My wife and I are looking at flipping a house and I was wondering if anyone here has done it. If you have or know someone who has, I was wondering if you would be willing to share with us your story. If we do it we hope to go at it early this summer if the market starts to show improvement. Thanks in advance for your time.
I have done several and work with investors everyday who do it. Feel free to pm or email me questions and I will be happy to help. Where are you located, maybe we can meet.
Adam;
Troy here is a good reference to go-to!
Also, feel free to PM, call, or Email me any questions you may have.
If I recall correctly, where your location is, I have a “flipper” down that way and he does quite well with it.
its sometimes difficult to find lenders who will lend on these types of houses….Generally they would like to see a little bit of time in the residence….like 9-12 months at least!!! Just something to be aware of….I know its out there I see it almost weekly right now!!!
Also “flipping” is not viewed very well with Mr. Hatch!!!!! Just a heads up!!!! 
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Also “flipping” is not viewed very well with Mr. Hatch!!!!! Just a heads up!!!!
screw him 
My wife and I have done a few. My two cents is to allow much more time than you first thought especially if you work fulltime also. Secondly, unless you have done some remodels before and have first hand knowledge, it will cost more than you think.
We like to believe the money is made when you buy it, not when you sell. You gotta know you didn’t pay to much.
Good luck!
Randge
Theres been alot of people here where i live who have bought and sold realestate that i have worked with over the years. I don’t want to scare you off your interist but i know a few agents that have said if theres much rebuilding to do and i agree, new roof for the bank befor they will give you a loan, plumbing and wiring changes to bring it up to code if you have to get into the walls much, etc. that by the time you get done you almost have to have them givin to you or bought really cheap. I’ve found that finding landlords that want to unload a few of thier houses that need minor repair is naturally the best bet. Finding someone that does good work for a resonable price, not cheap, is fairly hard to do because if they know much thier usually fairly expensive. If you can do alot of the work yourself is where you’ll make the most money and some guys will work with you and atleast guide you through a part of their work so you can save money there. Example is when i work on an older house that im going to redo the finish on the walls theres one heck of alot of masking to do masking all the trim around the windows and baseboard and putting dropcloths down, this is all done with 12″ masking paper. On an older two story plaster wall masking job its easy to go through a case of masking paper that has 180′ to a roll, 12 rolls is in case. This is done to tape and finish cracks, texture the ceilings and walls and then paint. A decent finisher is going to have about 500″ sq, ft of dropcloths to do a days work so the finish can dry so he has enough to do to fill the next days work… Ive been hanging and finishing drywall for about the last 20 years and i was a carpenter befor that so i know what it takes to get a decent job. The interior walls don’t have to be done perfect, they just have to look good with a fairly good paint job. The exterior paintjob, roof and the looks of the trim is the most important on exterior applications. Unless you can find someone that does alot of these things and works fairly reasonable and you can buy a house pretty cheap its better if you can do most of these things yourself, stay away from the houses that are woreout or worn bad unless you get them for rock bottom price or in other words for the price of the lot that it sets on. If things go fairly good and you buy a house that is in fairly decent shape you may be within 10% to 15% of the origional bid, theres almost always overruns and a little more expense. If the house is in need of major repairs be ready to go 25% to 50% more when everythings tallied up thats why its imporatant to be able to do most of the work yourself if you can. Unless you know a decent drywaller that works for resonable stay away from houses that have major plaster problems and the walls are full of cracks, its real easy to drop $10,000 to $15,000 on interior wall repair, drywallers and good finishers aren’t cheap and finding ones that are even resonable is hard to do if thier any good. I’ve done alot of interior finish work and know some pros and cons and if you want to message me i’ll help you by telling you whats right and whats wrong with the interior walls. Ive figured out bids of this kind alot over the years, i know what absorbant and what fair is. If you need advice message me and i’ll help you if i can,,, 
First off let me say thanks guys. I am a full time fire fighter and work ten twenty-four hour shifts in a month(not including vacations) so it’s not to hard for me to find the time to do a lot of this on my own. For 15 years I have worked in some type of construction mostly plumbing but also helping in drywall, framing, roofing, concrete. A true jack of all trades but surly a master of none. I have however got great contacts in all trades so that I am able to get help when needed and maybe even get some good prices if I hire some of it out.
My wife has a great ability to pick colors and decorate a home like a pro. She can make a room look worth millions on a very thrifty budget.
I have helped with remodels and know that they can run way past on time lines and way over on budget. This is what makes me skeptical of doing it. I feel that in a worse case I will break even. But who wants even? I know one flip will not let me retire but we hope to be starting a business for us both to work at.
