Who’s to Blame for the Mortgage Meltdown? You? Me? Or “Them”?

October 15 2008   With the capital markets frozen and the world economy in crisis, everyone is looking for someone to blame.  The airwaves are full of politicians and pundits lashing out at this party or that party.  The Obama-Biden team blames runaway de-regulation dating back to the Reagan administration.  John McCain blames the rampant “greed and corruption on Wall Street” while his running mate likes to wave her school-marm finger at the “predatory lenders”.  Some conservative talk radio hosts blame consumers for not taking “personal responsibility” while more liberal commentators lay the blame squarely at the Bush administration.

 

We’re all swayed by our own reality and frame of reference.  But I can tell you one thing, I’ve worked inside the system and I could see things unraveling years ago.  The system is broken and has been rotting from the inside-out for many years.

 

When I got into real estate investing full time, the first thing I did was get my appraiser’s license as I felt that was the best way to learn the fundamentals of the industry.  I freelanced for two appraisal companies (more on the life of an appraiser in a separate posting) and had a handful of my own clients who were mortgage brokers.  Banks worked only with the most senior, experienced appraisers who might sub-contract the work to less-experienced appraisers such as myself.  But mortgage brokers preyed on new appraisers who they knew were the most desperate for the work and would do whatever it takes to deliver the desired outcome.  Banks paid their appraisers within days – mortgage brokers paid whenever they felt like it, if at all.  And if pressed for payment, they’d drop you for another new appraiser.

 

I can attest first-hand that appraisers have been under tremendous pressure to “hit the number” – that is, bring the appraisal in at the value needed by all parties – sellers, buyers, agents, mortgage brokers and bankers – for the deal to go through. 

 

What does this mean?  OK, think back to the go-go years of 2003, 2004, 2005.  Values are rising up to 20% per year.  An aggressive seller prices his house high.  An eager buyer, convinced by his agent and financial advisors that values are rising fast, agrees to the price – or offers an even higher price to best any competitive bids – and applies for a mortgage.  Both the buyer’s and seller’s real estate agents as well as the mortgage broker and bank all have an incentive for that price to be as high as possible as everyone along the chain is earning a commission on that sale price.  The mortgage broker – or the bank – hires the appraiser and seeks the one who they know will turn the appraisal around the fastest (2-3 days) with the fewest problems. 

 

The appraisal must be based on “comps” – or the actual sales of comparable homes in the neighborhood during the past few months.  Not listings, not pending sales, not sales that fell out of escrow but actual closed sales.  There are tight guidelines for what kinds of sales are appropriate comps – they must be in the immediate neighborhood – across a busy road or higher up a hill should not be used as neighborhoods can change within a block or two.  Houses larger or smaller by a factor of 20% should not be used.  Houses of similar condition are sought – if the “subject property” (the house being appraised) is a fixer or newly renovated, than the comps should also be fixers or recently renovated.  Amenities such as room counts, bathroom counts, fireplaces, pools, views and number of garage spaces are all considered.  The appraiser finds anywhere from eight, nine, ten or more potential comps and narrows the choice down to three to five for the appraisal report.  Adjustments are made to each comp – adding or deducting value to account for differences from the subject property.  It is three parts science and one part art and requires sound judgment, in-depth knowledge of the area and experience.  The appraiser has the most at stake here as any mistakes or the slightest appearance of fraud can lead to loss of work or worse – lawsuits or loss of their license.

 

Aggressive seller’s agents often meet the appraiser with stacks of “comps” they’ve pulled.  They do this under the guise of being helpful but their real motive is to try to ensure that the appraiser uses the best comps – the highest sales – for their reports.  These comps, however, are rarely useful and the appraiser is discouraged from accepting them.  They pull from better neighborhoods or larger homes in better condition.  Since refusing them will raise red-flags with the agent, the savvy appraiser accepts them with a smile then throws them away.

