After selling our first house flip last fall, my son and I are back in the house flipping business again. In fact, we just bought our second house last week.
Allow me to reiterate the lessons we learned from our first house flipping adventure:
- Don’t overlook ongoing expenses. I realize that this is extremely obvious, but we somehow didn’t figure utilities, property taxes, homeowner’s insurance and maintenance (we had to pay for the one acre lot to be mowed). Little things add up, and these weren’t all that little: about $300 per month (or nearly $5,000 for the time we owned the house).
- It is a lot of work. We didn’t keep track of our time, but my best guess is that we weren’t making more than $15/hour for the work we put into this house. We justified it by saying “This is a learning experience”; “Doing father/son projects is a good thing.” and “We are creating a really nice home for someone.” Still, we are planning for our next flip to be much less demanding.
- We don’t need a broker. I have nothing against hiring a broker, but, as I have shared in other posts in this series, Jonathan (my son) has sold several houses on his own. He has a great working relationship with an attorney and a title search company. He also stays current with the local market and is great in working with prospective buyers. We did list the house in the local newspaper and on the For Sale by Owner web site. As it turned out, our buyer (the wife) saw the sign in front of the house, then, by checking on line, found our ad on the “For Sale by Owner” site. All of the pictures (we posted about 40) grabbed her attention and led to a showing which led to the sale.
- Lots of competition. With such a slow market and with financing as tight as it is, our area is definitely a buyer’s market. Although we should have known better, we fixated on one house without seeing the big picture.
- The Wow Factor. Because of this competition, we knew that our house had to stand out in the crowd. We therefore took extra pain with detail to basically create a “new house at a used house price”. Without that approach, I am convinced that we would still be sitting on this house. As it is, our owners are ecstatic about their “dream home”.
- Aim for a lower price range in order to attract more prospective buyers.
This time we found a charming, two bedroom, one bath house in a lower price range, with MUCH less work needed. Whereas we basically gutted our first one and totally remodeled it (new drywall, new wiring, all new fixtures, all new interior doors, new kitchen cabinets and counters, all new flooring), House Flip #2 is going to be much, much easier. In fact, we have already painted all of the interior walls! We will also:
- Paint the exterior of the house.
- Upgrade the electrical service.
- Add ceiling insulation.
- Refinish the hardwood floors.
- New ceramic tile floors in the bath room.
- New vinyl floor in the kitchen and utility room.
- Install mosaic glass tile back-splash in kitchen.
- Do some drainage work to eliminate a water problem in the basement.
- Upgrade ceiling lights throughout the house.
- Replace bathroom vanity with a pedestal sink.
As you can tell, most of this is pure elbow grease. Other than hiring an electrician to install the new electric service panel (we will replace the hodge podge of fuse boxes with a 200 Amp service), we can do the rest of the work ourselves.
I will be keeping you posted as our remodeling comes along, but hopefully this house flip series will be a short one. We would love to have it on the market in a month.
One more thing: If you would like to read my series on our first house flip, follow the links from “We Sold Our Flip House!” post or click the House Flip box from my Categories drop down box in the right sidebar.