I keep getting asked what the next flip is and you know what? I don't know yet! Now that Dori finally sold just about 2 weeks ago, I'm officially back to flip house hunting. In the past 2 weeks, I've checked out 6 properties with my Realtor and need to run a bunch of numbers to see if any are feasible as money-makers. We touched a little on the hunting/buying process last year in my Flipping Q&A series, but I figured today I'd open up a little window into my head and share what my thought process is and what I'm thinking when I walk through houses that I'm considering to flip.
Exhibit A- A current 2 family/potential one family in a great historic area on a corner lot.
It looks promising from the outside. While it would be so easy to focus on how cute it is and that I want to fall in love with it, I have to look at it through $$ shaped sunglasses. Right off the bat I see it needs a paint job, some exterior wood repair, most likely new windows, and a bit of landscaping. As I walk through each house, I keep a running tally in my head for what I estimate the renovations to be. So far on this one, my reno estimate is around $30k and we're not even inside yet. Even with that work that I see it needs, I'm starting to wonder why the house is priced so low for the area. Then we step inside and find out why.
This was a rare property for us to walk through and was actually occupied. Most of the houses we walk through are foreclosures, short sales, or estate sales and some haven't seen occupants in many many years. This one has 2 renters currently, so out of respect for them, my interior shots are of specific elements of the house and not wide overall shots.
The first room we walked in was apartment #1's kitchen and the low price started to make sense. This house was built in 1782. This kitchen is straight out of 1982. My favorite feature is the swoosh of linoleum by the cabinets and the carpet everywhere else. With cabinets, flooring (!), appliances, drywall work, plumbing, etc, this kitchen could run 15-20k as part of the overall reno.
And the bathroom.... with carpet on the floor and a mint green tub and sink..... While I actually kinda dig the mint green fixtures for a fun retro bathroom- this is not the house or area for that kind of design risk. Carpet on the floor of bathroom always give me the heebie jeebies.... It's a small bathroom, so I mentally add 5k to my tally.
The ceilings throughout are very low, but the home does have a few neat original features still intact.
Throughout the entire first floor unit, pretty much every room needs wallpaper removal, floor installation or refinishing, and drywall repair.
The entryway that connects the 2 units is kind to the budget and just needs cosmetics and repairing or replacing the stair treads up to the second floor.
So we head up to see the second unit. Even smaller size-wise with the same cosmetic issues throughout, although not as much original character. The kitchen up here, however is a HUGE problem. If you look past the current tenants stuff (and the pee pad for the 2 little pups that were kept in the room), the kitchen is barely functional. There was not a single full-size appliance to be seen. I've been in cheap hotel rooms with better cooking space.
The bathroom was just as bad if not worse. It only made sense if you knocked down the wall between and connected the 2.
But that's where my agent, Amy and I start discussing the feasibility of this being a single family or staying a 2 family. The layout really isn't ideal for either, but it has potential. Even more potential if I move around walls and really change it up. Not out of the picture if the $s work, but in order to figure that out, we need to see the basement and utilities. This could always make or break a reno budget. Can you imagine which this one was?
Let's just say the image below is what you DON'T want to see in a basement. Knob and tube wiring and sills that have both termite damage and rot. When I say sills, I mean the wood pieces that sit directly on the foundation that the entire house sits on.... Those 2 problems right there are a MIN $20k fix right there, maybe more depending on if the sills can be repaired and how.
But the basement's joy didn't end there. To get to the other half of the basement you had literally go down the rabbit hole. We were not having that. But we had yet to find the electrical panel which is normally in the basement, so instead we prayed it was hiding elsewhere.
Luckily we were right and the electrical panel was hidden in a cabinet in the first floor laundry room. Unluckily it was ancient and a dangerous brand of fuses. More $.
When we were all finished with the walk-through, my mental tally was up to a min $110k renovation budget and probably more since we always like to add on at least 10% for 'sh*t we forgot.' While the cosmetics of 2 kitchens, 2 bathrooms, floor refinishing, etc adds up fast, the real cost here is electrical, structural repair, windows, plumbing- aka the not so pretty stuff.
My take-away from this house: It's not stricken from the possibilities list just yet, but probably. Before I write it off completely, my agent Amy is checking into a few things (like if the termite damage has been treated or if it's an ongoing problem....). With a reno budget realistically around $120k and asking price of currently $225k, it's just not feasible. Resale is potentially around $350k, making the room for profit here approximately zero. Zero profit does not make for a good flip, you know. As much as I love old houses and want to save every single one, unless I partner with a rich benefactor that just wants to throw money at restoring old houses, I need to make sure there's room for profit. C'est la vie flipping. Guess I'll keep hunting!
