Flip #1 · Flip #2 · Flip #3 · Uncategorized

HOW I Do What I Do

I’ve talked about why I do what I do…but a closely related, and equally as important topic, is HOW I do it. Disclaimer: It isn’t easy & I’ve made more mistakes than I can count.

In this world of house flipping, there are two fundamental things that make it enormously challening:

  1. I’m a girl…in a man’s world.

Construction, real estate, home repairs, etc. are all part of a man’s world. And, unfortunately, I’ve met more than I care to remember that want to keep it that way. I’ve been told “I’ll just wait to speak with your husband so he can understand.” And I’ve been told “You just watch too much HGTV and think you can do this.” Both of those statements (and tons more) were by men trying to get my business! Obviously they were fired before they were hired!

2. I’m single. I do this all on my own.

You’d think that wouldn’t be a factor, but it is. That means, I tackle the projects myself. I determine when I’ve reached my limit and when to hire it out. I determine who to hire, who to fire, how much to pay, and if I’m satisfied. Sure, this job would be a lot easier if someone was helping me, but, at the same time, it ain’t broke, don’t fix it. I seem to be doing just fine without a companion in this business.

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So given the challenges, how do I do this? Well, it’s important to know- I NEVER intended to become a house flipper. I never intended to become a Realtor. Life is funny that way. After graduating college with a degree and a Master’s degree and entering the work force, I instantly regretted my major, hated my job, and spent the next 9 years miserable. In the meantime, I was either renting from my dad, friends, or living with my parents, and I wanted my own independence. So I bought Flip #1.

Here’s where we get to the HOW:

I was broke. Living slightly above the poverty line. I barely qualified for a mortgage loan, and I used my tax refund as my down payment. For many of my clients (and people I talk to), this is not unusual. Down payments are a huge hurdle to home ownership! And many people use their tax refund as a down payment because it’s “instant” cash. For some, like me at that point, saving up every month for thousands of dollars is entirely out of the question.

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After buying the house (a foreclosure), I had no money. I was living paycheck to paycheck and had used all of my tax refund for a down payment. The house was in dire need of updating. The only thing I could do was destruction because it was free. After living in barely inhabitable conditions and still having no extra money, I was frustrated, exhausted, mad, and hopeless. I honestly thought I’d live like that forever.

So I did something I hate. I used credit cards. [Disclaimer: I do NOT recommend financing home ownership and especially house flipping with credit cards]. Like magic, I spent the next year completely remodeling the place. Again, I did all the work I could myself. I didn’t have to hire out much on Flip 1. And then tax season came again, and I got another refund. I used that to pay off (or most of) my credit cards.  Around this same time, my dad [who is a Realtor and owns a tax prep. company] was encouraging me that I could sell the house for way more than I purchased it for.

So on a whim,  I listed it. In the middle of the recession. And it sold. In a week.

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I was hooked. I also discovered I thoroughly enjoyed every aspect of the process. Even the challenges. I was still working my 9-5, but my passion and enjoyment came from house flipping. I was spending my spare time with Dad showing houses, giving his clients ideas for properties, and I just loved every minute of it.

Then I bought Flip #2.

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What’s important to note- I have no degree in finance, investment, or even real estate. I actually never use my degree!  So when I sold Flip #1, I had money in the bank…totally & completely tax free! Since Flip #2 was $50,000 more than Flip #1, my down payment was even larger. Most of my proceeds from Flip 1 went to the down payment. The remaining balance was used to finance the remodel and pay on student loans. It wasn’t enough money, but I was planning on tax refunds to cover the rest–which they did.

Flip #2 had tons more headaches, lessons, and expenses than my first flip. The hardest lesson I’ve learned is budgeting. By nature, I’m a penny-pincher, but that really increased when I started house-flipping. I buy used when I can, I repurpose as often as possible, and prefer to not hire work done. The habit of frugality is essential in this business.

During both of these flips, I was STILL working my 9-5. Still miserable on the work front. I was still helping Dad at his real estate office and going on showings with his clients. And then one day I had enough. I quit my job, got my real estate license, and joined the family business. My level of sanity and peace dramatically improved! Of course, the steady paycheck and benefits decreased! But some things are worth it.

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By the time I got to Flip 3, my financial situation had changed for the better. I mean I’m not rich by any means, but due to flipping, I was dramatically paying off student loans and increasing my breathing room in my finances.

Now that I’ve got this down- to some degree. Here’s how I do it now (Flip 1 is nothing like how I do it now).

  1. Find a house. Obviously, foreclosures are my niche. By short sales, estate sales, and even As-Is sales are great options. I strongly encourage you to use a Realtor in the process! {You don’t pay the Realtor–the SELLER does, so there’s no downside!}
  2. Maybe this one should be before #1, but get your finances in order. If you’re drowning in debt, know your limitations. Know realistically what you can and CAN’T afford. Have a game plan for your down payment & remodel costs. Maybe waiting until a tax refund is a good plan for you too.  **Note: I have lived in ALL of my flips. Yes, it’s a nightmare. Yes, it’s inconvenient–so why do I do it? Money. If you live in a house for 2 years as your primary residence and sell it for more than you paid, you pay $0 in taxes! That’s my reason- I want every dime, so I live in them to avoid taxes.
  3. Once you’ve found your house, either during the showing or during the inspection, know exactly what you want to do to the property. For me, I usually know all of this in the first 10 minutes. When I walk into a house, my brain looks like this:270518_910475717407_3504474_n
  4. I always do the destruction myself. It’s actually my favorite part. I usually start that immediately after closing. I have never hired out destruction. There isn’t much a sledgehammer and I can’t do.
  5. As for the financing during the project, I keep a separate checking account just for flips. I put the money from the last flip (or for some of you that might be from a tax refund) into that account. I can always check how much I have left. I frequently reference that when I have decided between bids & orders.
  6. When it comes time to sell, I review all my receipts (or online banking) to add up the total amount of expenses, add it to the purchased price. That way I know how much I need to break even.
  7. Then I get a Realtor…it used to be Dad, now it’s me! I calculate closing costs, title service, insurance, etc. on to my “all in” amount to know the very bottom line–if I wasn’t going to make a profit. Then I review comps, and list it. *It’s essential to use a Realtor in this process!

 

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One of the tips I’d suggest is to know your neighborhood. If you overbuild in your neighborhood, you won’t get that money back! I go to open houses in my neighborhood, I schedule showings for houses that are listed. I want to know what’s the norm in my neighborhood, and I mimic that (to some degree) in my property.

There are so many other things I’ve learned and would suggest, but I’d need to write a novel! I love this crazy life I live. It’s not for everyone, I understand that. It’s my quickest way to financial freedom, but it’s also ME. I didn’t realize it at 18 when I had to pick a major, but rehabbing houses, showing potential in properties, and helping people discover that- it’s what I really, really enjoy in life. I just discovered it about 15 years too late!

I get asked questions all the time about house flipping, remodeling, real estate, etc. Some of them I’ve addressed in this post or other posts. But if you have a question, shoot me an email! I’d be happy to address any questions in an additional post.

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