Flip Thy House

Creek House = Sold

Delays on the USDA side of things pushed closing back a few times, but we officially closed on the Creek House yesterday morning, so that one is finally done and done. And I mean done.

As far as what’s next, well, that’s a good question. I did renew the line of credit with the local bank I’ve been working with, as it’s set up as a 12 month product, so I’ve got funds to play with. I’m busy with Larry’s house for the next few months, but aside from that pickings are very slim at the moment on the MLS, as there’s really not anything available at the moment that’s even vaguely tempting, as far as either  a flip or something to keep as a rental.

Aside from being a bit burnt out in general, I’m also increasingly worried about where the larger economy is heading the next few years, along with the real estate market. Looks like we’ve staved off outright financial doom, which is good, but when even the government starts warning that 10%+ unemployment is here for years to stay, well, that’s not exactly a solid foundation for a rebound in the broader economy or the housing market, especially with plenty of REOs (and REOs to be) waiting to come barreling down the pipeline, and with the tax credit shifting some potential home sales forward but not exactly spurring on tons of people to buy who might have otherwise continued to rent.

I have been kicking around the idea of getting serious about building very small homes, as I do think there’s potential there, both as rental properties and as owner financed deals. Our tenant in the Wee House couldn’t be happier with the house, and I’ve talked to her a good bit (she is definitely an ear-talker-offer) about the house, my plans for Larry’s house next door, etc. She’s single, makes decent money as a nurse, but has no desire to be a homeowner again now that she’s older and her kids are grown, yet she also has absolutely no desire to live in an apartment building. So for her a 600 sq. ft. house is perfect, easy to clean, she has a yard and no loud neighbors above or below her, etc. Her rent is about the same as what she’d pay for an apartment, so in her eyes it’s a great deal.

Assuming there are plenty of people like her (and I think there are), I think there’d definitely be a market for simple little 1-1 homes, around 400-500  sq. ft. Something like this, from one of the Katrina Cottage plans:

If I could build something like that $20,000-$25,000 (which seems crazy at first but is doable if you keep it very simple), you might have a nice little revenue generator. I could rent a house like that in a heartbeat for $400-$450, so it’d cash flow if you kept it as a rental, but it’d also be something I could potentially owner-finance as well, as you wouldn’t have a ton of capital tied up in them, so I wouldn’t be pressured to get my capital back out of it quickly. Owner financing wouldn’t be my first choice, but again, I think there’s a potential market there, as I do think that the type of person who’d be willing to pay $35,000 for a house like that (single person with a decent job but not great credit; older person with some savings on a fixed income; young couple with income but bad credit) are increasingly going to have a hard time getting a loan the traditional way to buy even a small, inexpensive home such as that.

The biggest obstacle is the land cost, as far as a lot to build on, as that quickly becomes disproportionate to the size of the house and the overall budget. There are a few very small lots in town for sale which would work (one listed for $8,000 and another for $6,000, but both have been on the market for 2+ years, so likely some wriggle room in the price) but I also need to talk with the city about the possibility of subdividing standard lots into very small parcels for wee houses, etc.

So yeah, still scheming, but no immediate plans to tackle another big project in the near future. Larry’s House should keep me busy for a few months, which’ll also buy me some time to explore the small house idea a bit more, and put together some actual plans, get bids for various pieces of it, and see just what I could actually build them for.