The Magnolia Story (with Bonus Content)

by Chip Gaines

  That Weed Eater cost what I made in a month, so I knew I was in big trouble. I hitched a ride back to the shop, and with my tail between my legs I told him what had happened. He was upset, but more in an “I trusted you” kind of way. You know, like when your parents would tell you they were disappointed in you rather than yelling. It’s almost worse.

  David made it clear that if I ever did something like that again, I was gone, and I promised it wouldn’t. Right then and there I grew up a little. I realized having fun was one thing, but jacking around on someone else’s dime and being flat-out disrespectful was another. I promised myself I’d never disrespect someone that way again.

  I must’ve done all right after that, because Uncle David and I rocked and rolled together for a whole year after that without a hitch. Then one day he said to me, “Son, you’re smart. You’re going to Baylor University. What are you doing working for me? Go start your own lawn business. You’ve already seen what we do. Go do it.”

  He sent me to an equipment company in town, and I priced everything out, and the total for what I needed to get started came to $5,000. I didn’t have $5,000. They told me to go across the street to the bank and try to get a loan. So I crossed the street and met a banker named Carroll Fitzgerald.

  I had learned a few basic things about putting together a business plan at Baylor, but I didn’t think that was enough to get me a loan with no collateral or experience. Carroll didn’t think so either. He quickly said no.

  But I wouldn’t let up. I was a perpetual salesperson. I talked Carroll’s ear off, saying, “Look, I’ve got five lawns I can start tomorrow. That means I’ll be making X amount of dollars. I’m gonna quadruple that in a few months, and you guys are gonna make every cent back plus our agreed-on interest. I promise.”

  Carroll finally gave in and lent me the money—my first $5,000 loan. I walked out of the bank, walked back across the street to the equipment company, and spent every last penny on the things I would need to get my business off the ground in a first-rate way.

  I repaid that loan in six months.

  I was so excited by the whole thing. I got hooked—hooked on starting businesses, hooked on borrowing money, all of it. I still joke with Carroll to this day that he created a monster. I love borrowing money!

  That was my senior year of college. And over the course of the next few years, as I’ve said, I sold that business off more than once. I built it up to more than a hundred accounts, with a crew, equipment, and a truck. And then I sold it to somebody else who wanted to get into the business.

  To be honest, I never made a ton of money off of it. I treated it more like a part-time thing, and I had a lot of expenses paying the crew and everything. But I basically flipped that business the way I’d later start flipping houses. There wasn’t always a ton of profit, but it was enough to keep you in the game until you could hit a lick and do it all over again. I was well on my way to building it up and getting ready to sell it again right when I met Jo.

  Chip had basically gone through this whole education in the real world of entrepreneurship, and he told me all of these stories as we were first dating. I was in awe. I’d never met anyone who was such a go-getter at such a young age or who did things in such an unconventional way. It was like every time he opened a door, he encountered another door, and another, and he just kept opening every door. In fact, it was his Uncle David who sold him the eleven-acre property on Third Street that would eventually allow us to launch Magnolia Homes.

  That’s right. So, my dad had worked his way up the ladder at American Airlines to become a vice president. He was making a good middle-class living. But right around the time I was starting my first lawn business, which would have been 1996 or 1997, he got a call from a corporate headhunter. The guy said, “Hey, we want to recruit you to come over and be the CEO of this office supply products company here in Dallas.” He went through the whole interview process, and they wound up offering him the job making five times the money he’d been making at American Airlines.

  My parents didn’t move into a bigger house or buy fancy cars when they came into that money. They were just never like that. Dad didn’t do anything with the extra money except stick it in the bank for a rainy day.

  Well, he wound up paying as much in taxes that first year as he’d made the year prior to that, so he quickly got passionate about finding ways to save on taxes. He got some advice from an accountant, and the accountant suggested they should divert some of their income by investing in some properties and businesses.

  Dad knew I was always talking up these business ideas. So he asked me if maybe I could help him find a house to invest in around Baylor—something we’d be able to rent out. The very next day, I went and talked to ten people and found him a house.

  He ended up buying this little ranch on a couple of acres a few miles from campus for a decent price. He didn’t want to manage the renting of it, so he offered me a little bit of money to manage the place for him. I moved into that house with a couple of roommates. They paid rent, which more than took care of the mortgage, and they also helped me fix the place up. We painted it, put in new carpets, all kinds of stuff. And we just had a blast in that little house.

  I loved the whole process of helping Dad buy that place, so I kept calling him. “Hey, Dad, I found this other one. Are you interested?”

  “Well, hold on,” he kept saying. “Let’s don’t get too crazy. I’ve already got this one. Obviously, we’ll see how it goes. But just hang tight.”

  A year or so went by, and once my buddies all moved out, Dad and I decided to sell the house. I remember he made probably thirty-five or forty grand on that one house. I was real happy for him, but I also got to thinking that buying and selling houses was a pretty good business to be in.

