Exciting things are happening. We are bona fide players now!
I had a conversation with a woman who is finally ready to take the leap herself. She’s been thinking about it since 1999(!) Wow, and I thought I was a tire kicker. Well, my philosophy is, it’s never too late to start. As long as I’m breathing, and I woke up on the right side of the dirt this morning. Check, and check.
She was inspired by Carlton Sheets many years ago. As a side note, here’s an amusing thread on Carlton and gurus in general I found on Bigger Pockets: https://www.biggerpockets.com/forums/79/topics/74644-what-happened-to-carlton-sheets
I told this woman to haunt Bigger Pockets. Read everything. Watch. Learn. Take it all in. She’s not ready to make a deal yet. She wants to flip houses, but my advice to her was to do a few wholesale deals first. Find the properties and get them into the hands of more experienced investors for a wholesale fee. Build up a cash reserve. Wholesaling means you’re constantly networking with these more experienced investors. A great way to do a flip is to find an investment money partner to go in on it with you and share the risks and profits – that’s what we did with this latest one. And we found that investor on Bigger Pockets.
This lady would be an ideal candidate for the mentoring program my husband wants to set up. Someone to hold her hand through the first couple of deals. Someone who can provide her with the right paperwork and contracts to make these deals. I think Steve would be great at that – but I want to proceed with caution. Real estate is a risky business. That’s why it pays so well when you win! But a sore loser could accuse my husband of being a snake oil salesman. I want to start a mentorship program, but I want people to come into it with eyes wide open and not full of stars.
Besides, we’re still learning this business ourselves! And I have a feeling it’s about to take off very quickly. Our investor wants to do a lot more deals with us. Now that he’s seen what we can do, he is willing to finance these deals 100% in exchange for our expertise. So we risk nothing other than time, and get one third of the profit at closing!
Does this house have flip-potential? A check list
Steve already has two houses under contract. There’s one I haven’t seen yet that I have to walk through in the next couple of days to make sure it has flip-potential. I have a pretty good knack for seeing what needs to be done to turn a house into something someone would actually want to buy. You could have a four bedroom house built in 1920, but if the rooms are tiny and airless no one is going to want it. I could knock down walls and turn it into a really cute modern two bedroom. Then Steve and I would have to crunch the numbers , taking into consideration what people pay for two bedroom houses, and the cost of the flip. If there’s still a profit, we’ll buy the house. If not, we’ll keep looking.
Here are a few other questions I ask:
Does it have a driveway? A garage? Older neighborhoods often have on-street parking only, which can be a pain during snowstorms or if you have inconsiderate neighbors. For most homebuyers, that parking situation is a deal-breaker unless you’re in a major city like New York, Philly or Boston. If I see a house with street-parking only, I would consider it for a rental, but not a flip. It’s not going to be anybody’s dream house. Investor note: if it’s logistically possible and there’s room in the flip budget to add a driveway, you may have a winner. We’ve done that! And a garage is a major plus, but it won’t necessarily kill a deal. Especially if the lot is big enough for the new homeowner to add a garage after purchase.
Let’s talk about the yard – is it a postage stamp, or is it sizeable enough for a family to enjoy an outdoor cookout? Can you see a dog running around in it? Is there room for a swingset? Major cities are different, but in this market it’s more of a suburban lifestyle. With the yard, bigger is better. Is the lot level and usable as an outdoor living space, or is it hilly and overgrown? That’s a problem we had with the house we just sold, which was solved with a back hoe and some grass seed. But neither my husband, nor our contractor thought of that. I pointed it out when I saw the property. Families care about the yard. The yard is a big deal.
How close are the neighbors? That’s another big problem with older neighborhoods. Somebody thought it was a good idea to build all the houses so close you can barely squeeze between them in some places. Again, nobody dreams of buying a house like that. But they’d rent one until they can afford to buy their dream house!
Is the home on the main drag or a quiet side street? Quiet side streets are preferable, but we have successfully flipped a house on a busy Main St. Are there any potential problems with the neighborhood? Steve is drove by one of the houses last night to see how much of a problem the neighborhood bar is going to be. Saturday night at 10:30. Sometimes there can be issues with parking. Or loud, drunken patrons. This particular bar will not be a problem.
How are the schools? If you’re trying to move a 4 bedroom house, chances are you’re selling it to a family with children. And families with children want good schools. Check out school ratings at www.greatschools.org. I’m not saying you won’t be able to sell a home in a sub-par school district, you’re just not going to be able to sell it for as much, or as quickly. Well-priced homes in good school districts go fast!
Some things to look for inside the house you’re thinking of flipping:
A lot of times, it’s going to be ugly in there. Don’t dwell on it. Look at the structure of the rooms. Are you going to have to knock down walls to turn four tiny rooms into one big living space like we had to do at the house we currently live in? Bring a qualified contractor with you on the walk through – they’ll be able to tell you which walls are load-bearing. If you have to knock down a load bearing wall you’ll need to reinforce it to support the ceiling/roof. We were required by the borough to hire a structural engineer. So if you’re knocking down walls, leave the appropriate room in your flip budget! If the room isn’t there, you’ll have to live with the smaller rooms (which may make the house harder to sell) and adjust the final sale price of the home accordingly. This will affect whether or not it’s still a good investment as a flip. When I look at living space, I picture a regular sized sofa/love seat living room set with a flat screen TV and entertainment center. Will all that fit in the room comfortably and attractively?
Kitchen space is big, too – literally. The bigger the kitchen, the better chance you have of truly making it the “wow” factor that sells the house. Smaller kitchens, designed efficiently, are OK, but your price will be lower.
I will write more about interiors in this blog space next week. By then, I will have walked through our latest potential flip, so I’ll have some before pictures, too. Meanwhile, enjoy the before and after pictures of our latest flip, which closed on Friday and netted us a tidy profit of about $20,000, after our investor took his cut. Not bad for a couple of relative newbies!
**By the way our investor wants to do about 24 more of these with us. If you know of a potential property, please send it our way. There’s a finders’ fee in it for you if we buy it, minimum $500. Not a bad wage for just passing off an address. Call Steve at (570) 798-7051 or e-mail firstname.lastname@example.org.