You Want To Flip THAT House?
April 16, 2013If Vanilla Ice can flip houses on the DIY Network and make money, then anyone can, right? After watching too many episodes of Flipping Vegas on the A&E Network, my husband decided he could make money by renovating a vacant house himself. Well, he wouldn’t be on his own. His son would be his partner through sweat equity. Could they buy low, make quick cosmetic improvements, and make some fast money?
According to the April issue of Money Magazine, “Housing Is Back!” and investors are helping with the recovery. There are still plenty of foreclosures available at discounted prices from the banks along with abandoned homes that are sold due to vacancy or back taxes but if you’re not careful, you could get burned. My husband happened to hear about an auction last month where the city of Baltimore was selling foreclosed and abandoned homes, with some having starting bids as low as $5,000, so he and my stepson jumped in the car and did a drive-by of some of the properties that looked promising. However, he would be bidding sight unseen for the interiors since many of the homes were boarded up and not accessible to view inside before the auction. Some of these auctions can even be done from the comfort of your living room by bidding online, but buyers at these auctions are accepting the properties “as is” so investors really need to do their homework.
After being the winning bidder on one of the Baltimore homes up for auction and putting down a deposit of a few hundred dollars, the euphoria my husband felt soon wore off once the keys were handed over. Settlement would take several weeks, but buyers were allowed to go in and even start cleaning up the property before ownership was official. With broom in hand, we all headed over this past weekend to view the inside.
One of my favorite parts of the show Flip This House was when Armando would walk in for the first time on a recent purchase and then name the home: Mouse House, Roach Hotel, etc. Unfortunately, the name that came to mind for my husband’s flip was Rain House. After a few spring showers the evening before, water was dripping into the bedroom from a huge hole in the roof. So much for just a few cosmetic fixes!
After calculating the costs of the total renovation the Rain House would need, there would be no possibility for a sure profit. (Here are some good tips for calculating rehab profits for real estate.) Since this was going to be a money pit instead of a moneymaker, the tough decision was made to walk away from settling on the home, and my husband lost his deposit. However, taking a few hundred dollar loss was a better option than having to sink in tens of thousands of dollars and still have to resell for a loss. It looks like A&E won’t be calling him anytime soon for his own series!