Flipping/investment homes

[jeggink]

We are moving from NC to OH and are thinking about trying our hand at some investment homes to help pay off some debt. Both DH and I are handy around the house and DH has helped his dad build a house before so we know what we are in for. We would love to get a single family home, live in it and fix it up, and then re-sell it within 6 months or so.

Does anyone have any experience with this and if so, please let me know any tips you may have. I thought I saw a thread on this a little earlier but can't seem to find it.

So far we have just been looking at houses online and will be in contact with a realtor. We are also in contact with the RIA (sp?) group. OH has lots of older homes for sale right now at great prices!

TIA

[miel]

we are flipping half of a two family...we are probably going to flip the other half pretty quickly...say in 2 or 3 years.

I'll let you know how it goes! :)

[MeTheGirlie]

jeggink Totally caught my eye here...DH and I are looking to get into the same thing - i.e. old house restoration and flipping....I love that kinda stuff.

Maybe you can help me here...what's RIA?

[kerrykate]

We bought our house 4 years ago for $40,000. It was a HUD house and a complete rehab, but luckly dh is a master carpenter so we(he) did all the work himself. It took about 5 months to complete. His parents gave us a nice chunck of money when we got married so that basically paid for most of the repair costs. We wanted to sell the house after we lived there for 2 years so we wouldn't have to pay capital gains tax on what we make but we got pg and it has set us back a bit (timeline wise). When we do find aother house to buy(hopefully soon, we've been doing a lot of looking just can't find what we want) we're going to put ours up for over $100,000 :D Not a bad profit.

A couple years a go we bought a 2bd 1ba house to flip instead of move b/c I wasn't up for moving yet with a new baby. We got it for $30,000 and planned on putting around $5,000 in it, and putting it up for sale by owner in around 8 weeks for $65,000. Once we(ok, he) started working on it one thing led to anther and 4 months and $8,000 later we put it up for sale by owner. Nothing was happening so we got a realtor and dropped the price and 3 months later STILL nothing was happening so we got a new realtor and dropped the price yet again and it finally sold a couple months later for $43,500. After realtor fees, property taxes, monthly payments, and the $8,000 we put into put into it I think we made a wopping $600(which we'll have to pay f'ing taxes on). I felt so bad for dh, he put a lot of time and effort into the house, the whole thing really pissed him off and burnt him out on the whole flipping thing. The house was SO cute he did a fabulous job on it but there is not a big demand for 2 bedroom houses and we were somewhat unrealistic with what we thought we could resell the house for when we bought it.
Hopefully after we find another house to fix up and live in and we sell our house and make good $$$ dh will be up for trying to flip another house, this time successfully...

[bethnjim]

I think the most important thing to remember when you are going to "flip homes" is what other homes in the area are selling for and what you can realistically get for the house. Putting in new carpets, new kitchen, etc can sometimes be a HUGE cost for you and not really get you the end results you are looking for.

My brother is a real estate appraiser and he can go in and search for what houses sold for, what they are worth, what you can get for the house for that area, etc. Without that, I would be really leery of going into this type of business!!

[lawyerlee]

** Bump **

[ejs]

Dollface, can you please tell me a little bit more about what you do? Those sound like huge profits, so I assume you are doing more than just updating windows, counters, and floors.

Thanks in advance.

[smiles33]

You should watch Property Ladder on TLC--it can be very educational as it shows you the amount of work and how exhausting it is to do all the repairs (unless you have enough money to hire someone to do all the improvements). I just saw an episode this past weekend and it was sad that this couple (well, the WIFE actually!) put in so much work and about $8K but then couldn't sell it for the price they wanted to sell (stubborn husband refused to lower the price and take a smaller profit). So, the wife had to go back to working outside the home, when she had previously been a SAHW and they had bought the house to flip because she had hoped to stay one.

Given the unpredictability of real estate markets and how most people can't take 2 mortgage payments each month for a very long time, I think it's something you can only do in certain markets and if you have enough income to cover the dual mortgage payments. That house mentioned above was in Texas, too, so it's not like they had to pay $500,000 for a fixer-upper like around here in CA. FYI, that house was "only" $120,000 or so but they couldn't sell it at the price the husband wanted (somewhere about $150,000 I think) which would've been about $20,000 profit.

[ejs]

I've seen the show. I'm just wondering what Dollface has done to get such a huge profit. It sounds like more than just some cosmetic work. That's why I asked.

I know that some flippers go in and do only some updating and refurbishing. But I know that some people actually do some remodeling.

[smiles33]

I'm curious how long they took to fix it up, too, as timing may have played a part in the profit. In really overheated markets, the demand is so great that you used to be able to just sit around and wait for it to go up. I know way too many people here in CA that made $800,000 in 7 years and DID NOTHING. That's right. Those who bought a house in the "right" neighborhood for $400,000 in 1998 and then sold it for $1.2 million this year. My parents have lived in their house for 30+ years (a 50 year old house that's only been minimally remodeled) and the value of that house has also risen by $800,000 but that's over 30 years, not 7.

[ejs]

smiles, I'm in the Bay Area, too. Our market has been nuts.

[Rancid13]

I've seen the show. I'm just wondering what Dollface has done to get such a huge profit. It sounds like more than just some cosmetic work. That's why I asked.

I know that some flippers go in and do only some updating and refurbishing. But I know that some people actually do some remodeling.

My guess is that since she's in the LA area, a large part of the profit has to do with the location as well as the demand for real estate in SoCal. It's not unusual in LA and OC for someone to buy a property, do minimal fixing up (flooring, painting, some updating, some landscaping-to make it livable and attractive to potential buyers) and make a pretty decent profit within a matter of months, even WEEKS in a market like we have out here right now.

