House Flipping (with no taxes)!

[Gumby]

Geesh, I can't believe all the negative responses. . . . I am not going to waste my time on a Forum that is so negative. Goodbye.

Jo Ann

I don't know, Jo Ann. The responses so far seemed like a mixed bag to me - some supportive, some skeptical and some inquisitive. I wouldn't expect everyone on the board to agree with anything I have done or plan to do; it is the variety of opinions that makes this a useful forum. If the skeptics really bother you, the forum allows you to put them on "ignore", so you won't have to read their posts.

 

[Bestwifeever]

Most people could not begin to flip houses (okay, maybe just DH and me); with no skills or the personality traits that successful flippers have, we would end up with dilapidated pieces of property that people like the OP would swoop in and buy from us at a big loss to us. Even if we could get cheap labor to do all the work, the stress of acting as the general contractor would still weigh on us.

I am impressed at the OP's successful history. Did you ever do more than one at a time? Do you ever get tired of moving?

 

[Aiming_4_55]

I think it's a mix bag so far. We all have a different point of view with respect to how we live ER. Some view ER as doing nothing but hobbies, some may say watching your AA/investments and rebalancing as needed as a part time job.

I for one agree it's a benefit to flip primary residences, but I have young kids (still in grade school) so relocation every few years would not be ideal nor would the ongoing construction. After I ER, I will probably just manage a few rentals that I have, but even that at times becomes a PITA.

Enjoy your next flip. It's about the journey more than anything.

 

[Willers]

I can relate to the OP's situation because DW and I have restored and sold many houses. We did it because we enjoyed bringing old houses back to life (restoration vs. remodeling) and made money along the way. We did the most work when we were younger and it helped get us on the road to FI.

Living on a construction zone wasn't always fun but the satisfaction of a job well done and money made was very rewarding. It was also a great way to pay for my tool collection! It was definitely not for everyone, but it was great for us.

I've told this story before, but I had a coworker once comment about how I'm lucky to live in the house I did. I suggested he come over that night as I was finishing the last bathroom remodel and see how I got so "lucky".

Was it free? Well sort of once you deducted rehab costs and all of the other incidentals (insurance, taxes, etc). As was said before, you have to live somewhere.

OP - I also hope you don't leave. Like any group, it's a mixed bag. Overall there are great, helpful people on this board. If you stay you'll learn that although there are occasional spats and a few members that are annoyed by how ignorant the rest of us are (just like real life), you will learn a lot and may teach a few along the way.

I made quite a bit of money doing the same thing you did. There are many ways to make money and none is inherently better than any other. Enjoy your FI and welcome.

 

[Texas Proud]

I did not see anything as negative as I have on other posts....


Would I do as the OP did.... not a chance.... have I heard others who have done it.... yes.... one of my sisters has a friend who does the same thing.... even though her DH works.... she just loves fixing up houses and when she runs out of projects moves on to the next....

 

[Chuckanut]

I am not criticizing flipping houses as away of making money. I just don't think it is 'free'. Maybe I took to many economics classes in college. ;-). If I have offended I apologize.

 

[Meadbh]

We already know that forum members have a high probability of being introverted and sometimes judgmental. Those of us who are INTJ tend to look at the facts and to say what we think. The OP's reaction to this appears to be quite defensive. Too bad.

 

[WestLake]

Houses are a hobby of mine and I will be doing this in retirement. It would not be a j*b to me, it would be a creative outlet. 2/3 of my net worth has come through real estate, so yes I think I know what I am doing.

 

[Fishingmn]

Geesh, I can't believe all the negative responses. I thought this was an Early Retirement Forum. Well my husband and I retired early at age 50 and have lived happily for 12 years off of the profit of our house flips. I just thought I would tell others how we did it. it is not for everybody but it is very doable.

I have a lot of ideas about early retirement since I have lived it but I am not going to waste my time on a Forum that is so negative. Goodbye.

