They say time is money, and when you flip a house you want to turn it over fast.
The home flipping shows do it in 6 weeks.
Our first flip took two years.
To put it in perspective: back when we started Obama was president, Cubs hadn’t won the world series yet, and Pokémon Go wasn’t a thing. Doesn’t that seem like a LONG time ago?
We realized about a year into it that we were going to need MUCH longer than we’d originally thought. The reality was just that with our full-time teaching jobs plus my design job plus taking care of our family we just couldn’t work on this thing fast. And we’d committed to making this little home incredible – something basically completely new that would bring pride to a homeowner and the neighborhood. But that meant doing everything – touching every part of the home. And that meant time.
Looking back, we don’t regret the experience. But we did learn some things that we will take with us into the next project. Some might call them mistakes. I don’t know if I’d agree with that, since they all contributed to an understanding of the process for us. The dumb thing about what I’m about to share is that it’s all been shared before. Not rocket science, here, folks. And you’d think since I’ve read these things before we would have known how to handle them best…but we didn’t. 😊
Here are the four big take-aways from our project that we’ll pay more attention to next time:
Sometimes it pays to pay someone for something we can do.
You know that whole ‘time is money’ thing? Well at the start of the project we didn’t really worry about that. For example, we spent weeks of our first summer cutting and clearing two giant trees from the back yard. By using the city’s free brush removal trailer, we saved money. But the time we spent on that was ridiculously precious, in retrospect, and we should have just paid someone to come in with a chipper and “git er done”.
We also spent a lot of time that summer on a side playhouse project at our own home. Great for the kids, but the clock was ticking on the flip and we didn’t really hear it. It’s like we were Hook (you know, the pirate character) and the croc with the clock was swimming in some other part of the river. The croc didn’t start chasing us until about 18 months into the project. Then we couldn’t escape that tick-tock…. tick-tock…. tick-tock. Ha!
Balance upgrades with time and money.
I made a decision early on that I wanted to do trim a certain way. It was pretty, there’s no denying. But it was time consuming (priming every piece and painting two top coats) and expensive (think ‘select lumber’ with every single piece hand-picked). And I THINK the house would have sold just as quickly with a more basic trim installed.
Just do it.
We waffled on whether or not to change the furnace and air conditioner (they were ancient but worked). We didn’t decide for a YEAR. In the meantime, a new patio was laid under the old air conditioner and then the old one was set into the wet cement. When we finally decided to upgrade the HVAC, we had to pull the old air conditioner out and of COURSE the new one didn’t totally cover that damaged concrete. Next time, if it seems like an ‘iffy’ thing that we MIGHT replace, we’ll just do it right away. This particular mistake didn’t cost us any extra money…but it could have if the damage had been any worse to the new concrete.
Time eats your profit.
Again, everybody knows this. If you’d asked before we started what was important about flipping, I would have told you: turning it over quickly! But reality is what it is, and we resigned ourselves pretty quickly to the fact that our profit was going to be impacted by our speed.
We bought the house for $58,500. We sold the house for $152, 500. (The home appraised at $150,000, so the buyer went a bit above and beyond to get the home. We had four other offers that were all right around that price, so the buyer was smart to offer more!).
When you see those numbers it sure looks like we ended up with a giant profit.
Buuuuuut hold on a second before you come over here to borrow our Porsches and luxury yachts! 😉
Time definitely ate into the profits! Let me break down the money spent and profit made to illustrate the point:
Home purchase price: 58,553
Cost of everything needed to update (materials, labor, permits, etc.): 57,828.30
Cost of utilities: $2,117
Cost of insurance: $2,788
Cost of taxes: $3,923
Interest on the loan paid over 2 years: 8,558.25
Closing costs: 8,880.63
Final profit: 9,849.82
What if we had finished this project in 1 year? Our profit would have been around $18,000:
What if we had finished this project in 6 months? Our profit would have been around $22,000:
But before I get upset, I ask myself: what would we have had to sacrifice to gain that profit?
- Quality of work at our other jobs
- Quality of work at the flip
- Quality time with our children
- Quality connections with friends and family
It really is a balancing act, but NOT just between time & money! It’s time & money balanced with priorities & values.
In the end, we felt like our first flip experience was good. We didn’t lose money. We learned more about the TRUE amount of time involved. We learned more about the hidden costs. And we feel a lot of pride in what we contributed to our community, because we took a disgusting house that NO ONE wanted and remade it into an absolutely fantastic, healthy safe home for future generations.
Oh, and we learned a lot about what we want to do differently in the next home we flip. We just need to find it first!