We have no idea of what type of financing or programs that are out there for this. We are not going into this without cash in the bank but we can’t afford to pay cash for a house either.
Thanks again for your time and your input.
Well I for one would think this is one tough market to flip a house in, have you looked at how many homes are availble in the area for the final price you’ll be looking for? Not to say it’s not doable, we have our grandpa’s house up for sale and we haven’t had a bite yet, there are a ton of houses for that price range in the market.
Nick
They are predicting that the market will get better by summer. If and when it does we hope that we have our ducks in a row and are ready to get this started by then. We are just starting to look into it now. Thanks for the tip.
Down here the rule of thumb is wait until after tax time when people start getting thier tax money back to put it down on a house, the end of the year is a slower time for all the trades here too. Beings you can do most of the work yourself and with some help from your friends your almost home. The first one is a learning experience but it sounds like it could go relatively problem free, do one and see how it goes, it sounds like you’ll be ok.
The housing maket as a whole is dead and in certain area like Rochester are beyond dead. Don’t let any “extert” try and tell you otherwise either. The market is saturated with homes.
You will need to sell the property to get you money back. In order to do so you will need to sell it cheap and I mean cheap. Years ago a 3-5% decrease in price was considered drastic. Now days 10-20% is normal. Plan to sell at 80% of what it’s realistically worth(start advertising at 90%). That will be you best bet of getting it sold in a short amount of time. So work back wards from there. I generlly figure on buying a house at about 60% if it only need minimal work.
I personally know of some low prices flips that have been on the market a year already and they are beutiful and cheap and no one will buy them.
IMO you best option is to buy and rent the property for the next 5 years or so to get you through the down turn in the market. You’re buy in price will be low now and you selling price will be high when the market comes back… if it comes back 
Also remember that he bank is going to need to see at least 10% and in most cases 20% down on an investment loan.
Cain;
I have 6 lenders at my door right now, willing to lend money for investment…..With zero down payment! And considering you are purchasing an investment with no interest out of pocket, the rates are very, very attractive.
However with the “right” credit profile, and 10% to 20% down, a person can purchase that investment property at “advertised” interest rates.
You are right though, you buy when people are selling, and you sell when people are buying.
However, the market is far from being dead. People are buying homes all over the place. It is a buyer’s dream world right now! The issue at hand is that everyone is trying to sell at the same time, because of the large equity growth seen over the past few years.
This is de-javu all over again. It happens in cycles about every 10 to 20 years. The urban sprawl gets harsh for those wanting out of the inner city. Everyone heads to the “outer limits”. Then, you have a large increase of homes for sale in the “inner city”. Prices drop because of large inventory. Then, people flock back in because prices are cheap. It is a cycle that will never end. The last time we saw it this harsh was in the mid-70s.
There is no “fast money” in flipping, not when you are pursueing the idea of flipping. At times, people have the opportunity to purchase property at $0.60 to $0.80 to the dollar. Generally through inheritance or foreclosure. “IF” you can get your hands on this, then you can get money. But be aware that there is a vast crew of buyers out there that specialize in this. They are what you would call an expert on it. They will have it purchased and ready to sale before you even knew it came up for sale.
The majority of flippers out there are purchasing re-habs and making them rentals for 2-3 years till the market comes back strong and selling then with the equity growth. Some are even loosing money on their monthly rent, just due to the long term investment.
Adam,
Unfortunately, I agree with Cain and some of the others regarding the timing. My neighbor has been doing this with his wife and father for the past 3 – 5 years. They’ve done real well – buying 1 house, fixing it up, selling it and then buying the next. I would guess they have flipped 5 houses. The one they are currently sitting on is in downtown Hudson and they’ve tried to sell it for almost a year now with very little interest. There are a crap load of houses for sale in my subdivision that just aren’t moving. And St. Croix county is suppose to be the fastest growing county in Wisconsin. Unless the interest rates come down to where they were 2 years ago, IMO homes sales won’t be improving much.
One thing that hasn’t been mentioned yet that you will want to make sure you look into is talking to a tax man. You can expect to pay 15% capital gains on anything you flip. There should be ways around the capital gains – reinvest in next property or live there for 2 years before selling. I believe my neighbor incorporated and they draw a wage for the time they work on the property.
Good luck. 
Typically the value of your house is determined by the price or dollar amount that you pay for the house! If you plan to add updates to your this house you just purchased you will not get your total dollar amount back in which you put into it…..unless you hold onto that house for a couple years!!!! Updates to homes do not increase the value of a house “overnight” they will increase the value in time!!!!
