I am really excited that we are finally able to pursue a big dream Brian and I have had on the back burner for the past five years: flip a house. Not live in it and fix it, then sell it a few years down the road. I'm talking a bonafide real estate investment, friends. I know I had millions of questions about house flipping when we first broached the subject all of those years ago so I thought it would be fun to take you guys along with us on the journey! I want to share our thought process, property tours, renovation estimates, and design ideas along the way.
A few weeks ago we looked at The Smith House. Even though I should know better, I really fell hard for this cutie-patootie house. It is old, small, and just quirky enough to make it charming and unique. Here are some facts:
List price: $49,000
Square footage: 1066
With it being built in 1938, there was still a lot of charm left in this sweet little cottage. Original glass door knobs, archway, hardwood floors, and built-ins were all still perfectly in tact.
I also loved the location - it is nestled in an up and coming neighborhood. However, it is right around the corner from THE best street in town with $500,000 homes and just a skip and a hop away from the blossoming downtown. The square footage was decent as well; not too big, not too small.
Unfortunately, the "bad" list was longer than the good. Just on a first glance it looked like most of the systems hadn't been touched in decades. We're talking old electrical, plumbing, and HVAC (and we haven't even seen what's behind the walls yet). Along with the charming old details, there were some items that we wish had been updated or better maintained including the original windows and the joists.
Plus, the lot situation was weird. It wasn't clear if the driveway and shed were included within the property line. There was a vacant lot next to it for sale which would eliminate any questions, but that would be another $9,000.
On top of all of that, the layout was pretty bad. The third "bedroom" was only accessible through another bedroom. The one bathroom was TINY and only had a tub (no plumbing for a shower).
Above all, there were signs of my arch nemesis: termites. The joists had been nibbled on quite a bit and there were large dips in a few places. In order to access and fix them, we would more than likely have to rip up the original hardwoods. Ugh.
Even though there are a lot of issues with this house, if the numbers make sense, it can still be a good deal. Here are the repair costs we estimated:
New roof: $3,000
Structural repair: $6,000
Foundation venting: $5,000
New windows: $3,000
Bathroom finishes: $1,500
We estimate that once this house was renovated, it could sell for about $80,000. With a list price of $49,000, these numbers just don't make sense.
$80,000 ARV - $49,000 PURCHASE PRICE - $37,300 RENOVATION = -$6100 PROFIT
This negative "profit" is before realtor fees, closing costs, and carrying costs which would lower our profit even further. We still haven't considered that other lot that would probably need to be purchased along with the home to make sure there aren't issues with the driveway.
In order for the numbers to even come out in the black, we would need to get the purchase price down. Way down. Probably closer to $20,000 to provide enough of a cushion for surprises. Even still, the amount of work and time this little house needed would cause carrying costs to balloon and seems too risky to take a chance. I joked with Brian that if the Brooklyn Street House and the Myrtle House had a baby, it would be this house! The same quaintness of our first home but allll of the work needed on our current home.
Even though I love the charm of this 1930s beauty, we will not be making an offer. On to the next!