Ugly confession time: I’m thinking seriously about buying another flip property.
Insanity, I say, insanity. Just when I find myself enjoying the relative peace of free spare time and leisurely weekends (well, relatively speaking), there I go, stars in my eyes (well, dollar signs), thinking about buying a train wreck of a house that would require major renovation, in a less than encouraging market that still potentially has some downside to go.
It’s hard to argue with the actual details, though. 3-2, 1300 sq. ft. house built in the 1950’s in a nice neighborhood, big corner lot, and currently bank owned. It appears an investor bought it at some stage, updated the plumbing, replaced the roof and had the foundation leveled, then quit and let it go to foreclosure.
The inside is downright scary, as it’s largely uninhabitable as is, with the subfloor in one bathroom completely rotted out, the other bathroom intact but horrow-show filthy and roach infested, rotted wooden siding, needs a new furnace (inside and out), and both bathrooms and kitchen would need to be completely gutted to the studs. It’s also got a weird haunted house vibe at the moment, with one bedroom painted purple, another one pink, and weird silhouettes of strange half moons that were hung on the walls in various locations.
It’s also got a strange 700 sq. ft. building in the back right behind the house that has outlets for a washer/dryer and related plumbing hookups and 3 big sliding glass doors that lead into it, but otherwise not really finished out at all. It’d normally be a positive but it’s crammed very close to the house, so other than converting it to a detached garage it’s an awkward structure, and one I’d almost be tempted to simply demolish.
The house does have the original hardwoods, though, which are salvagable, and original old solid wooden doors and glass doorknobs. The layout is decent, and other then removing a wall in the kitchen to open it up and maybe moving a wall to enlarge a bedroom into a true master bedroom (currently all three bedrooms are pretty small), nothing major would need to be done as far as additions, re-routing plumbing, etc. The sheetrock needs to be patched here and there and re-textured, but it’s mostly in good shape. It’d be a pretty straightforward flip as far as just basically updating what’s there and making it nice. Not nice nice, but 3-2 starter house nice.
it just came on the market and they’re asking $54,500 for it, but that’s crazy talk, given the condition it’s in. The banks here tend to list their REOs ridiculously high for the first month or so, then quickly cave in to reality and start dramatically lowering the price to get it off their books. Wouldn’t surprise me at all it they drop it to $45,000 or so in a month.
A conservative ARV would be $100,000-$110,000 (a 2-1, 900 sq. ft home on the same street just sold for $93,000 recently), and the house needs $20,000-$25,000 in repairs. If I could get it for $30,000-$35,000 the numbers should work, as far as being able to list it at something like $90,000-$95,000 for a hopefully quick sale.
My biggest worry is that I’d prefer not to be trying to sell a house in the $100K ballpark in this market, as properties in that price range are sitting on the local market for forever at the moment with the tightened lending landscape for folks looking for a starter home. Higher priced properties are still moving fairly well, but it’s pretty slow for stuff $100K and below. That said, most of those properties not moving are smaller 3-1s in not-so-great neighborhoods; the best equivalent 3-2 comp on the market is currently listed at $125,000, so there’s definitely room there to produce what would hopefully be a must-buy steal for someone at around $100K.
The biggest obstacle (and the one I’ve discussed before) is once again facing the prospect of sinking $20,000-$25,000 in repair costs into it. It’s doable but it’s tight, and I’d be back to walking around with the tension of a goodly chunk of our savings being invested, once again, in a flip property in an uncertain market.
No need to leap immediately, though, as it’s far from a screaming deal at it’s current list price, and I’m going to pursue the potential option of going the route of a hard money lender this time around. Peace of mind would definitely be worth paying more in interest, and I really need to get off my butt and develop some connections in the hard money world anyway, regardless of whether I go after this particular property or not.
It’d also give me a reason to, you know, post more regularly on this here house flipping blog, too. So who knows what’ll happen. If nothing else it’s kinda fun to roll possibilities around in my head again.