Just because you find a house below market value doesn’t mean updates or repairs will increase the value! Your purchase price of the home sets the value of that home for at least a year…..plus or minus about 20%!!!!!
I have an underwriter for a major lender that has given me his opinion on this subject!!!
Also this is not considered flipping!!!! Flipping is when you do a simotanious (sp) close! Which means you buy the house from the current owner at 40K and have someone purchase that same house without any improvements for 90k…Just because you got a “good deal”….That is frowned upon big time in the mortgage industry….Illeagal to flip….NO….unethical yes….
Believe me….even ask any other person in the mortgage industry…there are low lifes out there who are chasing the almighty dollar and will flip houses for a profit…strip the equity from someone only to turn a profit for themselves…..could you live with that….I couldn’t….
I hope this clears up a few issues!!!! Enough of the rant for me!!!!
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Unless the interest rates come down to where they were 2 years ago, IMO homes sales won’t be improving much.
What 
….rates are still super low….heck they even have 50 yr mortgages now!!!!!
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Unless the interest rates come down to where they were 2 years ago, IMO homes sales won’t be improving much.
Actually,
rates are just about the same today as they were 2 years ago.
In fact, the rates were the same in December of 2006 as they were in April of 2005. Exactly the same.
But even the difference today, with the T-Bill being different, the rates are still strong. It is just that the margins are different. It is all about margins.
Rates for the 30 yr fix are hovering between 5.75% to 6.00% on “advertised rates”.
That is right about where the 30yr fix was 2 years ago.
Rates are not high. The media tells you when rates go up, but they don’t tell you when rates go down.
When a person can borrow $250,000 for 6%, for 30 years. Money doesn’t get much cheaper. There are people borrowing $750,000 below 7% for 30 years.
That is cheap money, no matter how you look at it. 12 month CDs are bringing in around 4.5% to 5%. We are talking an average of 1.5% interest difference between saving money for 12 months on a committment and borrowing money for 360 months on a committment. Think about that statement for a few seconds. If you commit your money to the bank for 12 months, they will give you a 4.5% return. Yet the bank is willing to give you a 360 month committment for only the cost of 6%!
The T-Bill has never been stronger and the outlook for rates staying the same are very positive!
It has never been a better market to buy a house today.
Just like 2 or 4 years ago, it was never a better market to sell a house.
There are many different levels of “flipping” too. There are also some laws involved. You are only allowed to sell so many homes a year without a realtors license.
Here is a brilliant example of a client of mine who is making a fortune in buying/selling property.
He is a licensed electrician. He also has a crew of guys that does excavating/digging basements/pouring concrete/ putting up foundations.
So what he does is this:
Purchases a lot.
Obtains a “free house” in the metro area. (you can find free houses that must be moved due to new roads being put in or zoning changes due to city growth). It cost hime about $15k to move the house via equipment and permits.
He digs a basement, puts up the foundations.
Drops the house on the foundation and connects the HVAC, water, electricity.
Sells the property at 80% to 90% appraised value for a quick sale. He just profited approximately 20% when the smoke clears.
He calls me with clients to get them the financing. The clients are eager to purchase, because they are buying a $125000 parcel of property for $100000 (FOR EXAMPLE ONLY). They just gained “20% equity growth”.
Why wouldn’t you buy a house at $0.80 to the dollar?
This individual just turned 30 years old. He is a self-made millionaire already. On paper, worth about $2.5 million. Paper he could liquidate easily within 12 months.
However, you need to understand. In order to do this, he has support and a “committment of business” with a local bank. They back his play. In exchange, he pays them about $75,000 in interest each year. This is what he does. He buys and sells. He has the “ability” to sniff out money. Unlike anyone else I know. There is also a cost in this. His life is stressful. He is always on the go. He even jokes about it with me, telling me he thinks he is nuts for what he is doing.
And tomorrow, he might loose it all in one single bad move.
It is the “cost” of doing business. Nothing is free, nothing is simple, nothing is cheap.
You have to be creative and “think outside the box” in order to make money in any industry.
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Unless the interest rates come down to where they were 2 years ago, IMO homes sales won’t be improving much.
What
LOL!
Yes,
there is 50 yr mortgage, 40 yr mortgages, “interest only”, even negative payment mortgages.
Some may look at the interest only and think it is the dumbest thing to do. But if you are looking to only have a mortgage for 2 or 3 years, before selling a house, why tie up the cash flow?
You do the math. In 24 months, how much principal do you pay on a 30 year mortgage? Is it worth tying up $2500 or $4000 for 24 months, when you are going to sell a parcel of property for $20,000 more than what you paid for it?
Are you buying the house to pay it off?
Or
Are you buying the house as an investment?
