Blog Post 2 - How to do a very slow flip

It could be called flipping very slowly, but to us, it was just buying a bad looking house in a good neighborhood and living in it for 5 years while fixing it up. This is how it started for me.

A long time ago, in a galaxy far far away... Well almost 30 years ago, south of San Francisco, a couple of newlyweds were living in a small one bedroom apartment just 6 months after getting married. My wife and I were absolutely certain that we were going to buy our first house and that we would get a fixer-upper and make it really nice. We started looking immediately after getting married. And, we used a hack that probably isn't readily available any more. My wife got a job working for a bank. No, not to rob it for our down payment. Back then, one of the benefits of working for some banks is you could get an employee home loan. This was like a regular home loan, but because they knew where you worked and they could get at your pay check before you could, the bank would loan you the money with a much smaller down payment and charge 1/4% less on the interest rate. Armed with this, we scrimped and saved and begged our families for help and cashed in a life insurance policy and savings bonds and managed to come up with barely enough to buy the worst house in a fairly nice neighborhood. 

Before we bought the house, it had been vacant for a year and a rental for at least 4 years before that. It was on a corner lot and was so overgrown with ivy and bushes that from across the street, you could not see what color the house was painted. It had been built in the early 1940s (pre-war) and had a single bathroom elegantly decorated with pink tile and pink fixtures and an etched shower door. It had a portable dishwasher that didn't work in the kitchen along with narrow counters with yellow and black tiles and a single outlet for the entire kitchen. 

The concrete driveway was heaved up and there was an enormous olive tree dropping nasty black olives all over the driveway and sidewalk. It had 3 tiny bedrooms, a tiny living room and a roof made of ancient wooden shakes that had been perforated by woodpeckers. I looked at it inside and out and saw that the framing was done with real redwood 2"x4"s not fir 1.75"x3.5" studs made from Douglas fir. The floor in the kitchen squeaked and I learned that 2 of the piers supporting the house had sunk by an inch or two. It had oak floors that were darkened by decades of wear, but had no rot or even bad stains. The wall paper was hideous and all the windows and doors were horrible and seemed to stick badly when you tried to open them.

We made a ridiculously low offer on it and waited for the inevitable rejection. We had already made dozens of ridiculously low offers on other houses and all had been rejected outright with no counter offers. This time they came back with a counter offer. We negotiated as only two broke people could, by pointing out that we had no more money to spend. Fortunately for us, nobody else was willing to take a chance on such a big project, so they accepted the offer. 

We had a home inspection and I met the inspector and asked if I could help him do the inspection. I offered to carry his clip board, get him water, hold his flashlight, but most importantly, I promised to keep my mouth shut and stay out of his way. He then proceeded to scare the snot out of me by pointing all the faults with this pathetic house. One of the really troubling things he pointed out was those piers that had sunk under the house were in a direct line with an area of the street directly in front of the house that had obviously also sunk and been repaired multiple times. He said this probably meant there was some kind of underground stream running under our house, but he couldn't be sure. 

I could fix it all, or so I thought. Being inexperienced and optimistic led me to taking on way more than I should have been able to handle. But as I would learn, if you never give up, you can eventually figure out how to do nearly impossible things. We knew it was going to be an uphill battle and things could go terribly wrong, but we took the plunge. Flash forward 5 years, and we have 2 sons ages 2 and 4. The house is starting to come together. We had stripped wall paper (nasty nasty job), repainted everything inside and out. I had carefully shimmed the roof each year with a new pallet of shingles, a process where you slip good shingles under rotten shakes to preserve the soundness of the roof without expending thousands and thousands of dollars. We tore out the driveway and my wife caused quite a stir taking her turn using the jack hammer to bust up the concrete. We replaced it with a nice paving stone driveway. Every Saturday morning we would don gloves and do battle with the Bermuda grass that had invaded our planters. We planted roses and irises. I put in sprinklers and new sod. But no matter how much we worked on it, we could never totally get rid of that darned Bermuda grass. I learned to hate Bermuda grass and I think we decided to move because of it.  

We had the floors refinished and they turned out beautifully. Finally we saved enough to pay a contractor to remodel the kitchen. We chose stunning cherry cabinets, granite counters, stainless appliances, and a nice back splash. We turned the contractor lose and the first thing he did was tear right through our newly refinished floor to get at the sunken piers. He then excavated a huge hole under each one and poured a ton of concrete to support the two new pier blocks. He did a fantastic job and even managed to put the floor back when he was done. By the time it was finished, we needed to get out of that house. Two boys under the age of 5 with construction going on constantly was not a good combination for new parents.

As soon as the work was completed, we listed the house with a local realtor, removed 80% of our belongings and furniture, and headed out on vacation. When we got back, we had multiple offers, all over our asking price. We picked a nice newlywed couple and banked a tidy profit.

I know what you are thinking...Wait! wasn't there supposed to some kind of tip about flipping a house in there somewhere?

Here is the tip. You don't have to be a flipper. You can be a newlywed couple and have two kids and 2 careers and live in that house and enjoy it.  You can start your marriage in it, have your kids in it, and build the foundation of your life in it, and still make money. What it takes is: 

Buy the right house, terrible aesthetics but good bones, in a good neighborhood.

Make a lot of ridiculous offers until one is accepted. 

Live a frugal life and put most of your extra money and time into fixing it up, while saving some to get help where needed.

Work your butt off on weekends scraping wallpaper, painting, and landscaping.

When it is complete, get a good realtor, remove most of your belongings and stage it.

Then go on a cheap vacation so the house stays clean and smells like new carpet and paint instead of diapers and baby food.

By doing this we were able to sell our little house in the Bay Area at a nice profit which we rolled over into a big custom home outside of Sacramento.

If we had kept that house, today it is worth....... well it added a second comma.

I am just grateful we did as well as we did and it got us started on the road to retirement and I learned a bunch about how to fix and sell a home. That knowledge is the best part of that first venture.