May 2010: Cover Story Preview

Good Deal Hunting

The life of a house flipper in an upside-down market
By Amanda Heckert

Once a week, Steve Mulligan drives from Woodstock to scout the shuttered houses of East Atlanta. Derelict, the homes have slipped through unfortunate fingers, and if it were not for people like Mulligan, there they would sit, forgotten, the sun beating down and peeling away another layer of paint.

“I want to make my houses into the nicest house on the street,” he says one spring morning, as he winds his F-150 through the circles and drives just east of Moreland Avenue. “If I can’t see that possibility from the beginning, it’s not really worth it.” Mulligan is a house flipper, prospering even in these days of tight-fisted lending. His company, Eclipse Renovations, buys mostly foreclosed homes worth somewhat less than a luxury sedan. Then, in a matter of months, they transform the properties into swans that sell in weeks, if not days.

Tomorrow, a contract will close on one more, a brick ranch in Bouldercrest Acres that Mulligan bought for $36,000. He walks through it, proudly pointing out the glass tile backsplash in the kitchen, the wall they destroyed to open up the floor plan, the finished basement. After three months of renovation, he listed it for $149,900, and it took just nine days for a buyer to bite. If the company stays on pace, Eclipse Renovations will flip around eight homes this year.

Mulligan began more modestly in 2007, just as the economy was nudging south. He was driving through East Atlanta when a shabby home caught his eye. He took his nest egg and bought the sad little rectangle for $91,000. “I’d been watching TV shows like Flip This House, and I said to myself, these people don’t even have any construction experience!” But he did—he’d been working construction, mostly in East Atlanta with local builder the Housing Group, since graduating from Lassiter High School in 1999. After four months of converting the home into a Craftsman-esque bungalow in his spare time, he sold it in four days for twice the purchase price.

When builders stopped building, Mulligan and his wife’s brother, Ryan MacDowell, quit the Housing Group and started a painting company, together flipping about two houses per year on the side. His wife, Jennifer, joined in, negotiating the contracts and the financing until their first daughter came along. Just last year, Mulligan and MacDowell became full-time flippers—the latter overseeing day-to-day construction, the former handling the paperwork.

Mulligan has a youthful, easygoing confidence, but maybe that’s because he hasn’t had to withstand much suspense. The longest one of his houses has been on the market is six weeks. “We do a better job than anyone else,” he says. “The people who can’t flip anymore, that was because of the quality of what they were doing.” He uses contractors he knows from his Housing Group days, contractors whose work will pass a stringent, “we’re going to test even the outlets” bank appraisal. “The ‘paint up and fix up’ guys—that’s what I call them—they couldn’t pass the [Federal Housing Administration] appraisals.”

Financing, even for someone with a success rate like Mulligan’s, is getting more difficult to obtain. For this last house, he approached around fifteen banks before finally finding a private investor. Still, Mulligan shrugs off the overall impact of foreclosures. “The profit margins are about the same,” he says. “Two years ago, a $70,000 home could have been turned around and sold for $189,000; now that same home could be bought in foreclosure for $50,000 and sold for $169,000—it’s all relative.” It helps that they secure the loans and contract out the work themselves, saving money by cutting out the middleman.

He did go to the courthouse steps once, just to check out the home auctions. Too chaotic. So instead, Mulligan partners with a local real estate agent, Michael Neville, to help them spot and buy foreclosed homes and to sell them once they’re renovated. “Michael’s tried to push me into other areas besides East Atlanta,” he says. “But I have a good feel for the market here; I know what the East Atlanta buyer is attracted to.”

What attracts Mulligan is the potential he can see from the street. Once, he walked into a house and found colonies of cockroaches skittering over the walls and floors. “From the outside, it looked promising, but you walked in that thing, and it was like, holy cow! But it had great curb appeal,” he says with a sigh. So he went ahead and bought it for $69,000, exterminating the roaches, ripping out the drywall, every crevice, every cavity, until it was clean. Remodeled, slate bathroom, stainless steel appliances, it sold for $165,000.

“I’d like to think there will always be a market for what I do,” says Mulligan. “But I do dread when home prices start balancing back out.”