In fact I just saw a property in Santa Ana be purchased for $576K, a tiny 2 bedroom 1 bath 770 sq foot home, only to be put immediatly back on the market at $650K without having anything done to it other than close escrow. Of course, $580K was a stretch and it surely isn't *worth* $650K by any means now, but that doesn't mean there isn't someone (or even several someones) out there right now bidding on the property.

We just bought our condo in January this year for $400K. If we put it on the market today, we could easily get $460K or more for it. We have done NOTHING to it other than move in and put in a new bathroom faucet and some electrical faceplates. We don't plan on selling though, ever. :)

[ocgatita]

My guess is that since she's in the LA area, a large part of the profit has to do with the location as well as the demand for real estate in SoCal. It's not unsual in LA and OC to buy a property, do minimal fixing up (flooring, painting, some updating, some landscaping-to make it livable and attractive to potential buyers) and make a pretty decent profit within a matter of months, even WEEKS in a market like we have out here right now.

In fact I just saw a property in Santa Ana be purchased for $576K, a tiny 2 bedroom 1 bath 770 sq foot home, only to be put immediatly back on the market at $650K without having anything done to it other than close escrow. Of course, $580K was a stretch and it surely isn't *worth* $650K by any means now, but that doesn't mean there isn't someone (or even several someones) out there right now bidding on the property.

We just bought our condo in January this year for $400K. If we put it on the market today, we could easily get $460K or more for it. We have done NOTHING to it other than move in and put in a new bathroom faucet and some electrical faceplates. We don't plan on selling though, ever. :)

I totally agree with Rancid13. Dollface has probably made a significant profit doing relatively "little" work to her investment properties given the area she is in. Seriously, the market in California is just INSANE!!!!

My husband and I purchased a single family residence in the good ole' "OC", CA. We live in a gated community and our house is 1800 square feet w/ three bedrooms and 2 1/2 baths. We bought our home for $510K last August and our same model down the street from us w/o any "upgrades" is closing escrow this week for $650K :eek: ! We went to an open house in our neighborhood last weekend for a four bedroom model in our community that is going for 720K and the realtor said that since we have "upgraded" our house, he could easily sell it right now for 670K!

Given these circumstances, I can see that Dollface would be able to make a profit doing little to nothing to these homes :)

[dollface]

Sorry I didn't come back to this thread sooner-been super busy with work! Anyhoo, with all of our flips we did minor cosmetic changes...paint, carpet, minor landscaping and still managed to make a great profit :)

[ejs]

Dollface, what has been your average turnaround time from your purchase of a house to its sale?

[miel]

Dollface-- This is what we are doing...and the changes are pretty cosmetic on the condo we are flipping. However, we're putting the money back into our mortgage. So this means we will get a condo worth about 400, 450 or maybe more for about 300 or a little more. But when we renovate the condo we will have will be worth about 550 or more...so everything depends on the cost of the renovations. No matter what we will probably make $100,000 profit.

It's one of these faith things. Will I stumble across someone selling all their kitchen cabinets for a song, etc.? Will the wood floors under the carpet be nice or will they require thousands of dollars in repair.

So what we are doing is more risky than what you are doing. But if we can flip this in 2 or 3 years we'll buy a bigger property and then flip that...depending on what happens in the market.

So far we have no experience and this hasn't been a success. It is just our crazy idea! But the market here is also hot (not as hot as Cali but hot) so I am hoping your experience suggests it won't be a completely nutso idea.

If all goes as planned our turnaround time on our condo will be 3 months max...if all does not go as planned, 1 year (I don't want to sell in winter because prices drop then).

[miel]

Oh, I guess I should tell you to (1) look for creative mortgages--because if you have a lot of interest up front you can write it off on your taxes and (2) investigage tax consequences. If you sell before 1 year it seems to (according to one accountant so far) be taxed as income (i.e., about 30%--high!)...if you sell after 1 year it is taxed at 15%...if you sell after 2 years, you can keep all profit up to $250,000 if you are single or $500,000 if you are married.

Renting also reduces your tax burden, as do the repairs you can write off. So, if we fix the roof, we can write off 1/2 the expenses on the taxes...which is good because we are planning on living in the other 1/2 of the duplex.

But don't quote me on that. Get a tax program like TAXMAN and you can do the math yourself.

There are also websites that will tell you what you can expect to get back from your investment in an item--e.g., fireplaces will return 119% in the sale, supposedly. How they calculate that I have no idea!!!

We are not going to go crazy on renovations...we are going for cosmetic and seeing whether someone falls in love with it on the basis of how it looks... ;)

[Jaycee]

Subscribing**

I'm getting ready to buy my first investment property in the next month or so. I'm doing this while keeping my full time job, but if this one goes smoothly, than I'm considering changing focus and doing real estate investing/flipping as a full time gig. I'm so excited!! One of my best friends is a real estate agent and she specializes in these types of investments, so she really knows what the smart investments are and aren't and she also has a whole team of contractors, that work cheap but do good work!! She's gonna hold my hand through this first one and I'm soooooo excited!!

[dollface]

Dollface, what has been your average turnaround time from your purchase of a house to its sale?


Usually 6 months or less but we have one as long as a year.

[miel]

Good luck Jaycee! You are so lucky to have some guidance...I am completely working in the dark here. Just hoping to get lucky. It may turn out horribly but even if it does there are ways to fix it, I believe--e.g., we can rent it, or live in it, etc. I HOPE it's going to work out, that is.

But good luck and PLEASE share your tips! If things go well here we are definitely going to have to try this again--we may be wiser but we will still not know very much! :)