It was December, and we’d just closed on another piece of rental property to supplement our income. This was truly a diamond in the rough… complete with a two story, four bedroom house on a corner lot AND a garage apartment. However, what we didn’t see were the troubles it would take to polish this little jewel.
Now, I should state that we have flipped numerous properties, all of which have been successful because my husband is awesome (and licensed!) to complete these types of projects. With this in mind, I’ll continue… Immediately after our purchase, we began working on the garage apartment because it needed less work to become rentable. New windows, new kitchen, new bathroom, new heating/cooling system – by the time we were finished, we’d invested about $12,000 into the garage apartment alone. It was more than good enough for rental property, so we then moved on to renovating the house.
The house was an entirely different experience. It seemed like every turn threw us another curve ball. It was an older home, so we knew that there would be several significant issues to address. Yet, structurally, the house was very sound. Cosmetically, we knew that new cabinets, different flooring, and paint would cover the ugliness. However, it was the inner workings that drove us to the breaking point…
This home was equipped with gas lighting (which I had never even seen previously!). It had unsafe electrical wiring throughout both stories, and outlets (yes, electrical outlets!) were cut into the floor. Asbestos was abundant, and the entire bathroom floor was in desperate need of replacement. Oh, and the plumbing and septic system was in disarray. To say the least, we were in way over our heads due to time constraints as well as finances. It was becoming difficult to continue funding this nightmare while making a payment as well.
If you are considering buying a property to fix and flip, there are several points that need consideration before you finalize the deal. Here are our top items for discussion.
- Can the property be insured while it’s being renovated? With our disaster property, it could not be insured (for a fair and reasonable amount) while it sat empty. Apparently, the location of this home activated some specific geo-code on the insurance grid, which rated it as a high risk property. Consequently, insurance premiums were at an astronomical and unaffordable high.
- Consider the distance of your potential buy from your primary residence. For us, the money gobbler home was a 30 minute one-way drive from our home. If you can flip the property quickly, this may not be an issue. But if not, you may end up depleting a significant amount of you funds in travel.
- What time of the year is it? Yes, this is also an important element to consider due to heating/cooling costs. Also, this may be a factor that will either entice or deter contractors. From our experience, working in the winter months made things much more difficult.
- Can you do the work yourself? If so, you can save a tremendous about of money. If not, you will likely spend much more than is necessary.
- Consider the amount of time you have versus the amount of time it’ll take to renovate the property. This can be tricky because you must account for things that could potentially go wrong. Also, it helps to account for the payment you are making because you’ll want to turn profit as soon as possible.
These considerations may help in your quest to fix and flip properties, but whatever the circumstance, be sure to contemplate all possibilities prior to your purchase.