Flipping 2 Bedroom 1 Bath homes?

Question

I'm a newbie in real estate investment.  I have two rental properties, but am looking to fix and flip my first home this year.  I'm out in the Colorado Springs area, and have noticed good numbers on smaller, 2 bed 1 bath homes in the downtown area.  I've always been more attracted to 3 bed 1-2 bath homes, but have not seen many with a great numbers.  I'm wondering if people have had success flipping smaller 2 bedroom homes (under 1000 sq ft.).  The numbers may be promising, but if I can't move the house not much point.  Is it worth looking into?

Randy Rought · Answer

I would recommend flipping a smaller place like a 2 bed/1 bath as a starting investment - a training property.  You can learn so much, and the cost isn't as high as a larger property. Learn to wade before you learn to swim.

This summer I picked up my first investment property - a foreclosure condo (2 bed/1 bath).  It was in good shape structurally, but very VERY dirty (smoker) and in need of some basic upgrades. I renovated the bathroom, flooring, countertops, minor electrical work, some minor plumbing, swap out of the kitchen appliances, inspection of the furnace and fireplace, and basically clean it up before being painted.  I think that a smaller place was a perfect learning property. I learned just how easy it was to underestimated renovation costs and time (even though I did the majority of the work myself). I learned about keeping track of my budgeting, expenses, man hours, and travel. I learned that some things need to be ordered before you are ready for them. One major item which has resulted in a long delay is getting countertops. I am ready for them now (thinking I could have them installed in a week), and  it will be a 3-4 weeks minimum wait. At least 2 weeks just to get them measured and a couple of weeks to get made. I wanted to put in hardwood flooring, but I learned that there were some high spots (ridges) that would not allow me to install wood flooring, so I had to change midcourse and put in carpeting. I will be waiting on carpeting for at least a week or so. If I would have had the place measured earlier in the renovation, I would have it on the market this week.

I like the concept of starting small and working your way up to the larger deals.

Mindy Jensen · Answer

CS has the Air Force Academy, which makes a 2/1 rental an awesome investment. (If you are considering rentals, be flexible with servicemen when they need to get out of the lease early.) When considering adding a 3rd bedroom to the property, don't just guess that the lot will allow for the addition. Go to the building inspector's office and make sure. We bought a house with an illegal addition 10 feet too close to the lot line. They allowed us to keep the current addition but would not let us build above it, which was the original plan. Which we didn't discover until after closing...

Daniel Elbe · Answer

Thanks everyone for the input!  I think that's an awesome idea to add another bed/bath, I'm going to shop around for some quotes.  The lot has the space, and I think the home would sell much quicker/higher with 3/2.

Mitchell L. · Answer

It all depends on your market.. Real Estate is all supply and demand.. If there is a ton of 2/1's in the market, I would probably not go for it but if otherwise and numbers make sense, then I would do it

William Cunningham · Answer

I won't buy 2/1s unless it's a swinging deal, or a larger 2/1 with room to work with adding a third - in my market they are much harder to move.  Many of Philly's 3bd rows have a very small bedroom but they still tend to sell faster.

Nicole Grant · Answer

I think it depends on your area. I would stay away from it in my market. I love 2/1 for rentals though! You are always going to have a bigger buying market for 3/2's.

Jonathan Godes · Answer

I love the idea of buying a 2/1 and adding a master suite if the zoning/lot size allow. By adding a Master you can sometimes tack on a laundry or mud room that create a lot of value for a fraction of the price.

Justin S. · Answer

@Daniel Elbe Great advice from the two previous posters.  Just comp it as a 2/1 or as a 3/2 if you adding on sq.footage.  I would not compare 2 beds to 3 bed homes.  Too much of a price differential.  Good luck!

Mike Wadsley · Answer

A month ago, realtors near downtown Colorado Springs were telling me that there is a big price drop between 3/2s and 2/1s to the point where adding square footage paid for itself and then some.

Adrian Tilley · Answer

Every house will move at a certain price.  Just look carefully at the comps and make sure you're buying it right.

You might also look at how to add a bed/bath.  That's a larger project of course, but the numbers may justify it.

Flipping 2 Bedroom 1 Bath homes?

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