  On top of that, my parents came down and took me out to dinner one night. “You know what?” they said. “We thought about it, and you did a lot of the work that helped us make that profit, so here’s a check for a certain percentage of that.” They gave me a few thousand dollars, and that got me even more pumped up about the whole house-flipping idea.

  Now, flipping houses wasn’t exactly a “thing” yet, so people thought I was crazy when I told them that’s what I wanted to do for a living. But the wheels in my head just kept turning and turning, and I was determined to find a way to make this work.

  I knew my “Uncle David” owned a big eleven-acre tract of land on Third Street with a couple of old, rundown rental houses on it. So I asked him if he’d be interested in selling. He wasn’t doing much with that property, and the houses weren’t in great shape at that point, so he agreed. My dad and I went in together on that second deal since I had built up a little bit of cash from the lawn-mowing business. We bought that eleven-acre tract for around $110,000. That was certainly a lot of money, but we knew David was giving us a good deal. To this day I’m still thankful to him for that opportunity.

  Dad and I also went in together on buying a little commercial plaza right on the edge of the Baylor campus. We rented one corner out to a sandwich shop, and I opened the little wash-and-fold business on the other corner.

  That was basically the last thing the two of us went in on together, because once I was a cosigner on those loans with him, the bank that had given him the mortgage on those properties was perfectly willing to loan me money on my own. That’s when I got started on my whole “Mayor of Third Street” endeavor. I realized I could make as much money flipping a house as I made running the lawn-care business for a whole year.

  So when I met Jo, as she said, I had already been through this whole education—half-formal and half-street. I was ready to keep this entrepreneurial life rolling, and it was after she closed the door to her shop that it all started to click for us. There was something just fantastic about what she and I did together that was far bigger than what either of us was capable of doing on our own.

  I wasn’t the secret ingredient. I knew how to work hard and how to find good deals
, but when we worked together on Magnolia Homes, it was Jo coming in at the end and putting her finishing touch on everything that made all the difference in the world. She was what was so special about our company.

  Selling off the bulk of that eleven acres gave us a pretty good windfall just before she closed the shop. We invested that money in some more land and sank it into a few more of the smaller flip houses we were used to doing. We got started building a house from scratch too—our first real “spec home” featuring all of Jo’s design ideas that she’d gathered from running her shop and working with her clientele. People loved it.

  Then Jo mentioned to me that she’d like to live in a place like Castle Heights someday, and I figured, “Well, maybe we could get into one of those houses that’s a bit of a fixer-upper. We could live there and renovate it and flip it for a much higher profit than we do these little student-housing-type homes.” It sounded like a bigger risk going in, but I was confident we’d be able to get a bigger return on the back end, so it really wasn’t any more of a risk than what we were doing with the smaller homes. I worked out the numbers in my head and said, “Why not?”

  I truly thought it would take years of savings and discipline for us to get into a house in that neighborhood. But just a few months after I closed the shop, Chip stumbled onto an opportunity to pick up a gorgeous 1920s Tudor-style house in Castle Heights. The interior was outdated, and the exterior had been neglected. The curb appeal just wasn’t there. We’d been living in such small homes that to us the place looked like a mansion. But to people used to living in nicer, bigger houses, it looked like a nightmare. So the owners had priced it right. Thankfully, we had enough cash for a down payment, and at that point we had the credit it would take to make the house ours.

  With four babies, we figured it wasn’t a great idea to live in a house and renovate it at the same time. So we did the renovations on that Castle Heights home quickly, before we moved into it—and the impression we made was instant. The neighbors couldn’t believe how good the exterior looked after just a couple of months.

  All we did was paint the exterior and rework the landscaping, but it drew all sorts of attention. Apparently nobody had thought to apply the same sort of fast-moving, flipping-a-house-style renovation ethic to homes in that neighborhood. We did things right. We did quality work. We just did things quickly because that’s what we were used to doing.

  When you’re flipping homes, there are seasons to it. There are times of the year when things sell and times of the year when they don’t, and so you get into this schedule of working overtime so you won’t lose your shot at making any money. The longer you hold something, the more the interest on the loan will eat into your profit.

  Jo and I used to make little bets with each other about how fast we could work. She would say, “You did the floors in two days on that last house. I bet you can do it in one this time!” I’d stay up sanding until two in the morning just to make the bet—and argue that it still counted as the same day.

  At the same time that we were renovating the Castle Heights house, things were kind of picking up everywhere for Magnolia Homes. We built our first houses in town, and people were in line to come to our open houses. People were just so taken with Jo’s designs that they would come to the open houses even when they had no interest in buying a house. They just wanted to talk to us. “We’ve got this kitchen, and man, it needs some help. We don’t know what to do. Is there any chance we can get you to do our remodel?” We would leave open houses and walk down the block to meet with people who were almost begging us to come do work for them.

  It all happened quickly. We seemed to unleash some sort of lightning in a bottle when we started working this deal together.