 

During the recent real estate boom, mortgage brokers (like my clients) would call and say “I need this house to come in at $X”.  Right off the bat, this is a violation of the ethics rules as they are not supposed to pressure the appraiser or influence the outcome.  It wasn’t unusual for the mortgage broker to call two or three appraisers and ask each one for a verbal confirmation on that phone call that they could “hit it” before they’d be hired – also a violation.  If the appraiser couldn’t meet that number, this could kill the sale which would incur the wrath of all parties so that appraisal would be thrown away and a new appraiser hired until they got the results they wanted.  When this happened, everyone accused the appraiser of incompetence and that appraiser would not only not get paid for his work (anywhere from $350 to $1,200) but would be black-balled from any future work from all parties involved in that deal.  It only took one or two such instances to kill a career.  Appraisers who cooperated were highly sought-after and got lots of work from strong referrals throughout the industry.

 

Appraisers did not stand idly by.  They were screaming bloody murder at anyone who would listen – banks, industry organizations, even the press.

 

So who’s to blame for the current crisis?  I blame the legislators who created a system that motivated and rewarded inflated values if not outright fraud.  The consumer is the hapless victim and is the last person who should be blamed.  The consumer was just following the advice of experts they relied on and the government who encouraged them through tax incentives and a steady drumbeat of homeownership as “The American Dream”.

 

What Does the Wall Street Bail-out Mean For You*?

* By “you”, of course, I mean “me” – unless you’re also a Beverly Hills real estate investor and flip-artist.

 

October 3 2008   Excuse me for not posting for a couple weeks, but I’ve been glued to every and any news source I can find to follow the meltdown of our financial system – and staving off my own emotional meltdown in the process.  Regardless of your politics, there’s plenty of blame to be shared across both sides of the aisle and this has been a long-time coming.  Like many of us, I’ve been hearing dire warnings from friends on Wall Street for over a year and dismissed them as kill-joy doomsayers like the crazy guy on the street-corner with the “The End Is Nigh” sign.  Let’s just hope he’s not right, too.

 

The silver lining to this gloomy black thunderhead of a cloud is that this could usher in a whole new era of better government, better oversight, stronger regulation and a newer, stronger, more vibrant and sound economy that opens new opportunities for all of us.  Or not.  We’ll start to find out a month from now.

 

Preparation plus opportunity equals success.  It’s an old saying with many taking credit for it but it’s true and timely.  Every change – no matter how painful – brings opportunity for those who are able to identify it and adapt to take advantage of it.  The real estate business will fundamentally change.  “Flipping” houses may or may not be a viable strategy at least for the near future but plenty of opportunities will exist – some we may not even have thought of yet.

 

The bright spot in the otherwise dreary real estate market up to now has been the high-end.  As the American middle-class weakens, the world’s rich have been getting richer as evidenced by the over-the-top demand for ultra-luxury goods including million-dollar cars and diamond-encrusted human skulls.  The very top-end of the real estate market in the select areas of Beverly Hills, Bel Air and Malibu (“Bevairbu”) has remained strong with a few clever realtors having their strongest years ever.  Houses in $10 to $30 million range in Bevairbu have been selling briskly to all-cash buyers.  When you’re not applying for a loan, you don’t care about mortgage rates.  And you can rationalize paying prices above appraisal values.  This explains the McCourt’s $19 million purchase of a crumbling beach shack on Malibu’s Carbon Beach next door to the Lautner-designed house they bought for over $33 million.  The number of sales of homes over $15 million in Beverly Hills and Bel Air increased over the last 12 months (ending October 1 2008) to a five-year high with more sales than ever getting near or above asking price in fewer than 70 days on market.  Remarkable, given what’s been going on everywhere else.  And positive sales trends in Beverly Hills is reported in a separate posting here.

