Anyone ever flip a house?

The Sandbox General
21

Hmmm, thinking more about Serena’s 10-20% and my 2x comments… they’re not apples-to-apples.

Serena’s talking about budgeting to answer the question “will I probably make or lose money if I buy this house to flip”.

Whereas I was looking at a worst-case scenario so that you don’t ever find yourself in the position of “I tried to become a flipper and I went bankrupt and lost my home and my car”.

So while the amount that you should budget to decide if you want to buy the house or not is lower, you need to have significantly more on hand for a worst-case scenario.

She & her husband undoubtedly have more cash available to them if something goes terribly horribly wrong. She didn’t budget for that when deciding to buy the house, but she’s got it so that they don’t go bankrupt when the unexpected happens. So I think we’re closer to agreement than my first read of her post suggested.

Maybe y’all picked up on that faster than me which is why I’m the only one questioning our very different numbers. :crazy_face:

22

Well, numbers can get variable, fast.
Last flip, we had one unexpected, and one I’m an idiot.
We opened the light receptacle box in the kitchen to install a new light. Every freakin wire in the house had been connected in the box. And the ends were burnt. That meant we ended up running new wiring to all the bedroom lights. Doubled our electrical costs, from 2.5 to 5, or 5 to about 8, I forget. But it was a noticeable expense. Though I had expected something to happen, electrical. My estimate of electrical is always ‘take a reasonable estimate, add padding’, and it’ll cost more than that.
Second screwup, I paid my SIL cash for that one. And I paid him handsomely. Which meant most of the profit endedup going to him, since I couldn’t deduct his labour from my earnings.
This flip would be more equitable. Nobody gets paid labour, and we split the net when we’re done. And I expect he’ll put in more hours than me.

My primary concern about unexpected events isn’t material or labour costs. It’s about how quickly we can get the house done. If we figure the kitchen takes 2 weeks, and it takes 4, that can start to add up in costs.Hate to estimate 2 months and have it take 4 or 5.

23

Uh yeah, I double the amount of time he says any project will take.

24

Huh? Why not? Is this for tax purposes? Some weird Canadian rule?

25

Take what the realtor says the value of the reno’d house is with a grain of salt. Do your own research if possible.

There is also land transfer tax, I don’t see that in your numbers.

Also there’s timing, people want to buy in early Summer, don’t plan to list the flipped house in e.g. January.

26

renovation costs where I am are insane. I can’t imagine making money flipping houses in this market. You’d be buying a piece of garbage for over 1m, and I don’t see how much value one can add to a garbage and sell it at a profit.

27

There’s also price risk. You’re buying an asset and improving it based on assumed constant market conditions.

28

I’ve got a spreadsheet that includes land transfer and other things. If I do an assignment, not sure of that affects it. If I do a flip, I have to pay it, then the new owner pays it again. If I do an assignment I think maybe I don’t pay it.
Plus insurance on a vacant house is crazy. Like 2k for 3 months or something similar.
I’ll spreadsheet it all out before I make a move, along with high and low estimates.

For the resale value, I’ll have the realtor pull numbers of past sales to confirm.
I’ll also negotiate commission.
In terms of timing, theres no inventory. City of 30k has 12 listings and no available rentals. That won’t change quick.
The market could crash but with low inventory I think that only happens if interest rates go up. And I don’t think the govt can yank interest rates way up without crashing the economy. Of course nobody ever sees that coming.

29

You can, but expect it to take longer than over the summer. My family jokes that we only ever move in January. Job relos can happen any time of year.

But the market is certainly slower from October - April than from May - September, no doubt.

Agree with the rest of your post.

Also find a title company with low charges. You can’t do anything about the transfer taxes, but you can try to keep the other charges to a minimum.

30

Houses here are almost all selling in days.

31

Yeah it’s crazy. Last one we bought was in October 2020 and I was shocked that we got it. We were offer number 10 or something like that on day one of listing it.

We got it bc we offered slightly over asking price, cash, no inspections, close in 2 weeks, and our agent personally knew the selling agent and that put our offer on top of the pile.

32

So, the way to win is to cheat? Good to know.

33

This always scares me. I know everyone is doing it, but there’s so much risk waiving inspection that I would never.

34

I acknowledged in my first response we are privileged by whom we know. :woman_shrugging:

35

I wouldn’t either if SO wasn’t skilled at doing them himself.

36

House inspections are a process, but not comprehensive. If you’re experienced, you can identify most major issues.the stuff that I’ve seen them identify that I didn’t, were questionble. Stuff like grading. And I’ve seen them miss important stuff before as well. Grain of salt etc.

Inspections only look at visible stuff, and I can do that to a decent degree.

37

Related:
My mom: how did you become so handy?
Me: YouTube and asking questions.

38

True. SO missed a foundation issue a couple years ago that took a chunk out of the profit margin. We still made money but lesson learned. If he’s not 100% confident about it, we spend the couple hundred bucks to send over the foundation dude.

39

For the most part, whom you know is a by-product of who you are. Having solid relationships with many different people says good things about you. You built that.

1 Like
40

My own experience is that updates and changes return less than dollar for dollar. Maybe .50 to .75 per dollar. So even at .75 per dollar, the upgrades need to be 333k to push up the price by 250k.

Plus you have to be damn sure that whatever finishes you use are desirable by “today’s buyers.” I totally got ripped by paying several thousand dollars to paint my house in 2016 and then in 2020 the relator told me that color was ugly and had to be changed.