The Best Places to Live 2008

The Fearless Flipper

Would you want to be a real estate investor right now? You would if you were Fran Yerardi, house-flipper extraordinaire, who believes almost no property is too far gone to be rehabbed for a profit—and is more than happy to share his secrets with those willing to roll the dice with him.

By Daniel McGinn

Photo by Kathleen Dooher

The two-family house at 95 Hollingsworth Street in Mattapan has seen better days. The paint on the porch is peeling. The aluminum siding is weathered. Inside, the empty second-floor apartment is pure squalor, with plaster hanging from the ceiling. The owner, Fran Yerardi, motions toward the back of the house. "I'll show you where he did the deed," he says, walking to a dingy bedroom. Yerardi points to blood splatters under the window and remnants of crime-scene tape on the door frame. Two years ago, the home's former resident, a 70-year-old retired machinist, was allegedly beaten to death in this room by his 41-year-old petty-criminal son, who then dragged his father's body to the basement and cut it into pieces, dumping the head and limbs in a yard a few miles away. Back in the kitchen, the woodwork retains a coating of the powder that detectives used to lift fingerprints. Out front, the victim's name is still on the mailbox.

Last fall Yerardi, a West Newton–based real estate investor, purchased the 2,800-square-foot duplex for $209,000. "This is an okay house," he insists. He walks through the gutted downstairs rooms, explaining his plan to convert both apartments' dining rooms into bedrooms, then to resell the property as three-bedroom condos. "The way I look at it, the ceilings are high, the doorways are awesome, the hardwood floors are perfect," he says. "It's got a good roof, good windows—it's ready to [renovate]." If you factor in what Yerardi has spent to empty the home of garbage and demolish the downstairs walls, as well as the interest on the money he's borrowed to buy the home, he's already invested $225,000. But after $100,000 more in renovations, he hopes to sell the pair of condos for $500,000. True, the house's history presents some challenges: Twice Yerardi nearly sold the place to people who intended to rehab it themselves, but each time the neighbors scared them off by vividly recounting the murder. Still, he's not worried. "It is what it is," Yerardi says. "We'll get out of it in a couple of months, and we'll make money on it."

He walks down the stairs, shuts the door, and secures the lockbox. As he strides toward his Jeep Grand Cherokee, he looks back at the decrepit house and utters the phrase that has become his mantra since he became a full-time real estate investor two years ago: "Who else is going to buy that house but us?" That is, who'd buy it before he's finished transforming it—at which point he expects to have no problem finding someone who will dig deep to take it off his hands, and give him a six-figure profit for his trouble.

This seems like an inauspicious time to try to profit from investing in homes, what with Massachusetts, like much of the nation, now mired in a housing downturn that's not just brought a jarring end to a half decade of sharply rising prices, but also appears likely to exact a lot more pain before it's through. In 2007, lenders foreclosed on 7,653 homes statewide, more than double the total seized the previous year. In Suffolk County, the median home price dropped by 5.7 percent, from $350,000 to $330,000, according to real estate research firm the Warren Group.

As politicians debate proposals to ease the skid, however, another group views the current atmosphere a bit differently. Sure, it's a lousy time to try to sell a house, but it can be a fabulous time to buy one. That's giving hope to a new generation of real estate speculators, who continue to tune in to Flip This House and crowd into meetings of the Massachusetts Real Estate Investors Association. Where some fear the worst housing market since the Great Depression, others are seeing a great chance to scoop up deals.

Yet even among those determined optimists, few are buying as aggressively as Yerardi. The 40-year-old married father of three first tried his hand at real estate in the mid-1990s, a few years after opening Yerardi's Restaurant on Watertown Street in West Newton. He started by buying homes adjacent to the restaurant and renting them out. Every so often, he'd buy a house to rehab, doing some of the basic work—like demolition and painting—himself. During this time, Yerardi also became active in Newton's chamber of commerce, and was asked to join the board of directors of a local bank. Three years ago, near the peak of the housing boom, the bank hosted a strategy session. There, Yerardi learned about homeowners' fraying balance sheets and the growing risk of a housing downturn. Seeing the opportunity that would create, he decided to make property investing his full-time gig.

In 2006, Yerardi paid $50,000 to become New England's first franchisee of Home-Vestors, a Dallas-based company that teaches operators to flip houses. Founded in the late 1980s, it today has 260 offices across the country, and provides people like him with training, financing, and advertising—via those billboards that scream "WE BUY UGLY HOUSES"—that yield a steady flow of owners looking to unload their homes. Greater Boston, with median home prices topping $300,000, is considered a tough place to ply such a trade, but in less than two years Yerardi has earned a rep as an unusually savvy operator. "He knows what to zero in on, to focus on the issues that will make him money," says HomeVestors CEO John Hayes.

In a perfect world, Yerardi aims to buy a home a week, to own nothing for more than six months, and to earn a minimum of $20,000 per home. With the market as soft as it is, the first goal is easy to achieve. But the corollary is that it's gotten much harder to sell the homes he's rehabbed. So Yerardi and his four-person staff spend much of their time on tactics that wouldn't have been necessary a few years back—courting prospective purchasers, working with mortgage companies to line up buyer financing, and helping novice home-flippers work deals. At any given time, Yerardi typically has a dozen homes on his hands, each costing him an average of $150 a day in interest. For all his confidence, he is not blind to the risks involved. Inside his offices, he constantly can be heard saying, "I've gotta get this house off my plate."