Jo Ann

Sorry if I came off as negative. I was just pointing out to others that a $100k profit in flipping may be harder to come by given current housing market conditions (I'm a Realtor).

Plenty of people might consider my 10 rental properties to be WAY to much work in retirement. Everyone has their own perspective on what works for their situation. Just like you, I have seen using real estate to build wealth is a good long term strategy.

 

[lynxville]

You did good, congratulations!

 

[tryan]

What has been your best source for identifying your next purchase? Have you tried the online auctions (perfect for cash purchases)?

Keep living the dream! You're a saint for living in a rehab (DW would NEVER do it. )

 

[daylatedollarshort]

I would like to find a downsized house that doesn't need major work - just one that hasn't been staged, cleaned or painted lately. We came across a short sale like this awhile back when we weren't ready to move. A couple leaving the open house was commenting and calling the house a nightmare. We just looked at each other and saw dollar signs. The house was close to new, was deeply discounted and really only needed cosmetic work. It had a bunch of junk left in it from the previous owners that could easily be removed.

I hope we can find something like that again when we are in a position to buy.

 

[golftrek]

Original poster here,

I will just ignore the negative responses and I appreciate the positive responses. My only purpose is to give people interested in early retirement an idea about how my husband and I have done it. I am too busy living life to spend a lot of time on the internet.

To answer some questions:

We only do one house at a time. Under the tax rules, the house has to be your primary residence and you can do one every 2 years to avoid capital gains tax.

As to how we find the houses, we use a variety of methods. We are always on the look out. We have used real estate agents, we get on Realtor.com, Trulia and Zillow and even Craigslist. We tell all our friends what we are looking for. We look at the foreclosure auctions.

Probably the best method we have found is to drive through neighborhoods where we would like to live and look for run down and empty houses. Even if the house does not have a for sale sign, we can sometimes locate the owner using tax records and see if they are interested in selling. Location, location, location is the most important thing, everything else can be fixed.

Our last house sold so fast (2 weeks) we did not have time to look for our next house so we are renting while we look around. We are not in a hurry.

We are glad not too many people are interested in doing this so we don't have too much competition.

Jo Ann

 

[golftrek]

OP here again,

About the question regarding moving every couple of years, actually we like to move. We have lived in several interesting areas and met a lot of nice people. We even did a flip in a resort area. Now we are in a college town.

We do not have any clutter and keep our furnishings simple so it is easy to pack and move. A decluttered house sells much easier. We paint the walls "relocation beige".

Three of the houses we have sold we also sold with most all the furniture to the buyers of the house so we had very little to move. When we needed to buy furniture for the next houses we went to consignment stores and estate sales. We actually had made profits on the furniture we sold too.

We like the freedom that moving gives us. if there are neighbors we do not like or something about the house we do not like, we can ignore it because we know we will move in a couple of years.

If we had the perfect house or neighborhood we might be tempted to stay there and not move but it has not happened yet. We like the adventure of a new place.

Jo Ann

 

[wildcat]

Original poster here,

I will just ignore the negative responses and I appreciate the positive responses. My only purpose is to give people interested in early retirement an idea about how my husband and I have done it. I am too busy living life to spend a lot of time on the internet.

To answer some questions:

We only do one house at a time. Under the tax rules, the house has to be your primary residence and you can do one every 2 years to avoid capital gains tax.

As to how we find the houses, we use a variety of methods. We are always on the look out. We have used real estate agents, we get on Realtor.com, Trulia and Zillow and even Craigslist. We tell all our friends what we are looking for. We look at the foreclosure auctions.

Probably the best method we have found is to drive through neighborhoods where we would like to live and look for run down and empty houses. Even if the house does not have a for sale sign, we can sometimes locate the owner using tax records and see if they are interested in selling. Location, location, location is the most important thing, everything else can be fixed.

Our last house sold so fast (2 weeks) we did not have time to look for our next house so we are renting while we look around. We are not in a hurry.

We are glad not too many people are interested in doing this so we don't have too much competition.

