Let's Make a Deal!

It's that time of year again.  My favorite time of year.  The sun is shining, the windows are open, flowers are blooming, and everyone is trying to sell their old junk.  Aside from the now abundant tag sales, this week also marks the first Brimfield week of the year.  I heart Brimfield.  Have I ever mentioned that? (oh right, I mention it every year- '14, '13, '12, '11) For those who are new here or maybe just tune out when I go on treasure hunting rants, Brimfield is my Disney Land.  3 times a year, 6 THOUSAND plus antiques vendors spread themselves across spacious fields down a several mile stretch of Rt 20 in Brimfield, MA.  Thousands!  There's so much to look at and poke through and just watch in amusement.  BUT I figured that since this magical time of year is now descended upon us, LET'S MAKE A DEAL!

Oh the thrill of the deal.  That's half of the fun!  Whenever I watch shows like Flea Market Flip and they DON'T negotiate I cringe.  If you aren't negotiating, you're leaving money on the table!

BUT HOW? you ask.

My personal philosophy when it comes to treasure hunting is to ALWAYS try and get a better deal.  You don't get what you don't ask for.  Even if you get it for $1 cheaper, that's $1 more in your pocket.  Use that $1 to indulge yourself in a frozen yogurt at IKEA or make the neighbor kid delighted by buying lemonades from their roadside stand.

Ok, so imagine this scenario.  You walk into a booth at the flea market and spy a glorious goodie that you just have to have.  What now??  First you need to figure out what you are willing to pay for it.  Would you be ecstatic if you could take it home for $30? Great, let's try and make that happen!

"Hey Mr. Antiques Vendor, how much is this glorious goodie?"  $40?  No me gusta.  At this point, many might walk away, $40 is more than you wanted to spend.  But remember, most of these vendors REALLY want to sell you their stuff.  The more they sell, the less they have to pack up and transport at the end of the week.  (Or if you're at a tag sale, less stuff they have to shove back into their garage)  They are almost ALWAYS willing to deal.

I'm about to give away my secrets here.  They want $40 and you won't pay more than $30?  Logic might lead you to think that you tell them that "My top is $30, would you take that?"  which might work occasionally, but usually, they'll try and get you up one more time and you'll end up spending $35.  Still a deal, but not the one you wanted.  To get the deal you want, anticipate that they want to have the last say on price and start off lower- your goal here is to get them to meet in the middle.  "It's priced at $40?  Any chance you'd take $20 for it?"  Don't expect a yes to that answer, but this will show you if they're willing to budge.  Sometimes they'll meet you right in the middle at $30 and voila you just scored the glorious goodie for the price you wanted!!  Congrats!  BUT, wait!  What if they only come down to $35 at that point?  Never fear!  That's your chance to say "For $30 you have a deal."  This won't work 100% of the time, but when it does, *happy dance*!  You just saved yourself $10 and got to enjoy the adrenaline rush of making a deal!

No negotiations are foolproof since you never know who you are trying to make a deal with.  Sometimes Mr. or Ms. Seller isn't willing to budge AT ALL.  That's when you need to decide how much you really want the item.

The biggest thing here is- don't be afraid to negotiate!  They expect you to!  They won't be offended if you offer a lower price (respectfully of course- don't be offering $5 for something with a $50 tag on it).  A few other tips- respect the item: don't try and get a lower price by telling the seller how crappy or broken it is.  Occasionally the seller may have missed a chip in the glass or a small crack and you can use that as a bargaining chip, but never insult the item that you are trying to buy or the person you are trying to buy it from.  The nicer you are, the more willing to make a deal the sellers will be.  Kill 'em with kindness.

I'm generally a bit of an introvert and would prefer not to talk to strangers, so if I can negotiate an awesome deal on glorious goodies, trust me, you can too!

Happy treasure hunting!!

Flipping Q&A: The Basics

Wow, you guys are awesome!  I received so many great questions that I'll be breaking the flipping Q&A into several posts.  So let's start at the very beginning (a very good place to start). Do you work with a realtor who alerts you to good leads for flip houses, or do you go it alone and hunt on MLS?

We work with a great realtor who has also flipped houses herself in the past, so she gets it.  She knows what we're usually looking for and will let us know when she sees a house that we need to see.  I do search inventory myself as well, but it's great to have her as a resource.

Do you only look for houses in your neighborhood or do you choose projects within a certain radius of your home?

We've tried purchasing properties in our own neighborhood but it's very competitive and we always end up losing to a higher bid, unfortunately.  Closer to Boston means more competition and higher prices.  I'm willing to travel about 45 minutes to a flip, so that's where we set our radius.  When I was working my corporate 9to5 in Boston, I had an hour commute, so as long as we keep it under that, we're golden.  Even though I look at houses in many different towns, thus far all 4 flips have been in Worcester.  It's a 45 minute commute from my house, but, it's conveniently close to my sister, in-laws, and friends so I've always had a bathroom to use when the flips had none.  Higher prices and more competition do generally mean higher selling prices as well, so I'd love to expand to another area.

Do you already have an idea of how much it will cost to flip a property before you put in an offer? If so, how do you come up with this estimate?