 

Is that party over?  Too soon to tell for sure.  The world’s super-rich may be too insulated to be affected.  Most of these buyers are foreigners – Russian oligarchs, Middle Eastern oil barons or members of exiled political regimes.  They may be drawn more than ever to the relatively stable market of Los Angeles’ Westside in an increasingly unstable world.

 

My advice for the near term is to move into rental properties, building a portfolio of small homes in solid middle-class neighborhoods with a minimum of a five-year time horizon while keeping an eye on the sales activity in the usually recession-proof Bevairbu. 

 

For more about investing in this tumultuous market, read “Amid the Chaos, Is This Any Time to Invest in Real Estate?

Check back in a few months to see how my advice holds.

Amid the Chaos, Is This Any Time to Invest in Real Estate?

September 21 2008   Bear Stearns!  Goldman Sachs!  Lehman Brothers!  AIG!  Fannie Mae!  Freddie Mac!  Wall Street bail-outs!  Every day a new sensational headline about the meltdown on Wall Street.  Just when we think it can’t get any worse, it does.  So what, exactly, does this mean for real estate investors and is this any time to get into – or out of – the market?

 

Before I answer that, let me share a secret.  It’s the secret to success in business and investing.  And I’m going to share it with you, just you, dear reader.  Ready?  Come close.  Lean into the computer.  Here it is… 

 

“Buy low and sell high.” 

 

That’s right.  Repeat it a few times.  Write it down, if necessary, so you don’t forget it.  All you have to do is invest when prices are low and sell when they’re high!  That’s all there is to it!  It’s that simple.  The only thing you have to figure out is when the prices are low and when they are high.  When you figure that out, let me know. 

 

I can’t tell you when prices are going to be high but I can tell you one thing, they’re low right now.  They might even get a little lower – but the fact of the matter is, they’re pretty darn low today.  And I can tell you one other thing – they will rise.  I can’t tell you exactly when, but I’m pretty sure that within five years they will have at least recovered to their pre-crash levels if not more. 

 

Without getting into the detail of it, real estate has, historically, consistently delivered some of the highest returns on investment over time.  Sure, there are ups and downs along the way and speculators have been known to get reckless and homeowners have suffered.  But those losses almost always occur when there’s a short-term time horizon and homeowners or speculators are banking on short-term gains.  Investors who endure and succeed are the ones who are in it for the long term. 

 

I learned that lesson the hard way with my first real estate investment.  I was looking for a quick buck from flipping a co-op in New York City in the mid 1980s and I lost when conditions in the neighborhood suddenly made it un-sellable.  (The city opened three welfare hotels immediately adjacent to the building.)  At the time, I felt like the first person ever to lose money in the go-go Manhattan real estate market – but I wasn’t the first, nor the last.  Those welfare hotels were gone two years later and the neighborhood quickly gentrified.  In fact, one of those “welfare hotels” became one of the first of the new wave of “hip” high-end hotels.  If I’d had the wisdom, wherewithal and resources to hold on, my $75,000 investment would have been worth at least $1.5 million today.  On top of that, I would have taken in nearly another million dollars in rental income by now.  The property would have been fully capitalized (paid for itself) after only seven years with the remaining fifteen years providing pure profit.  Even after expenses and taxes, that’s not so bad.  My partner in that deal did hold on and that co-op is one of the best performing assets in his investment portfolio today – and he’s a successful hedge fund manager.

 

I predict that five-to-ten years from now, many of the people we read about in the Wall Street Journal and on the Forbes 400 list will have made their fortunes building their real estate portfolios today. 

 

So back to today.  Prices are at historic lows.  Foreclosures are at an all-time high.  The rental market is red-hot with rents rising.  Inventories are at an all-time high making it as much a buyer’s market as it ever gets.  Here’s where two-plus-two equals five.  This is an unprecedented buying opportunity for investors.  A recent article in the New York Times (“Finding Profits in a Distressed Market” 9/14/08) quotes Gene Hacker of Century 21; “You’ll probably never see anything like this in your lifetime again.  With the rental market as strong as it is, and prices as low as they’ve been, this is as good as it gets.”