  I was able to do 90 percent of that work from home too. I would hire a babysitter and go out to see a property or check on a job site for a couple of hours here or there in any given week. But I could do all of the actual designing without leaving my kids by using photographs of the location and a sketch pad—and eventually incorporating some design software that I taught myself how to use on the computer. The fact that I was all of a sudden able to do that work from a thirty-six-hundred-square-foot dream home in Castle Heights just seemed beyond imagination. I was in heaven!

  Nearly every house in that neighborhood was like a one-of-a-kind work of art. There were homes with grand pillars next to more modern, midcentury homes next to Tudor-style homes next to bungalows built in the twenties and thirties. Just looking out from our new front porch provided me with all sorts of inspiration. And inside our home, I let my inspiration run wild.

  I poured everything I had learned up to that point into that house. I had taken to looking at all sorts of architecture and home magazines, and I wanted my home to be worthy of that kind of attention.

  So much of what made that house special, however, had nothing to do with what I could do to it. In fact, the best thing I could do for it was to let its character and history come back to life. The reality is that old houses that were built a hundred years ago were built by actual craftsmen, people who were the best in the world at what they did. The little nuances in the woodwork, the framing of the doors, the built-in nooks, the windows—all had been done by smart, talented people, and I quickly found that uncovering those details and all of that character made the house more inviting and more attractive and more alive.

  A lot of modern houses in the suburbs are big and beautiful, and I don’t want to run anyone down, but when you look closely, it’s almost like a beautiful woman with a little too much makeup on. Our Castle Heights home seemed to just get more and more beautiful the more Jo wiped the makeup away.

  Mixing the old and the new, bringing our own sense of history into the home—that became really important to me. I think there’s something about things from the past that just calls to us, that triggers a kind of longing. Sometimes you look at a piece of furniture or an old clock or a piece of artwork—whatever it might be—and you’re just drawn to it. You think, Why do I love that piece? Well, chances are it’s because it reminds you of something—something from history, something from childhood, maybe even something you lost. This can be true whether the piece is extremely unique and one-of-a-kind or just plain classic.

  Take subway tile, for example. Subway tile is the most basic, affordable product in the world. It’s not a high-end type of material. But you go into any bakery that ever inspired you—maybe one in France—or you look behind the counters in some cool old restaurant, and what do you see on the walls? Subway tile. You look at old pictures of the New York subway system or delis and coffee shops from a hundred years ago that just draw your eye and make you long for a simpler time, and there it is.

  Putting those tiles in a home just works for me. They’ll never go out of style. They’ll never seem dated. And the more time I spent in that old house in Castle Heights, the more that notion sank into my heart and showed itself in my work.

  It’s funny how people will get caught up in trends. It’s almost like the shag carpet thing in the seventies. People who put it in their houses weren’t thinking, Hey, let’s go be dumb. They were thinking, This is great. It’s gorgeous! But there are just a lot of trends that come and go, and what Jo was aiming us toward was setting a standard that’s the complete opposite of trendy.

  Why would I want to encourage my client to use the new hot color when I know that in a year or two she’ll need to paint the walls again just to get rid of it? I wouldn’t want to do that in my own home. I wouldn’t want to waste all that time and money.

  I suppose we could have gone in the other direction. I mean, we’re businesspeople, right? Why wouldn’t we convince the customer to do the hot new color? Then we’d be back every year or two going, “Oh, you’re not still doing that orange we talked about last year, are you? That’s so outdated. Here, we can give you the newest green for $10,000.”

  That’s just not who we are. And honestly, I’m a creature of habit. I’ve done my makeup the
same way since I was thirteen, and I’ve always had long hair. I think I’ve just always liked classic. The Castle Heights house sort of focused me in on it more in terms of design, but in personality I was always that way. I find something I like and I stick with it. Ironically, that’s how Chip is too. He’s worn the same brand of boots since we married, the same brand of jeans since we married, the same old basic white shirt since we married.

  So going after classic, long-lasting looks just made sense to me. My knack for finding antiques and interesting pieces at markets and garage sales certainly didn’t die when I closed the shop down. I kept it up in the interest of staging our flip homes and open houses, and I kept many of the most interesting pieces I found for us.

  I started to get more creative in how to display my finds too. Building upon the idea that three-dimensional objects add character when they are hung on walls—an idea that started with the fencing window treatment I used in Drake’s first nursery—I started hanging baskets on the walls, and then baskets with plates in them. I hung antique gates up to add texture, along with interesting pieces of wood, branches, and other things you might not normally expect to see on a wall.

  I started making trips to Canton, Texas, which holds a famous open-air flea market every month called First Monday Trade Days. There I found lots of old, authentic pieces from all over. I frequented the twice-a-year trade days in Round Top, Texas too. And as I did so, I realized my design aesthetic was evolving.

  I stopped looking at all the scratches and the scrapes on the old pieces of furniture as flaws. I loved that they told the story of a family that had once eaten at that dining room table—or whatever the story might be. So instead of thinking about how I could refurbish these pieces, I focused on how I could highlight their imperfections. Like houses, the pieces with the best bones were the most fun to bring back to life and the most profitable when I got done.