more realistic prices, and then stages one of the homes. He even offers some prospective buyers a bridge loan so they can afford to buy before their own home is sold.
Lesson No. 2: Build another spec home fast and cheap
Now that they’re on a roll, Torres walks Webre through building spec home No. 3—in 90 days, no less! For starters, he shows her how a few changes to the architectural plans can make the rooms bigger and more appealing, while actually reducing the price of construction. They also lower costs by keeping a tight rein on the contractor, and not changing things in the middle of construction, which can get expensive.
And guess what? A mere 90 days later, the home is completed and looks fabulous. It quickly sells for $20,000 over asking price, at $620,000.
Lesson No. 3: Reduce monthly debt
“I don’t know how you sleep at night,” Torres tells Webre as they go over her monthly expenses. She not only has the $11,000 loan payments to make, but she also rents an office for $2,500 per month and has a $3,500 house payment of her own. Torres persuades her to give up her office, and offers her a home equity line of credit so that she can make her other payments and not default before they get the third spec house completed.
Lesson No. 4: Market and sell the extra lots
Once construction is going on the third home and there’s an active marketing plan in place for the existing spec homes, there’s renewed interest in Bakery Village. Torres uses his contacts and expertise to enhance this. By the time the third home is completed, Webre is able to sell four more lots for $220,000 each.
How does it end?
Thanks to Torres’ magic touch, in a mere handful of months, Webre’s Bakery Village is revitalized. That means Webre is able to pay her parents back the money they invested, and she’s reduced her bank debt to about a third of what it was originally. She now has the money to build spec homes on the remaining lots. Also, once her enterprise takes off, Torres will enjoy 20% of the profits.
So, what appeared to be a huge risk in the beginning has turned into a great success. Phew! But can Torres continue to turn these wayward projects around, or will the next one be the money pit he can’t escape? We’ll definitely be tuning in next week to find out.