Preston Tedesco comes from a family of real estate developers. His grandfather lent him the money for his first property, which he successfully flipped last year while he was a full-time law student. It made him a profit of $70,000.
Looking to make a name for himself in the New Orleans real estate world, the 24-year-old set out to do his second flip without the help of his relatives.
He found a rundown, 100-year-old shotgun home in the Bywater district with a lot of potential, and while Tedesco had some money to work with — $25,000 — it wouldn’t be nearly enough. He estimated he would need a total of $275,000 to buy and renovate the property.
That’s where real estate mogul Sidney Torres came in.
Torres, who uses his own money and expertise to help struggling property investors on CNBC’s “The Deed,” offered to partner with Tedesco 50-50 and put up the remaining $250,000. Half of that money would be his own investment, the other half would be Tedesco’s loan and they’d split whatever profit they earned after selling.
Tedesco agreed to the deal and they bought the property for $175,000. Then they started a three-month long renovation process with a $100,000 budget.
The process taught the student a valuable lesson, and one that he would pass on to other young home flippers: Don’t cheap out.
Before working with Torres, “My whole mindset was: Do this as cheap as possible, flip it, get out,” Tedesco said on Wednesday’s episode of “The Deed.” “But sometimes that backfires and it sits on the market like a bunch of houses in this area that also didn’t spend the money.”
As he learned from the real estate veteran, certain details are absolutely worth the price tag. For this particular flip, Torres encouraged him to spend more to replace the cheap, aluminum windows and to invest in two gas lanterns for the exterior of the home.
“In New Orleans, it’s a sin not to have a gas lantern on the outside of your house,” Torres said on the episode. They can cost up to $600 per light and it’s “something that most people won’t spend the money on,” he added, “but it’s a little detail that goes a long way.”
Another detail that is often worth the splurge is a skylight, Torres tells CNBC Make It. They can open up a dark interior kitchen or bathroom, and, while they can "cost a little extra money, I think it pays off in the end.”
Don’t cut corners when it comes to the closet, either, he says: “A lot of people cheap out and get cheap closets made, but there are other ways to save costs than to cut in the closet. " Since it’s “an area that people can touch and feel and envision their clothes in,” Torres prefers “very nice, custom-made closets. … Lots of drawers, hanging space, and storage."
The details that Torres and Tedesco invested in paid off: They ended up selling the home for $449,000 and both walked away with $77,000. That’s chump change for Torres, who has made millions developing properties, but it was a big win for 24-year-old Tedesco, who’s now collected a total of $147,000 on his first two flips.
Like this story? Subscribe to CNBC Make It on YouTube!