If you are going to buy a house to pay it off, then don’t bother wastings tens of thousands of dollars in interest on a 30 year loan. Borrow the money for 15 years.
I am sure Gary could bore us all to death with mortgage talk for the rest of the afternoon, however if your looking at doing some sort of investing, purchasing, or even refinancing your current home…..Give this guy a call or PM him…..He know his mortgage’s…. he also knows a little bit about fishing too!!! 
Good luck to whomever tries the fixer up role to try to make a profit….it will take a lot of work and can be done for a huge profit if done correctly!!!
Gary,
Looks like a happy birthday is in order.
You sound exactly like my father in-law (a newly retired loan officer). I’ll be the first to admit, I don’t know my head from my butt when it comes to comparing all the mortgage rates that are on the market. I’ve done all my loans and refinances through my father-inlaw (like I had a choice 
). I based my statement on mortgage rates on what I can currently get a loan through my current lender. The 30 year (7 year ARM) is higher today than what is was 2.5 years ago (around 4 3/4%). My cabin loan is a fixed 30 year at 5 3/8% we refinanced about 3 years ago. I know I can’t go back to the same bank and get these rates today (keeping the closing costs and everything else the same). I’m comfortable with my fixed rate but worry about what the rate will be in 5 years when the ARM will adjust. I’m doubting it will be going down.
Also remember there are other ways of making money on an investment property. “lease to owns” and ” contract for deeds” can yield you some more money on your investment if you know how to do them right. There are some legal guidelines that have to be met on these. There are also some “moral” guidelines as well. There are people making money on “lease to owns” that are set up to default in order to obtains a quick buck. A person can set up a “lease to own” that is actually going to benefit the seller and buyer.
There are lots of options out there.
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The housing maket as a whole is dead and in certain area like Rochester are beyond dead. Don’t let any “extert” try and tell you otherwise either. The market is saturated with homes.
You will need to sell the property to get you money back. In order to do so you will need to sell it cheap and I mean cheap. Years ago a 3-5% decrease in price was considered drastic. Now days 10-20% is normal. Plan to sell at 80% of what it’s realistically worth(start advertising at 90%). That will be you best bet of getting it sold in a short amount of time. So work back wards from there. I generlly figure on buying a house at about 60% if it only need minimal work.
I personally know of some low prices flips that have been on the market a year already and they are beutiful and cheap and no one will buy them.
IMO you best option is to buy and rent the property for the next 5 years or so to get you through the down turn in the market. You’re buy in price will be low now and you selling price will be high when the market comes back… if it comes back
Also remember that he bank is going to need to see at least 10% and in most cases 20% down on an investment loan.
I am going to respectfully disagree with most of this. I won’t speak for the loan side of things but I have investors that get 100% loans, interest paid when they sell them, and the fix-up cost financed also.
I will consider myself an “extert” (?) on the real estate side. I have written 9 contracts in the last 60 days in this “horrible market” and in the slow time of the year.
If a home is in good condition and priced correctly it will sell in a reasonable time. If you overpaid for a home you “had to have” 4 years ago you will need to sit on it to recoup your mistake. Most of the homes that are sitting that I know of are overpriced and in poor condition. Sure you have to work harder now than a couple of years ago to sell a home but that is good. It has weeded out the lazy realtors and builders who shouldn’t be in the business anyway. I just sold a house for $370,000 that 4 years ago would have been $450,000- the builder wanted out and my buyer had cash.
Inventories have come down, interest rates a awesome, sellers are hungry.
It is a GREAT time to buy a home, make a great deal, watch your expenses, make a profit.
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The housing maket as a whole is dead and in certain area like Rochester are beyond dead. Don’t let any “extert” try and tell you otherwise either. The market is saturated with homes.
You will need to sell the property to get you money back. In order to do so you will need to sell it cheap and I mean cheap. Years ago a 3-5% decrease in price was considered drastic. Now days 10-20% is normal. Plan to sell at 80% of what it’s realistically worth(start advertising at 90%). That will be you best bet of getting it sold in a short amount of time. So work back wards from there. I generlly figure on buying a house at about 60% if it only need minimal work.
I personally know of some low prices flips that have been on the market a year already and they are beutiful and cheap and no one will buy them.
IMO you best option is to buy and rent the property for the next 5 years or so to get you through the down turn in the market. You’re buy in price will be low now and you selling price will be high when the market comes back… if it comes back
Also remember that he bank is going to need to see at least 10% and in most cases 20% down on an investment loan.
I am going to respectfully disagree with most of this. I won’t speak for the loan side of things but I have investors that get 100% loans, interest paid when they sell them, and the fix-up cost financed also.
