Son in law wants to flip a house (they’re a credentialled carpenter) and wants me involved. Anyone ever flip a house before? Stories?
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I haven’t personally, but the house in front of me was flipped by amateurs, and it was a disaster for them. They overpaid for the house because there were professional flippers involved in the bidding for it, and drastically underestimated the cost of repairs, and then we had a brutal winter that meant a lot of the outside work stopped from December-April and they didn’t get to sell it for almost a year.
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SO and I have done several. Call me if you want. We’ve been fortunate to have made money each time but it’s because of his experience and skill as well as the privilege of who we know.
If this is a first time situation, I’d be very cautious. Don’t give more than you can lose and don’t expect to make anything. (If you do, consider it gravy)
I don’t know what the housing market is like where you are but it’s still pretty crazy here. We haven’t bought anything in over a year.
For past buys, we know good bird dogs who have offered us first dibs on great deals. Even then, it’s a very difficult business.
In order to get the best deals, you have to move fast which means buying with cash/no inspections. Which means you better have the knowledge to do your own inspections or have someone on standby. We have a foundation guy on standby - if the foundation looks at all questionable we get him over there. Foundations are a budget killer.
Even when things go right, I budget 10-20% overage for renovations. Then be sure to subtract from your expected sale price the cost of commissions and any other add ons that the buyer or their inspector wants.
When you do all the conservative math, if the expected profit isn’t at least 10%, walk away.
That’s my very abbreviated advice. 
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I have and my family (parents and grandparents) have flipped dozens. The house flipping TV shows make it look simpler and more realistic for the common person than it really is.
My recommendation would be that amateurs never try to flip a house for a profit unless they plan on using it as their primary residence during the reno and selling it 2-3 years after purchase. Professionals and investors have eroded the profit margins in most areas, and doing the work yourself often delays completion to the point that finance charges eat away at whatever potential profit remained.
If your son-in-law is really good with that type of work (I’m not sure what type of carpentry work he does or what his vision of the completed project is) then it might work out fine, but it will be a LOT of work.
Something unique you have to consider right now is the time it takes to get materials too. Many of the new builds I’ve seen around me have been taking forever because the materials they need aren’t always readily available.
I need to also add: I think we are pretty good at flipping. And yet we don’t do it as a means of income. We do it because SO is a contractor and having a flip house going means that his crew doesn’t have down time between his other projects. He can always keep them busy.
Even being good at it, I consider any profit to be pure gravy.
VERY good point.
I keep thinking of stuff 
You say SIL is a carpenter. You’re going to need a plumber, an electrician etc. I know you’re pretty handy yourself but you should both consider your limitations and add in the cost of a professional for stuff that’s out of your wheelhouse.
That’s another advantage we have: SO knows so many others in the industry that he can get another professional over if he needs to and we pay wholesale not retail for that work.
The house across the street from me is in the process of being flipped. Apparently they got a permit to do some renovations but not as much as they ended up doing and apparently had some staggering fine and delay (which was evident as it sat idle for a few months). The owners are there literally everyday working on it now (Thanksgiving included). I can’t see how people make any money on it without valuing their time at near zero.
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Plumber electrician, concrete, etc, all available in the family.
Sil has renovated their house. I’ve done two kitchens, probably 5 bathrooms, etc.
Sil and I have done a flip already. It went well.
I’m thinking entry to mid level market because easier to sell generally. We find a house that needs kitchen,bathroom and paint/wallpaper. That I know we can do well.
I’m also thinking of doing an assignment type sale. We find a house where someone is say moving to assisted living, or house is empty. Offer good money with a four month close, plus crazy rent for 4 months. We renovate in 3 months, then sell.
That reduces cost of carrying money, plus land transfer taxes plus legal, plus govt insurance.
I don’t mind waiting for the right house. Real estate is an area where I’m ok sitting and waiting for the right deal, then moving fast.
I know nothing about flipping houses, but I live in a 100-year-old neighborhood so a lot of homes here get flipped after their owners since the 60’s pass away. It seems to me the only way they make money is to do a really shitty job under a pretty facade. All those homes have so many issues after 6 months of being lived in. One across the street had the plumber out twice last week, and the plumber has been out a dozen times in the year before that also.
