Thread: The Flipping Houses Jackpot

Question for all you house flippers out there ...

In your experience, what specific problem areas constitute the house flippers jackpot? What I mean is, what areas of concentration make a house a great flipping candidate? Besides the discount, when you examine a house, what criterion makes it a great candidate?

For example, if I'm looking to flip a house, my logic would tell me to look for homes that need inexpensive "Visual" updates like:

1) Needs paint (cheap, visual impact)
2) Need landscape cleaning (good value return, visual impact)
3) Need flooring (relatively inexpensive, big visual return)

What are the "jackpot" items that immediately make a potential flip a buy ....things that make ya say "Oh yea!" Things that can be renovated inexpensively and have the most bang for the buck?

And conversely, what are the "money pits?"

1) Needs new A/C system (this change is not visually seen and is expensive)
2) Foundation (Again, not visual and expensive)
3) Cabinetry? Countertops?

What "this house needs this" will make a flip an unworthy candidate?

I know that after watching "Flip This House", everybody and their grandma wants to try house flipping by simply changing fixtures, painting, and slapping in some new carpet.... But, my company really focuses on delivering a quality product above and beyond anything you will find in that price range within town.

Some things I look forward to changing when I walk through a potential rehab include:

- Doors (Change from those old wood grain doors to new 6 panel doors)
- Countertops (It's inexpensive to use a formica simulated granite counter now...)
- Appliances (We always always always use new stainless steel appliances...)
- Ripping off wood paneling, and drywalling then retexturing

Things I think make the biggest change in value:

#1). Landscaping -- Many flippers overlook this, but in my opinion -- Nothing can improve the look and value of a house like quality landscaping. A little sod can go a long way! A few landscaping timbers will not break your budget and will really add to the yard... And you can buy mulch in bulk really cheap.

#2). Getting rid of popcorn ceilings and replacing with knockdown texture

#3). Putting on a new roof, if needed. It's not that expensive if you have the right contractor and priced it into your purchase price.

#4). Installing Ceramic tile in the kitchen and all the bathrooms. Don't be cheap with flooring!

#5). Using an upgraded carpet. Again, don't be cheap with the flooring and buy the crap landlord grade carpets. Pay a little extra for a cut berber or thicker carpet! Also, always pay for the extra thick pad to put under it.

Potential Money Pits?:

Well, you could say that anything is a potential money pit, but here are a few common ones that come to mind:

- Replacing or retexturing concrete driveways -- It just doesn't seem to be worth your while most of the time, and the customers don't really seem to care much about it.

- Finishing garages -- Sometimes it can look nice, but most buyers don't care much about the garage.

- Granite countertops -- Most neighborhoods are simply not granite countertop neighborhoods, so I'd stick with Formica.

- Cabinets -- If you replace cabinets, I'd try to find a full set for around $2k... Many people blow their budget by spending $5-6k on cabinets, and it's totally unnecesary.

- Staging -- Don't spend $5k to stage a house that you are only going to make $15-20k on when you sell it. Go to Kmart or Target and pick up a few simple pieces of furniture for under $500 bucks, and then plan on reusing them in your other flips in the future. Do not pay for furniture rental or staging services from an external vendor -- As you will get ripped off, big time.

Cheers,

- Hakrjak

Hey Mike,
I had similar questions and posted a thread about this topic last year. Some really good responses here.

http://www.thefastlanetomillions.com...enovating.html

Lighting/MJ-- does it make sense to merge these 2 threads?

-Russ H.

I am not a flipper (I like to buy and hold), but thought I'd chime in with a "buying cheap homes to rent" perspective.

I strictly buy homes that only need cosmetic work (i.e., replacing carpet, replacing/installing appliances, replacing doors, replacing locksets, and so on are what I would consider a "heavy" rehab). I may pay more for the house, but I am saving in several other ways: immediate cash layout, time, and stress. I buy a home, spend a week getting it ready, and I'm done with the "rehab". If it needs a new A/C system, or new roof, or the foundation needs leveling, or anything that is traditionally seen as a "heavy" rehab, I'll pass (it on to another investor). My job is to spend as little money, time, and stress up front in order to get it filled.

However, like hardcore flippers, I STILL concentrate on specific areas more than others, like landscaping, the kitchen, and bathrooms. I'll mulch around front yard trees and beddings. I'll plant colorful flowers (if it isn't too cold). I'll install new bath fixtures, if the old ones are worn. I'll replace a garbage disposal if the old one is rusty, or not working. And so on. Mainly just small things here and there that take a few minutes. IOW, I still need the place to look good, but I'm not trying to sell it retail.