Here’s my advice.  Buying foreclosures and other well-priced distressed properties and running them as rental properties with a long-term time horizon of five years or more could be a very smart move right now.  That’s why I’m talking to my partners about investing our money in residential income properties – maybe even some commercial properties like small retail centers and coin laundries. 

But pick your markets carefully and, like anything, invest only in what you know and do your research.  For example, I only invest in Los Angeles where the booming entertainment industry sustains an economy insulated from the rest of the country and international jet-setters will always flock to the enduring cachet of Beverly Hills and Malibu.  (Read about sales trends in Beverly Hills here.)  Having worked in the entertainment industry, I understand these buyers.  I would not invest in markets that are shrinking or over-saturated – Phoenix, Las Vegas and Miami come to mind (although I have a friend doing okay with vacation rentals in Tucson – the poor-man’s Santa Fe.)   

 

Stay tuned and I’ll let you know how it goes.  And let me know what you’re doing out there.

 

For more information about investing in this tumultuous market, read “What Does the Wall Street Bail-Out Mean For You?”  And look for future postings here about how to find and buy foreclosed properties, evaluate a real estate investment including calculating the capitalization rate and rate of return.

What Is a Permit Expediter and Do I Need One?

The permit process can be pretty straightforward if you’re doing a simple remodel.  But try to do anything out of the ordinary (like everything I do), and it can be a frustrating, time-consuming, and expensive proposition.  The city Planning Department is a fun-house hall of mirrors and the people who work there like it that way.

 

The Planning Department is a vast conspiracy whose primary mission is to make the process as confusing as possible in order to guarantee every retiring staff member a lucrative second career as permit consultants where they make more money than they ever could have working behind a counter.

 

These consultants are often called “expediters”, but that term is misleading and often misused.  The only people who can really expedite a permit process are one of the downtown law firms who hire former planning department staff members and even retired city council members and charge fees starting at $50,000 and up.  These expediters are hired by large developers or superrich celebrities trying to get around the rules with as little fuss as possible.

 

For the rest of us mere mortals, there are a variety of consultants who can help us navigate the system with as few mistakes and delays as possible.  Only by avoiding delays are they “expediting” anything.  They cannot circumvent the process or make anything move faster.  The most they can do is ensure that an eight-month process actually takes eight months – not ten.  But these consultants aren’t cheap either and usually won’t touch a project unless they can charge at least $10-20,000 in fees.

 

What many people call “expediters” are what I call “runners” or “bag-carriers”.  For $40-50 per hour, they will carry your plans through Plan Check and other planning counters.  Some of them will help you research and prepare your case – others won’t.  Some others only do the research, not the trafficking.  You’ll see these runners around the planning office, often pulling file crates on wheels loaded-up with plans and paperwork for multiple clients.  I’ve seen two types: 1) older men and women who recently retired from the Planning Departments and are still on close terms with everyone behind the counter, and 2) young, leggy women who wear the highest heels, the shortest skirts and the lowest-cut blouses you’ve ever seen and know how to flirt.  In both cases, you’ll see them wave and blow kisses to everyone as they enter the floor.  They’ll stop and chat with everyone they see and spend more time talking with staff members about family, vacations and office gossip than they do conducting business.  All this while you sit seething, waiting for your number to be called, feeling like the outcast at a party where everyone else knows each other.

 

So back to you – do you need a runner, a permit consultant or an actual expediter?  It depends on how complicated your permit issues are and what your budget can afford.  You don’t need any of these if your project is fairly simple and your architect or contractor doesn’t hit any snags.  But if you do encounter a problem, it’s going to be up to you which strategy to pursue since you’re the one paying the bills.  In separate postings I’ll talk about how to find the help you need, and how to handle the process yourself.  Or contact me directly through this site and I’ll see if I can steer you in the right direction.