I don’t have the skills or patience to flip a house, but I think the only way I would attempt it would be if I planned to live in it myself after.
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Eg there’s a house for sale locally for 650. Realtor says finished, it’s worth 900. I’ve got connections for cabinets countertops Myers, etc right from the manufacturer so there’s some padding in there to still make some money. I figure we can do it right for 75k plus our labour.
Oh, and sil has been doing favours for others in the trades for years. Got a deck needs building? He was there. He figured the time would come when he could call in some favours.
Apparently the problem locally is getting labour. I feel like we have that well covered.
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That’s not a flip. A flip means buy-reno-sell. Sometimes we flip, sometimes we keep them as rentals. Just depends on the math.
I bought my condo from people who were trying to become professional flippers but they went bankrupt in the process. Was a big mess because they were under water on the condo and hadn’t gotten a short sale approved and it was months before we closed and I became a creditor in bankruptcy court.
I think you need to have a very large cushion of cash to get involved in that line of work. And either be good at doing the improvements yourself or get in good with contractors who will do it for an honest price. You probably won’t make money on every property as some will require more repairs than you anticipated.
If you can’t at least cover a 25% down payment plus 2x the estimated cost of the repairs with cash, then you probably should steer clear.
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You do you but I’d walk away from that.
My math: Buy is $675 (you pay closing/taxes/fees etc). Sell is 825 (you’ll pay again and realtors exaggerate). Reno budget is $100 (for the shit you didn’t know about). 50k (maybe) for 6+ months of your collective time, labor and headache? No thanks.
Hmm, Serena says
That seems aggressively low to me, but I suppose it depends on how accurately you can pinpoint the cost of the obvious renovations. She’s done this and I haven’t… I’ve just seen the financial mess when things go wrong. Seems like her husband really knows what he’s doing though, which is a massive asset.
My 2x was covering both “crap when we pulled out the old sink we discovered a plumbing issue that we didn’t know we’d need to rapair” as well as “shoot, I thought we could reno the bathroom for $6K but it’s actually going to be $9K” (or whatever the right numbers are).
Another thought: I don’t know the players here as you do and you’ve done this before so take this with a grain of salt. It’s stressful. At least it is for me. And it can take a toll on relationships.
SO and I keep our roles delineated. He does his thing, I do mine so we aren’t over each others’ shoulders. But we’ve involved friends in the past as investors and it can get tense.
I’ve had family members want to get involved with us in flips and I won’t do it.
I agree with being cautious. But I don’t see 100k in renos since we are doing the work ourselves. 20k all in for a small kitchen and 10k for two bathrooms, that’s well padded and less than what I’ve done before. Plumbing doesn’t scare me.
The only wiggly is electrical but there’s a reasonable cap to that.
The other numbers, I’m only paying a realtor once, on the backend. Legal taxes insurance etc, I’m still good that 75k is worst case scenario, and we buy to avoid that case. Worst case we split 50k. Better more probable case is we split close to 200k.
It is. I’d never do this without him.
Family dynamics are already tested and not a concern to me. I’m confident there won’t be any drama. In fact, SO and daughter are best friends, so putting them in a room to prep walls and paint for a weekend is a fun time.
The other thing I do is assign tasks by workload and skills, then each person takes 100% responsibility for that. So I’m not going to tell SIL how to install cabinets (might offer suggestions, but in the end, we do it his way). SO would do all the design elements like colour, cabinetry, etc and they’re decision is what we go with. I handle lawyers, realtors, negotiations, finances, insurance, taxes, etc without a lot of oversight (though I explain things).
So, no drama expected. We get along, and know how to work together.
I still have to crunch more numbers. And wait for the right house.
Ironically, my SO’s tastes in decorating tend to be fairly neutral. People have joked about our house. Neutral, light colours. So they can do their thing, and not end up with some rumplestiltskin of a house to try and sell.
Our realtor’s wife also does staging, and the realtor is trying to negotiate commission to include staging.