Flipping rental property adds life to neighborhoods
April 16, 2017 at 10:42 p.m.
Updated April 17, 2017 at 6 a.m.
When business partners Brian Ferguson and Bulmaro Martinez, of Platinum Properties, entered a unit in a four-plex at 508 E. Convent St. in 2015, they found part of it burned, and it felt like they could fall through the floor.
The four-plex was built in 1970s and was uninhabitable, Ferguson, 31, said. The partners completely renovated the space over a six-month period and are finishing the final touches in one of the four units.
Flipping property, including rentals, is a popular trend across the country. But as the industry grows, flippers have to be careful with their investment.
Ferguson and Bulmaro have bought four-plexes and apartments on East Convent Street, Lawndale Avenue, Colorado Street, Brazos Street, Rosemary Drive and Melrose Drive since 2011. The properties were built anywhere from the 1950s to the 1980s.
One four-plex can cost anywhere from $160,000 to $200,000 to renovate, and the partners have spent more than $10 million on their rental properties, Ferguson said.
"Some of those areas were rough," Martinez, 36, said. "Myself and Bryan, we grew up in those neighborhoods. I grew up on a block from Convent. It's not bad; there are good people there. We just need to go around and clean up the area. Give people a place to stay and a place to call home. We say we can give back to the community, and it's our way of giving back."
The partners buy properties that are located next to each other so they can watch over the neighborhood and clean it up, Martinez said. With four-plexes, that can be difficult because often a different landlord owns each apartment.
They bought 21 units on Colorado Street in 2011, and when they entered the property, they found the building boarded up and homeless people staying in it, Martinez said.
"Sometimes the landlords don't have keys for the locations and say, 'Go in at your own risk,'" he said. "Behind every door was a surprise."
Ferguson and Martinez started flipping houses in a bad market. They started Platinum Properties by not being able to sell properties and then renting them out, Ferguson said.
"You look at Colorado; it was easy to turn around, but it wasn't vacant," he said. "That area, it was full of tenants when we went and evaluated those. Every door was something else. One of the units, when we went in there, the people were smoking weed in the room and didn't care that we were there."
At the locations the partners rent out, they offer 24-hour maintenance and have quarterly checks. They also conduct background checks for all tenants.
"One thing you notice once you go through that neighborhood, you start seeing people take a pride of ownership," Martinez said. "They'll start to do flower beds to brighten the area. Everyone feels they want to get out there and do something to help out and improve the area."
Ferguson and Martinez own Platinum Properties, Kimberlite Homes, Platinum Homes and Splish Splash Laundromat.
Their goal is to flip 20 to 25 rental units a year with Platinum Properties.
Their company, Platinum Homes, flips houses, and they average about 150 houses a year.
Every flipping project is different, and no profit is the same if there is any profit, Ferguson said.
"I've sold $400,000 houses and not made a profit," he said. "It's hard; it's unforeseen. One project you may make 20 percent of your money, and some you may make 5 percent."
Roland Rodriguez, 39, of Victoria, owns RCR Homes and has flipped about 10 houses from 2016 to now. He started flipping homes about four years ago and has been in the homebuilding business for nine years.
"We really try to set our selves apart and deliver quality work," he said. "If we get into a property that needs quite a bit of repair, we're going to make sure that we look at every item that needs to be fixed or maintained, and we're going to address those issues."
Rodriguez usually spends $50,000 to $70,000 on flipping three-bedroom houses. Profit can be 25 to 40 percent of the total investment, but every project is different, he said.
The last house he flipped was one he acquired through a foreclosure. He invested $100,000 into the property and sold it for $120,000.
"It was really bad. For most people, they would walk in and kind of run from the project," he said. "I assessed the property, and I felt I could really make the house breathe again and bring life back into the home and be able to provide someone with a great house."