Originally Posted by Russ H

Lighting/MJ-- does it make sense to merge these 2 threads?

-Russ H.

Ehh just leave it as is ... I'm looking for FLAGS/INDICATORS in the evaluation process that indicate a good flip over a bad flip.

Originally Posted by SteveO

What is the big deal about changing an a/c system if you can do it for 2K and have it done in a day?

Wow. We can do it in a day (just did, yesterday). But it cost us $6K (5 ton, 13 SEER, min CA stuff).

Damn. Last time I paid $2K on an AC was more than 10 years ago!

I once again pay homage to you, Steve. I am humbled by your resourcefulness.

-Russ H.

Originally Posted by Russ H

Wow. We can do it in a day (just did, yesterday). But it cost us $6K (5 ton, 13 SEER, min CA stuff).

Damn. Last time I paid $2K on an AC was more than 10 years ago!

I once again pay homage to you, Steve. I am humbled by your resourcefulness.

-Russ H.

I pay my guy about $500 per install, and I buy the units off craigslist new or used for between $150 and $700.... You don't have to go broke doing central AC!

- Hakrjak

These tips on how to / where to find good materials / contractors for your flips could be the start of another great thread.

Definitely have a bunch of thoughts on this thread, but getting ready to head out of town for a long weekend...will post on Tuesday when I return...

Originally Posted by Hakrjak

I pay my guy about $500 per install, and I buy the units off craigslist new or used for between $150 and $700.... You don't have to go broke doing central AC!

Old AC units have terrible efficiencies-- around 5-6 SEER or even less (3-4 SEER) if they have a slow leak. It's against the law in CA to put them in.

Also, many of the older units use banned CFCs (chloroflourocarbons), which are more than against building codes around here-- using them means jail time.

Our local codes require a min of 13 SEER for AC (higher is better).

Ah . . . a cursory glance at your energy codes looks like at least 10 SEER is required for remodels-- which costs way less (about half) of what the 13 SEER units run right now.

A 5 ton unit runs about $3.5K. A 3 ton, about $2K.

ColoradoENERGY.org - Air Conditioner SEER Value Table

http://www.pprbd.org/codes/EnergyCertSingleRes05.pdf

http://www.pprbd.org/codes/2008RBC_Revised.pdf

http://www.pprbd.org/PPRBC/99PPRBC.pdf

-Russ H.

SteveO-

I had thought AZ had mandated a min of 13 SEER as well-- I was wrong.

10 SEER.

OK. I feel a little bit better . . .

-Russ H.

Sorry to hear that once again California has gone out of their way to make sure it's as difficult and expensive as possible to do business.

I've been able to find some real steals on used units, and even a couple of new units with the caps still on here over the past 2 yrs, and I have never once asked what the Sear level is or what type of coolant it uses, etc... I take a look at the unit, see if it looks like it could pass for new, and then I buy it. The only question I ask is what is the tonage, so that I can estimate if it can cool the amount of square footage in the house. When a new flip is on the horizon, I start running ads on Craigslist that read, "I buy used & new Central AC UNITS!" -- Something along those lines.... I get all kinds of calls from desperate souls trying to unload these things, because I guess not many people buy them? I've never had a bad one, or a DOA unit (So far, knock on wood)

When I go to sell the flip house after completion, I've never had a client ask me the age of the AC Unit, or anything about it's specs... Their home inspector checks to make sure that it works, I suppose -- and that is about it.

I did purchase a brand new 2.5 ton unit for $350 last year, and I've had it in storage until this month. My AC guy did mention something about the SEAR level, and told me that he couldn't buy those anymore, but this one was obviously brand new so he'd be happy to install it for me, for our usual price arrangement.

Cheers,

- Hakrjak

Hak-

Sorry if I sound dense, but it's against Title 24 here to install units that don't meet energy guidelines (which is why they sell on Craigslist so cheap here-- you can't legally install them!).

Are you saying the local code enforcement folks (aka your local building inspectors/building dept) are OK w/you installing these things?

Or do you just not ever pull permits, and never have any of the work inspected?

Sorry if I sound so dense-- just not getting it. If we covered this before, my apologies. My memory ain't what it used to be!

-Russ H.

I was going to respond but Steve said exactly what I started to type, so I'll just say re read his post.