 

Read more about clearing a difficult permit here.

Bad Design is Bad Economics

  

You’ll see me harp a lot about design issues in a blog about real estate flipping, but design is what makes or breaks a house when you’re selling it.

 

This may strike you as obvious, as it does me, but it’s not obvious to everyone.  The wide proliferation of ugly spec houses throughout L.A. attests to that.

 

I know a team of developers who once showed me a high-end multi-million dollar house they were flipping in the Hollywood Hills.  They bragged to me about the deals they got on materials and how they bought overstocked flooring, doors, hardware, vanities and fixtures at huge discounts off Craigslist and eBay.  There was hardwood flooring of one color in the sunken living room, another kind of wood on the stairs to the dining area which had cheap-looking engineered flooring of another color.  There were at least six different kinds of doors in the house – solid flush wood stained, solid flush wood painted, doors with clear glass panels, doors with frosted glass panels, louvered closet doors and mirrored closet doors.  There was different door hardware in every room – some knobs, some levers, some chrome, some brass.  There were even windows of aluminum, black anodized, and white vinyl clad.  Outside they had aluminum railings, white light fixtures and a faux gold-leaf door.  And some of their ideas were just plain asking for trouble – a faux-concrete finish over drywall in a shower?  A large wood-framed window in another shower?  Both disasters waiting to happen.  The place was a mess.  It looked like the showroom at a bad Expo Design Center.  Think I’m exaggerating?  I’m not.  And these guys were both real estate agents who thought they knew their market.  What they didn’t know was anything about design or the value of working with an architect. 

 

The end result?  Their house sat on the market for almost a year with repeated price reductions and eventually sold at a loss for about $450 per square foot.  My smaller house directly across the street sold in 60 days with multiple offers at $1,200 per square foot.  Those guys ended up hiring my architect for their next project.

 

See other postings here about why you should work with an architecthow to find, hire and negotiate with a contractor and the option of working with a design-build firm.

Hiring a Contractor – Fixed-Price or Cost-Plus?

There are two types of contracts when working with a contractor – “cost-plus” or “fixed-price”.  Under cost-plus, you pay the contractor for the cost of materials and labor plus a commission to cover his compensation – typically 20% but it can range anywhere from less than 10% to over 25%.  Of course both parties work to a pre-determined budget so you have a pretty good idea of what the total job will cost.  With a fixed-price contract, you pay a set amount and it’s up to the contractor to make it work – if he’s over budget, it comes out of his pocket and the more money he saves, the more he makes – you pay the same either way.

 

A recent article in the Los Angeles Times Sunday Real Estate section [“Digging – It’s Your Job” 7/13/08] suggested always negotiating a “fixed-price” contract, never a “cost-plus”.  Their reasoning was that it left it up to the contractor to lose money or turn a profit.  I couldn’t disagree more.  What contractor is going to choose to lose money?

 

I always work on a cost-plus basis and here’s why.  I want to know what I’m paying for, and I want control over my budget.  The estimated cost of the project is just that – an estimate.  Every job is full of surprises and budgets need to be flexible.  You never know what you’re going to find when you’re opening walls or removing flooring.  No contractor is going to want to lose money and with a fixed-price contract, he’ll do everything possible to cut corners including using inferior materials or skipping important steps to maximize his profit.

 

If you want to know exactly what you’re paying for what, negotiate a cost-plus contract within a set budget and insist on detailed invoices with back-up.  My contractor’s invoices generally have up to five or more pages of Excel spreadsheet showing over 200 or more line items detailing what’s being billed against the original estimate.  Changes to the original estimate are discussed in advance, solutions worked out between us and billed separately as a change order.

 

The only time I might make an exception and opt for a fixed-price contract would be for a small job like a closet make-over, a bathroom remodel or maybe even a kitchen – but never for a major house remodel.

To learn more about finding and hiring a contractor and why to work with an architect, read “How to Find and Hire a Contractor” and “Architects!  Who Needs ‘Em?” here.

