When Holly and Scott McKhann first met in 1991, they shared a mutual interest in buying old houses and renovating them.
The two married later that year, and two years later, they bought a fixer-upper in which to live. For a while, Holly said the idea of flipping houses for profit was put on the back burner.
The couple would eventually start Modern Pacific Homes in April 2007, and in 2008, they flipped their first home. The first house the McKhanns flipped was in Moreno Valley, California.
“We did a lot in the Inland Empire, because that was kind of the epicenter of the housing crash and crisis back in 2008, like when it started,” Holly said. “But we have flipped houses from San Diego to the north side of LA to Laguna Beach, all the way to the border of Arizona, at a town called Blythe.”
“So, we’ve done one at a time,” Holly continued. “We never bought any groups of houses, but one at a time, 250 houses.”
For the last 15 years, Holly and Scott McKhann have been buying and flipping houses in Southern California. The South County couple has worked to find the beauty in rundown homes and give them another chance through renovations and reconstruction so new families can have a place to call home.
The couple moved to Dana Point after buying and flipping a house near Dana Hills High.
“So, of course, we renovated that to live in and moved into it,” Holly said.
Now, Holly and Scott live in San Clemente and are working on renovating the house next door to theirs to move into when it’s done.
A typical flip takes an average of six months these days, Holly said. Scott added that when they first began flipping houses, banks were selling houses cheaply without a lot of needed work.
“So, it was like paint, carpet, granite, grass, and you sell it,” Scott said. “You could get houses that didn’t need a lot of work. The only way you get a good deal now is if you get a house that’s really beat up and needs a lot.”
Holly and Scott work with a variety of contractors and specialty subcontractors to tackle all aspects of the house flip.
When Holly and Scott spoke with the Dana Point Times in late March, the couple was working on 10 houses in various stages of completion.
When looking for a house to flip, Holly said she likes the house to be as “ugly and challenging” as possible.
“Anything where we can bring it from outdated floor plan and lifestyle to contemporary with open floor plan, where we can make the biggest change,” Holly said.
Scott added that it’s also important that the house is in a strong housing market where the couple can sell the renovated home at a good price. To make money on a flip, they need to have the house back on the market as quickly as possible.
“Time is the No. 1 thing, because we’re making monthly payments on loans, and we have all the carrying costs of insurance and taxes and utilities and everything,” Holly said.
The extent of renovations varies from project to project.
“We almost always take down a wall; we are scraping ceilings, adding lots of lights,” Holly said. “At the beginning of the flips, we would really just change paint, flooring, countertops, sometimes a new kitchen.”
“Now, we almost always gut the entire house: new kitchen, new bathrooms, new flooring, new windows, scrape the ceiling’s popcorn, the lighting, open up as many walls as possible, sometimes cut in new windows,” Holly continued.
Once construction is complete, the couple aims to have the house in escrow within 30 days or less, Holly said.
Nationwide, Holly noted that there’s very low housing inventory after many people refinanced their mortgages over the past couple of years.
“In today’s interest rate environment where it’s 6% for a new mortgage, people are saying, ‘I don’t want to give up my 3% for a 6% mortgage. I’m going to stay in my house and not sell, not move, even though it’s not ideal and not perfect,’ ” Holly said.
“It’s older people in two stories that want to get out of them; it’s families that want to get a bigger house—it’s all those things,” Holly continued. “People are just dealing with their imperfect housing situation, because they love their mortgage.”
Holly added that because inventory is low, desirable houses will still sell very quickly.
After flipping homes the past 15 years, Holly explained that they’ve seen lots of changes in aesthetics and home design.
“Even just a few years ago, the walls would be a gray beige color and the flooring we would often do was tile,” Holly said. “Now, we do luxury vinyl plank that looks like wood, but it’s actually waterproof and it’s really nice, really durable and indestructible, and we do white walls.”
As a former Dana Point and current San Clemente Planning Commissioner, Scott explained that his expertise helps to “speak the language of the city.”
By flipping run-down houses, Scott said the two are able to raise property values in the neighborhood.
“We renovate houses to be great houses for families,” Scott boasted. “We always are increasing the property values of this property and all the properties around it. We usually buy the ugliest house on the street and make it the prettiest house on the street.”
Scott added that it’s rewarding to breathe new life into an old, run-down home.
“Obviously, we love that it’s usually profitable, but not always, but it’s very rewarding and fulfilling that way, to take something that’s usually very ugly and run-down and make it beautiful,” Scott said. “Then, ultimately, a family or a person gets to have it and that’s their home, and it’s going to be their home normally for a long time.”
Discussion about this post