Prior to this story I'm about to tell, we had flipped our own house several times (live-in flips). I often refer to that process as House Hacking.
But I'm going to tell you about the first flip we did of a house that we didn't live in. This is what I often refer to as Flip Hacking. We specifically bought this house to flip it & sell it soon after.
It will probably help you to read the blog post entitled "3 Ways to Flip a House" first, if you haven't already. That will explain some of the terminology I use in this post.
Here's the story:
My wife told me about a house she really loved in a great neighborhood we had lived in before. The house wasn't currently for sale, but I contacted the owner anyway to see if he'd be interested in selling. The timing was perfect & the owner let us know he had been thinking about selling soon & liked the idea of selling off-market. Not long after, we bought that house.
The previous owner had mentioned that the person across the street was planning to sell soon as well. That immediately piqued our interest. We had been talking about flipping our first house but we weren't quite sure how to start.
We decided to go over and meet the neighbor and just see if he'd be interested in selling off-market to us before he went public with the listing. He was definitely interested. He liked the idea of a hassle-free, as-is sale that didn't require him doing a bunch of work to the house & could help him avoid real estate commissions.
When we got a tour of the inside, we could immediately tell that it needed a lot of work. The seller knew this too and was open to selling at a discount because of the condition.
We asked him what he would sell it for & he said he was thinking around $120,000. We ran some comps & made him an offer of $115,000. He agreed. We closed about a month later.
We decided to just go with a Lipstick Flip & see if we could make a small profit. Remember, a Lipstick Flip involves just doing a little bit of work to the house to make it retail-ready, then putting it on the market.
The inside was a mess. Dirt everywhere. Stained carpet. 1960s appliances. Old belongings strewn around the house (we told him he didn't have to clean it up & could just leave it the way it was). The exterior wasn't much better. The paint was chipping and the fascia was damaged in spots. The back porch was cracking due to a massive tree right next to the house. The backyard was in need of some TLC. The fence was also falling over. You get the idea.
We had some work to do. We hauled a bunch of the stuff out. We hired someone to help us do a deep clean of the interior. We spent a lot of time repainting the entire exterior (did this ourselves). And then tried to make it look presentable for the retail market.
We took some pictures & then listed it (my wife was a Realtor & listed it for us).
We knew we'd have to be patient if we wanted to get a good price because the house was still in need of a full remodel. We received some low offers, which we understood, but thought we could do better if we just waited for the right buyer.
We let it sit on the market for almost 2 months & finally we received an offer we accepted of $155,000. Remember, we purchased it for $115,000.
After closing costs, holding costs, and the money it took us to do the Lipstick Flip, we made approximately $32,000 in profit. My Dad was our financial partner, so we split it between us (more on this in next week's post).
We were ecstatic and we put all of this money toward paying down our mortgage!
That was significant extra money for someone in ministry!
Now we had proof of concept. We knew we could do this again. And we believed that eventually this could allow us to see our dream come true of giving all of my salary back to our church! And a few years later, we were able to do just that!
I'll continue next week with a Q&A about this 1st Flip.