It was such a grand time. Even steerage on the Titanic was elegant. And that’s why this home, that will probably only retail between $75-85,000, can take my breath away.
Some investors reading this blog will wonder why we’d bother with a flip that’s only going to sell for $75,000. The answer is, if you can get it for $20,000 and put $20-25,000 worth of work into it, it still meets our profit goals in this stage of our game. We’re looking at another flip that retails for $450k. Thinking we might be able to “pick that up” for a “mere” $225k.
Flipping with Other Peoples’ Money
It’s all relative. Especially when you have an investment partner fronting you the money! That means we only get a percentage of the profit, though. But it’s OK, that’s the stage of the game we’re in. Our investor won’t front the deal unless he’s convinced it’s a good deal. That takes a lot of the risk off our shoulders.
The reason this investor wants to work with us is we’ve successfully flipped a couple of houses in this market. He went in on one project with us and got a 50% return on his money in six months. Now he wants to do a lot more.
This is good for us in a number of ways. It’s fairly steady income with relatively low risk. It’s a chance for us to flip a lot of houses in a short amount of time – left to our own resources we could do only 2, maybe 3 a year. Every time we flip a house, we learn something new. We build stronger relationships with tradespeople, realtors, inspectors, title companies, fellow investors.
We’re also learning who we can’t work with. And we’re learning the warning signs of what to watch out for, and exactly how to put agreements in writing so there will be no misunderstandings. Burn & learn, I call it.
Getting Screwed in Real Estate – Learn While You Burn!
I used to get mad when people would burn me, but at the end of 2016 I decided to trade that in for a new attitude: http://thisgingerjustsnapped.weebly.com/blog/hope-for-the-angry-entrepreneur
It’s all about mindset. 2017 is the year I’m going to think like a winner. I could spend my energy dwelling on the soon-to-be-ex tenant who is squatting in my $1025/month all-inclusive townhouse she hasn’t paid rent on since November. Or I could just circle the date the constable is coming to escort her out the door on my calendar and turn my attention to how I’m going to redesign the kitchen of our latest flip to give it the WOW factor that will sell it after a week on the market.
Flip potential – what to look for inside
Last week I started writing about what I look for in a potential flip: http://thisgingerjustsnapped.weebly.com/blog/getting-paid-how-to-spot-a-house-with-flip-potential
In 1200+ words, I didn’t even make it inside the house! I focused a lot on external factors such as location: the busyness of the street, the desirability of the neighborhood, the rating of the school district; and things such as parking, the yard, how close you are to the neighbors. For some houses, their highest and best use is as a rental property. The street is too busy, the yard is too small, the home is too close to its neighbors, or the parking is too much of a hassle for this to be anybody’s “dream house.” Even if it has a granite kitchen, awesome cabinets and an open-plan living room. I would love a government grant to flip houses in a neighborhood such as this and give lower income working people a chance at homeownership, and I’ve blogged about this before: http://thisgingerjustsnapped.weebly.com/blog/flipping-nepa
Someday, when our business income is comfortable and there is abundance to spare, I will likely spearhead a project to upgrade these older neighborhoods. But until that day, I will have to look for houses with good flip potential in the current retail market.
A Tale Of Two Houses
I walked through two houses this week. The first one was a modest Victorian – 1500 square feet was considered modest in that era! What I love most about Victorian homes is they have good, solid structure. They were built to last, which is why so many of them have. But any house that’s over 100 years old is going to need upkeep, which is why so many of them have fallen into disrepair. This one wasn’t that far gone.
It had its original wood siding, with peeling paint. We’ll replace that with the newer vinyl siding, which can look very classy if done right. The original rope windows will all have to be replaced – thank goodness it’s a relatively small house, that can get pricey! The deep front porch will require some reinforcement, as it’s a little saggy, but no biggie.
When I got inside I caught my breath – so grand! Whoever lived here obviously loved it enough to keep up the splendor inside. Original stain glass windows. Gorgeous hardwood floors. Big rooms, wide doorways, original wood trim. I can’t wait to show you the pictures! We have it under contract, but it’s pending inspection so my husband told me to wait a week. Let me just say I leaned against a wood-trimmed doorway and watched Scrooge’s nephew toast his uncle at Christmastime. There was even a window seat with built-in storage!
And the greatest thing about this Victorian? Someone had already modernized the wiring! The problem with houses of this era is most of them have the original knob-and-tube wiring, which is a no-no for most insurance companies so we’d have to rewire the whole place. That usually puts it out of the profit zone for flipping.
The kitchen had good space. It really just needs to be modernized. The linoleum & formica treatment doesn’t do the rest of the house justice. But I could make it POP with granite, tile, copper hardware on the cabinets and stainless steel appliances.
The staircase was open enough so that modern furniture could be moved upstairs. The bedrooms were smaller, but adequate, with those beautiful hardwood floors. The bathroom, too, was small but adequate. It was laid out all wrong, though, with a 1980’s pink plastic vanity. Nope. Pedestal sink and built in shelves.
There was a second half-bath, but it was down a flight of basement stairs off the kitchen. Not ideal, but it’s not as inconvenient as it sounds. I would make that little hallway and staircase to the restroom as inviting as possible. I never liked bathrooms directly off the kitchen anyway. Something always grossed me out about that.
The second house I walked through made me sad. It had potential – but it would require a $60,000 rehab including knocking down some walls. It was a little two story NEPA “coal cracker” house with two rooms on each floor, and someone had built an addition that added a nice family room on the first floor and a large master bedroom on the second floor. The problem is they cut such narrow doorways to access the addition from the original house. And the master bedroom was only accessible by walking through one of the smaller bedrooms.
The staircase, too, was steep, like climbing a ladder. It would need to be ripped out and reoriented – we’ve done it before and it’s no small task: http://thisgingerjustsnapped.weebly.com/blog/how-it-all-began-part-7-flipping-avoca
The kitchen was all wrong. There was only one bathroom – on the first floor. And the $60,000 rehab it would require to fix all this is in a neighborhood where people could buy houses for $60,000. We walked away. Even if we could get a realistic $85k offer for a gleaming new flip it would be a very thin deal, even if we got the house for next to nothing. Pass.
As we build our team and get more experience flipping houses, I will have much more to say about what to look for. I hope I get to practice on that little Victorian, because I can’t wait to post those pictures. I guess that gives you a reason to check back next week!
**Like I said last time, our investor partner wants to do twenty-four flips with us this year. We are offering generous finders fees to anyone who supplies us with a lead on a property that we buy, provided it is not already listed on the MLS. Know anyone who just wants out of a property? Spread the word! Call Steve at (570) 798-7051 or e-mail us at firstname.lastname@example.org!