First flip am i over investing?

Question

This is my forst flip i went in half with a partner. I was trying to do the minimum to clean it up and sell it. My partner on the other hand would like to do a lot.

The house had tile in the kitchen, but there was a 4 inch drop down in the dining room. We poured concrete to level it off. I agreed this would be a good idea but then we needed to change the tile in the kitchen since we couldnt match it. Coming from the kitchen is a hall that has nice wood, but each room has different cheaper wood. Is it worth ripping out all of the floors to make them match.

When we poured the concrete in the dining room we also made a huge patio in the back that cost us 5 thousand which i didnt really want to do, but it is nice. Was that wasted money or is a nice back porch a good investment?

Its a five bedroom house but one bedroom is small wand its connected to a really small bathroom and on the other side a decent kid size room. Is it worth changing the 2 rooms and small bathroom into a master bedroom and bathroom with a walk in closet? Or is that just over spending?

The house has a two car, car port with 2 small tool rooms in the back. It has a nice roof just like the rest of the house. Should we leave it be, or is it worth investing in closing it off with a nice garage door?

The house has some current wiring and some knob and tube. Is it worth updating all the wires?

The house has ducts for a heater but does not have a condenser and coil. Is it worth taking out window units and installing central air? If so do i go with a cheap seer just to have one or is it worth getting a better effeciancy?

Yes i have a lot of questions, also if there is good reading material on this type of things id love some good links.

Thank you for your help and time.

John Teachout · Answer

A big mistake you're making on this project is going at it willy nilly. You need to have a plan and scope of work before you start in. Sounds like you guys are just doing random upgrades here and there that haven't really been thought out ahead of time. If you study the market, you should know what additions/upgrades will net you more dollars or make the property more appealing.

I suspect this project is going to eat your lunch but it will provide a learning opportunity for your next attempt.

Pouring concrete to level the floor? Is this house on a slab? (I hope so)

Wondering about the knob and tube? Yes, it should be replaced if you're doing a major rehab.

HVAC should be modern. On a rental window units may be acceptable but if you have central heat, add central air as well.

Maybe talk to a local realtor and get some advice how to proceed.

Michael Plante · Answer

ONE of the Most important things

what do similar houses sell for in the neighborhood?

If we are taking 600k the answer is much different VS $250,000

Curt Smith · Answer

@Tyler Boykin in the cheaper south , Atlanta, a no change on outside walls full rehab is

..    $100k rehab ...

Re run yiur numbers.  You may not make a nickle.

Most 1st time flippers run close to breaking even.  Flipping is insane difficult to finish and sell,,   and to make a net profit.   Not mentioning taxation of the net even.

Have a strong mentor guiding tiu.  Taje boot camp education from the local Rei groups,  like a REIA.    Search for local investors!

Good luck

Ronald Allen Barney · Answer

Some general rules of partnering which you are learning the hard way:

1.  Before even forming the partnership, meet informally and discuss high level goals, preferred strategies, and case example tactics to make sure you are both 100%, not 99% but 100% on the same page.  Situations will come up that will test that 100% and if it starts out 99% it can drop to zero really fast.

2.  Before purchasing a flip get 100% on the same page as to what rehabs will be done, where, how, with what materials, and agree on an estimate of cost.  If a partner is dragging you into a nightmare expensive flip that you don't want to invest rehab in, chances are you skipped step 1.  Same if you are the one doing the dragging.

Others will be better equipped than me to recommend specific in-the-weeds tactics of an actual flip.

Jesse Arriaga · Answer

First thought, you should have agreed to a scope of work and budget before you embarked on a partnership deal with someone else. Making decisions about improvements is a function of price point and competition in your specific market area. We look at improvements to houses we are competing with or trying to match comp value as our guide. In general, we focus on kitchens, master suite / bath, curb appeal. We have rehabbed houses from $150K to $1.4MM. We also never design to our personal taste. When grays are in, we paint light gray. We keep finishes relatively simple but elegant. For example subway tile. A good tile installer and make it look great and you can add subtle accents.

Rick Baggenstoss · Answer

@Tyler Boykin. You have to pick one or several sold houses as comps.  Match their level of rehab to get the price you're shooting for.

Your house sounds like big rehab, but you don't have the team to do it.  You really need to plan it out - hire a manager if that's not for you.  Otherwise, you're gonna lose a lot on this one.

Jim Kalish · Answer

Hi @Tyler Boykin.  Welcome to the world of real estate investing.  I'm not going to second guess the work you've already done.  It all depends on what the rest of the neighborhood looks like and what sells.  So what I think you should do doesn't matter.  But I would suggest as others have, a window A/C doesn't cut it.  There was a time when homes in the north could go without central air but even there its become the norm.  But again, what's the rest of the neighborhood look like?  As for the efficiency of the unit, most buyers today are well indoctrinated in what SEER means.  So they will be looking.  I'd go middle of the road.  Its going to be 4-5k.

But the bigger issue is the fundamentals.  The old saying you make your money when you buy has never been more appropriate.  As @Ronald Allen Barney said, all of this needs to be resolved and put on paper before you even offer.  You and your partner have to agree on every step up front.  And a rough estimate is fine when you are weeding out the loser deals.  But when you are getting ready to make the deal you need to know just what you are going to do and what it will cost.  If you go into a deal hoping to figure it out as you go you will almost definitely lose money.

So in this case take a close look at what has sold in the area over the psat 6 crazy months and use that as your go-by.  Not just the price but what was done to them.  There is a good chance you can still pull up the ads that were listed on sites like Zillow and Realtor to look at the pictures and descriptions.

One more thing.  Get rid of the old knob and tube.  You will most likely have to disclose that and since most people won't even know what it is they will google it and walk away.

Good luck with this one.  I hope you see a profit.

Jeffrey Donis · Answer

@Tyler Boykin Regarding the nice back porch, if the comps in the area also have a nice back porch (for example). You should look into the comps in the area to determine which updates you should make.

Tyler Boykin · Answer

First of all thanks for all your responses. At this point yeah, breaking even sounds great lol. I know its a hard profession and its a bad time to start into it.

that being said, maybe you all can help me not lose as much. Now i bought it all cash out, no interest is stacking on me, but utilties add up and i only have 6 months of insurance.

Im a pretty compitant worker, i did all the electrical, plumbing, 90% of my ac, all the drywall, and some of the tile in my own house. I should probably do some of that to save money, but if i do it all it would take too long. Which ones should i do and which ones should i contract. No matter what i pay a contractor to get the permit and inspect my work.

Should i fully redo the house, windows, siding, close in garage, change things to a master bed and bath instead of 2 small rooms and a small garage? Or should i just put in some cheap stuff to make it look complete and sell for what i can?

when it comes to floors do i buy tile and actual wood, or should i go cheap and buy that lifeproof style cheap crap. Also there is a place i found the state next to me i could get enough actual wood to cover the whole house for 5 thousand(i would have to sand varnish and seal it). But then even my kitchen is wood.

Also you said find a mentor, and groups. Whats the easiest way to find a good one? And is there a good way to find materials and labor at a better cost?

Theresa Harris · Answer

I'd stop and assess how much you've spent and what remains to be done.  Think ahead-so the example of raising the kitchen floor resulting in need for new tiles.  Write down what you need to do and then what you'd like to do, the cost and the potential return.  With the costs, add more in case of overages and with the return, be conservative.

Contractors will want to add on as they make more money.  You and your partner need to get on the same page and stick to the plan.

If you are planning on flipping it, time is also money.  You have interest accumulating and then think of when it will be finished and the market.  Houses typically are harder to sell in the winter.

First flip am i over investing?

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