Bravo’s “Flipping Out” – Real or Fake?

Whenever I tell people at parties that I flip houses, they inevitably ask if I watch “Flipping Out” on Bravo and what I think about it.  And the job supervisor at one of my houses kept telling me I reminded him of the guy on the show (I’m equally obsessed with details).  So I finally had to watch it. And like a train wreck, I can’t take my eyes off of it.

 

 

“Flipping Out” is about as close to depicting the life of a real estate investor as “Green Acres” was to portraying the life of a farmer.  Jeff Lewis’ life is nothing like mine.  He wears designer clothing which never get dirty, drives around in one of two $100,000 cars (which also never get dirty), employs a huge staff to do non-essential work such as fetching coffee (140o!), getting someone on the phone, or cleaning-up after one of his dogs.  He drives from Los Feliz to Encino and back in record time, and enjoys leisurely lunches at home with his staff every day. 

 

My days, on the other hand, are spent running around with my hair on fire – going to Home Depot sometimes twice a day, any of a half-dozen specialty lighting stores, electrical wholesalers, plumbing supply stores, hardware stores, furniture stores or meetings with contractors, sub-contractors and other suppliers and vendors.  In between all that, I’m making the rounds looking at houses on caravan days (when realtors hold open houses for other realtors) looking at comps (similar homes) for my projects and keeping an eye out for my next project.  I drive a beat-up SUV I can’t keep clean because it’s always loaded with building materials or my dog. 

 

I wear shorts, tee-shirts and construction boots and am lucky if I can bathe once a day and shave once a week.  If I get around to having lunch, it’s usually at 4PM and might be a 3-day old sandwich from a gas station mini-mart – or it’s off the “roach coach” at a job site.  I can’t afford to employ a personal staff since every penny I have goes into each project and I don’t have the margins for such luxuries.  And my evening hours are spent at my desk crunching numbers, reviewing budgets, reviewing and paying invoices, creating punch lists and schedules and emailing photos and teasers to realtors, journalists, TV producers and other people important to my business.  When other people might kick-back and watch TV, play video games or surf the web, I spend my idle moments scanning the MLS for sales trends and comps, or mining the furniture websites for prices on vintage pieces and furnishing ideas.

 

I only wish I had the time Jeff Lewis has to wreak havoc with other people’s lives!

 

 

Staging a House – Rent or Buy?

Everyone knows that houses show best when staged – and staged homes stand a better chance of commanding a premium selling price.  But with staging companies charging thousands of dollars up front and thousands every month, staging can be expensive and eats directly into your profit.  But it doesn’t have to be that way.

The $25,000 it can cost to stage a typical home for the months it takes to sell can be better spent buying the furniture yourself – then selling it at the end of the project (or storing it for re-use in your next project.)  The cost of ownership will be minimal.  And, if you do it right, you might even be able to make it a profitable side business.

Here are twelve tips for staging a house:

 

1.   Never pay full retail.  All prices are negotiable.  If a dealer can give 20% off to the trade, they can give it to you too, so start all negotiations from 20% off the asking price and go from there.

 

2.   Look for clearance sales.  Get to know the dealers you’re interested in to get tipped off to the sales in advance.  Then check out the items you’re interested in and see if you can get an early sale price, or have your items set aside for you till the sale.  Get to the sale early to get the best pick of the best items.  Then return during the final hours of the sale to scoop up any left-behind bargains.  They want to get rid of their inventory and might accept an even lower price than you normally would have offered.

 

3.   Buy floor models.  Retailers slash prices on floor models when they’re ready to sell them.  They may be “used”, but they’ve been meticulously maintained.  They might have a few dents or scratches but most damage can usually be easily repaired or cleverly hidden with a strategically placed vase.  And minor damages will never be seen in your photographs.