Our realtor and I will generally head out and look at several properties at a time.  After we finish up, I head home and start doing some math for the properties I'm considering.  I'll start a spreadsheet with the costs that I estimate for the fixes to see if the numbers work for us.  These are very rough guesses based on my previous experiences.  For example: 5k per bathroom update, 15k for a kitchen, 5-10k for a new roof (depending on size), etc.  While I don't generally use high end materials, I like to think that I put a twist on my projects that makes them look much more expensive.  We always add in a 10% "sh*t we forgot* factor to cover the unknown or stuff we just forgot to take into account.  If there's something that I really have no idea what to estimate, I'll call a friend who's had similar work done, or find someone to give me a ballpark cost.  Once we have a rough reno budget estimated, we look at the potential resale price, subtract out carrying costs (utilities, taxes, insurance...), subtract out the reno budget, then decide how much profit would be worth us taking on the project and adjust our offer accordingly.  This is where it's all about the numbers for us.  If the sellers are asking far too much for the renos that it needs (which is most often the case), there's no room for profit for us and it gets crossed off the list.  We see so many cool houses that I would love to save, but the numbers just don't work.  Granted my estimated budgets aren't always 100% but so far they've served us pretty well.  We went over on Millie about 5k due to lots of surprise plumbing issues, but ended up about 3k under on Grover.  I'd say that's not terrible for rough estimating.

HOW exactly do you go about purchasing the house?

When Hubby and I first started talking seriously about flipping, we started to sit down to talk to a bank about a commercial loan.  We have an LLC established for our flipping, so we were looking to borrow as a company.  We didn't end up having to go that route because we are lucky enough to have family willing to invest in us and provide us with a "private" mortgage.  Basically when we put in offers to buy the houses, we look like we're cash buyers because we do the mortgage on the side.  This is a huge plus since a lot of the properties we try and buy don't qualify for traditional mortgages anyway.  While we borrow to purchase the house, the reno costs thus far have come out of our savings.  We started small and have been reinvesting the profits which has allowed us to take on bigger fish like Millie (more on $ next week)

Are there certain things you look for or avoid when considering a house to flip? 

As mentioned above, the numbers have to work for us to consider making an offer on a property, but I'll admit that choosing the next project is a bit emotional too.  I'll be spending a LOT of time and money on this property and I have to like it.  Obviously antique homes just charm my pants off, so they generally get more consideration, but if we can turn a profit quickly on a basic ranch, you bet we're running the numbers.  Very few things actually scare me away from a house.  I can deal with questionable stains, stenches, blue bathrooms, badly done DIY renos... I'm even willing to deal with structural and termite damage if the house is desirable enough (for example a historic property in the right location).  If there's room for profit after dealing with the structural issues, termite damage, or new septic system it'll stay on my list.  What won't stay on my list is houses that just don't make sense, and there are a lot of those out there.  Like a house where the only way to get to the in-law suite addition is through the only bathroom or a house where there's no hallway by the bedrooms, just doors through the bedrooms to get to the next (both true stories).  I have to be able to make sense of a house, because if I can't make sense of it, buyers won't be able to either.  It's worth considering if I can move a few walls and have it make sense, but more often than not, these weird houses are beyond my help.  They either started as old farmhouses or mixed-purpose buildings and don't make sense for any modern functionality without MAJOR renovations (i.e. gut and add an addition or dormers) or they're a house that has been the victim of bad homeowner renovation ideas (in-law suite through the bathroom??).

Before you close on a house, do you have an inspection to search out any big issues? Is that a condition of closing?

We always get a home inspection to make sure that there's no issue that I wasn't already accounting for.  We don't make it a condition for closing since we generally by "as-is" properties anyway.  We just want to make sure that there aren't any major issues looming.  We've only had one property that we backed out of after an inspection.  After our offer was accepted, we discovered that there had been a ton of unpermitted work done to the house recently and the inspection turned up structural issues on top of that.  We came back to the sellers with a lower number since we would have to restructure the basement in addition to tearing walls back open to get permits for the plumbing and electrical (who drywalls the entire first floor when you don't even have plumbing run to the second??).  Well, they wouldn't take our lower offer and never put the property back on the market.  It's been sitting vacant and half (poorly) renovated for the better part of 2 years.  If we could get that house for the right cost, however, we'd still buy it in a blink.

Did you have much experience in construction/renovation before you got into this?

Nope.  I'm the product of growing up in a very handy household.  Add a design degree on top of that and it's a dangerous mix.  Growing up, my dad and uncle built our garage, my dad finished our unfinished basement, and my parents built their dream multi-level deck.  (All with an eye for detail.  If you do it, do it right.)  I think handiness is in my blood.  I didn't really get into any heavy duty stuff until we got our home 4.5 years ago.  Before my first flip, I had never tiled,  and had very limited tools and experience.  My dad got a call just about daily- "how do I do ______?" or "can I borrow _____ tool?"  Now we joke that the student has become the teacher (in some areas).  My brain works in a strange combination of an artist and an engineer- it's about how the pieces work, but how do the pieces work to make it pretty?

I think that's enough for today's novel.  Clearly I could talk about flipping for days, but I'll spare you for now.  I'll be back with more Flipping Q & A next Friday, so if you think of more questions, toss them my way!

Have a great weekend!

In the Know

A few of you have already deduced, but I can finally tell you- we are under agreement with Millie!  Will you join me in a happy dance?? A couple came through at the very first open house, fell in love with the house and made an offer the next day!  We're hoping to close in just a few weeks.  Phew!  While I love the process of fixing houses, the process of selling always gets me on edge, so I probably won't be fully at ease until we have the cash in hand, but yay!

While I'm already on the look out for the next project (and already have several rejected offers), I figured that this would be a great time to open up a bit and answer any flipping questions you may have.  What do you want to know about how I flip, why I flip, my approach, whatever- just ask!  What do you want to know?  Leave your question in the comments, facebook them to me, or e-mail me.  If I get enough questions by Friday in lieu of my regular "flipping" post, I'll answer all your questions.

After Millie I've needed a bit of a breather from projects, but rest assured that next week I'll be back to my regular M/W/F posting.  So- questions!  Don't be shy!