I will consider myself an “extert” (?) on the real estate side. I have written 9 contracts in the last 60 days in this “horrible market” and in the slow time of the year.
If a home is in good condition and priced correctly it will sell in a reasonable time. If you overpaid for a home you “had to have” 4 years ago you will need to sit on it to recoup your mistake. Most of the homes that are sitting that I know of are overpriced and in poor condition. Sure you have to work harder now than a couple of years ago to sell a home but that is good. It has weeded out the lazy realtors and builders who shouldn’t be in the business anyway. I just sold a house for $370,000 that 4 years ago would have been $450,000- the builder wanted out and my buyer had cash.
Inventories have come down, interest rates a awesome, sellers are hungry.
It is a GREAT time to buy a home, make a great deal, watch your expenses, make a profit.
You are right anything will sell if priced right. But those that aren’t doing it every day like you are, need to be prepared for what lies afead. Values are down and DOM’s are up. There are a tons of forclosure and pre-forclosures out there so someone with tha ability and know how can work that to there advantage.
Thanks for the Happy B-day Buzz!
Good points from both Buzz and Cain.
Yes, rates are higher today, then what they were 2.5 years ago, when you look at the ARM programs. Prime is higher too. Those rates consitently fluctuate in heavy swings when you look at the history of it all.
People going into ARMS need to understand it is nothing but short term and nothing else but a short term mortgage.
Cain;
You brought up a great point. I just spent an hour on the phone with my “flipper”. We were actually chatting about you guys. Your statement just popped up in our conversation before I even read it.
“Anything will sell if it is priced right.” If you want in on this business to be successful, you need to get that information before anyone else!
Good luck all, on your shopping!!!
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They are predicting that the market will get better by summer. If and when it does we hope that we have our ducks in a row and are ready to get this started by then.
Don’t wait, buy now. House shopping roughly starts in March and goes til August to October. You want that house ready for the busy season. If you are just looking, wait til fall so you can work on it during the winter and sell it in the spring. This way you will have less time you will be sitting on it. Also keep in mind for a family that needs to move, they want to move in the summer so if the kids change school districts, its not during the school year. Have fun with your project. I’ve never heard of anyone losing money on real estate.
I have pleny of clients who lose money on real estate. You may first want to check if the amount of equity in your current home is enough to finance your “flip” home. Looking at things in a tax deductible way. Interest paid on a home equity loan is tax deductible, assuming you itemize, interest paid on investment property is not. Unless you file as a self employed business person and deduct interest through your business profit or loss work sheet. The person who was talking about the father/son who has been doing well, by forming a corporation, the corporation pays capitol gains taxes at a much lower rate than an individual. Good idea if you are going to be doing this for a period of time.
Thanks Chomps!!!!
Very good points!
Gary, I was reading your post on a 15yr vs. a 30yr note. Each person has their own view, and both may be right for certain individuals. Right now we are at a certain point where it makes sense to go with a 30 year note and invest the difference. Right now the difference between a 30 and 15 yr. note may be only .25 – .50% difference in rates. Doesn’t seem like much in the spread, but over the period of the loan you will always save $1,000’s in interest by shortening the payback period. Here is why I make a case for a 30 yr. note. Let’s say the difference between the loan payments is $200 per month (15 vs. 30yr). If you took that $200 and invested it in high yield corp bonds, currently 6.78-7.48% yeild, for 15 years, you more than likely will have enough built up in your account to pay the balance of the mortgage, if that is the most pressing issue, and still have a nice sized amount of money left over. This really makes a big deal for those in a higher income tax bracket, as the after tax cost of a 6.25% mortage loan is considerably less. Enough of that, but your point of banks giving away money cheap right now is correct.
Now I am just a lowly computer programmer so I know nothing about mortgages or ‘flipping’ houses. I do know my fiancé is an underwriter for a very large home builder and my brother-in-law is an ‘important’ person at another large home builder. Both of them would tell you the new home market has come to a stand-still. Many of the builders have a huge inventory of spec homes that they cannot move. Even the company my fiancé works for stopped supplying office supplies because they are trying to cut cost. 
In fact if you are interested in a new spec home, walk in and offer $50k-$100k or more off the price and there will be interest on their part.
I am assuming most houses being flipped are more of an entry level house (again, know nothing) so that is a completely different part of the housing market so maybe ‘flipping’ works. It is an awesome market for first time buyers. There certainly are a lot of houses to choose from, and should only be more to choose from with all of the foreclosures that are/will happen when people’s ARMs expire and can’t afford their new payments. Just my .02 cents!
Good luck with your decision!
Brent
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