 

4.   The retailer is your friend.  Let them know that you’re a real estate developer staging your own houses and they’ll bend over backwards to get your business.  The next thing you know, you’ll be getting invited to private receptions to see a new line or meet the designer and you’ll be courted by every furniture store in town.

 

5.   Buy in volume.  Buy as much from one dealer as possible to negotiate the best discount.  Eventually limit your shopping to the few dealers you know best and cultivate a relationship.  Invite them to the house and solicit their suggestions.  They might have access to furnishings not displayed in the store – or they might even offer to help stage the house at discount. 

 

6.   Partner with the furniture store for freebies.  If they know you’re staging a house to be offered furnished, many retailers or vintage dealers may offer to furnish your house on consignment – at no cost to you.  Then if your buyer decides to buy any of the furniture, you may even earn a commission.

 

7.   Hang the house with good art.  Buyers of high-end luxury homes often have high-end art collections and they want to know how they’ll look in your house.  Partner with an art gallery to hang your house for free and offer the art for sale to your buyer.  Negotiate a commission with the gallery for anything that sells to your buyer.  As an added incentive, allow the gallery owner to have receptions at your house.  That will bring in the right kind of people who may end up sending you your buyer.

 

8.   Buy from designer showcase houses.  I once went to a model home for a stylish development which was furnished by a high-end retailer as part of a sponsorship.  The furniture was perfect for a house I was finishing at the time.  I figured the retailer wouldn’t want the furniture back since it was now used, so I offered to buy the whole lot if I could get a good price.  The retailer offered 60-70% off any items I wanted and threw in free delivery to my site over 100 miles away.  I ended up selling much of it to the next buyer – and the rest on Craigslist – for about 20% off full retail making a tidy profit on each piece.

 

9.   Offer services in trade.  Is your house going to be published?  Will it be on any design tours?  Offer furniture dealers promotional consideration in exchange for any free stuff.  (That means publicly giving them credit in any articles or presentations.)  If you’re not on design tours and have no publishing commitments, offer them use of the house for their own receptions or trade showings.  The more exposure your house gets, the better for you.

 

10. Buy low and sell high.  Think of your furniture as a potentially appreciating asset and seek-out good vintage or antique pieces that will retain their value – or even appreciate.  I once bought six cool-looking mid-century chrome dining chairs in a reputable but off-beat vintage shop for $100 each.  I spent another $100 having each one reupholstered.  By the time I was done with them, their designer, Milo Baughman, was having a resurgence of popularity and I was able to sell the set for $7,200 ($1,200 each) to a collector on Craigslist.  Another time I bought a house-full of furniture for $10,000 which included a granite-topped dining table, a grand piano once owned by a celebrity, and five Danish modern dining chairs.  The chairs turned out to be rare Hans Wegner “Chinese Chairs” which I discovered were worth as much as $3,200 each full retail.  I held a virtual auction among dealers throughout the country and ended up selling them for $2,500 each to a dealer in New York – who even paid for “white-glove” shipping.

 

11. Buy and sell through auctions.  Get to know the auction houses who deal with the kind of furniture you’re interested in.  If you know what you’re buying and have researched the prices, you can get some great deals on high-quality collectible furniture at auctions.  Then when you’re ready to sell it, you might get top prices from those same auction houses.  But be warned – you need to be educated and have calm nerves to play this game, and don’t forget to factor-in the auction house’s commissions on both ends of every transaction.  Look for a separate entry here about auctions and research sources.

 

12. Research, research, research.  Frequent furniture stores even when you don’t need any so you’re up on prices and sources for when you do.  Scour the internet scanning prices on the auction and vintage sites (a list of the sites I use is at right).  When you’re ready to buy, whether it’s from a store or at an auction, you’ll know exactly what price to pay to feel confident you’re getting a good deal.

 

Read about how to tell the real thing from a fake when buying classic vintage pieces like an Eames Lounge Chair 670 and Ottoman 671 and a Corbusier LC Series chair.