Jo Ann

Hi Jo Ann. Thanks for sharing your experiences & advice. I actually recently stumbled across a fixer upper---FSBO found by going to an open house and there it stood across the street. Put an offer on it and bought my first house.

Needs a lot of work from insulation to new floors throughout so I'm trying to figure out where to stop budget wise and what that will allow me to do.

What do you all focus on with your remodels? I've always read/heard people say kitchen and baths but kitchens can get real expensive, especially if cabinets are involved. Do you just try to draw attention away from areas you don't spend as much money on?

 

[Texas Proud]

OP here again,

About the question regarding moving every couple of years, actually we like to move. We have lived in several interesting areas and met a lot of nice people. We even did a flip in a resort area. Now we are in a college town.

We do not have any clutter and keep our furnishings simple so it is easy to pack and move. A decluttered house sells much easier. We paint the walls "relocation beige".

Three of the houses we have sold we also sold with most all the furniture to the buyers of the house so we had very little to move. When we needed to buy furniture for the next houses we went to consignment stores and estate sales. We actually had made profits on the furniture we sold too.

We like the freedom that moving gives us. if there are neighbors we do not like or something about the house we do not like, we can ignore it because we know we will move in a couple of years.

If we had the perfect house or neighborhood we might be tempted to stay there and not move but it has not happened yet. We like the adventure of a new place.

Jo Ann

A question on moving..... are you staying in one place or moving around the country (or maybe region)

 

[Dawg52]

I've known people who did this. They ended up living in a very nice house in the end through the profits they made on the fixer uppers. Wish I had the get up and go to have done this. My problem......too lazy.

 

[Accidental Retiree]

I would like to find a downsized house that doesn't need major work - just one that hasn't been staged, cleaned or painted lately. We came across a short sale like this awhile back when we weren't ready to move. A couple leaving the open house was commenting and calling the house a nightmare. We just looked at each other and saw dollar signs. The house was close to new, was deeply discounted and really only needed cosmetic work. It had a bunch of junk left in it from the previous owners that could easily be removed.

I hope we can find something like that again when we are in a position to buy.

My dear FIL lives in such a house (except that it is not "close to new"); my MIL died a few years ago and FIL is still in the same house where they raised their family starting back in 1955 when they bought it before it was even built. It is now 'updated' with early 1980s decor.

FIL is in his mid-80s, and he would like to see the family keep the house when the time comes, but DH's siblings aren't really interested in putting any work into it and probably will just dump the house when the time comes if, that is, the house is not sold for any of FIL's medical needs later on.

DH knows it will take a bunch of work to update it, and I've come up with some estimates and have a folder of 'fixing it up' ideas. I am rarin' to go. I think it would well worth our while to do some of these fixes before selling it, unless we want to be landlords. We could definitely live in it during remodel time, even if it's not our desired neighborhood any more, and rent out our own house.

What will have to happen is that DH and I will have to buy it from the estate and save realtor fees. We would also benefit somewhat from Prop 13. DH and I kick this around from time to time. Mostly he is inclined to let it go because it wlll take money and effort to put lipstick on FIL's nice little piggy.

However, I keep reminding him, "This is a Southern California/ Orange County pool home on 1/3 acre we're talking about here, so let's think this over verrrryyy carefully."

FIL is behind me, but no one else is!

Golftrek, I shared your original post with my DH, and I think you got his attention. I sure didn't.

 

[daylatedollarshort]

What will have to happen is that DH and I will have to buy it from the estate and save realtor fees. We would also benefit somewhat from Prop 13. DH and I kick this around from time to time. Mostly he is inclined to let it go because it wlll take money and effort to put lipstick on FIL's nice little piggy.

Prop 13 definitely adds a layer to complexity to house planning and succession. Prop 13 is like the golden handcuffs of housing for people that bought in CA years ago. We would like a smaller house to take care of but keeping the big house and letting the kids inherit the Prop 13 tax base is certainly something we have to consider.

 

[pb4uski]

....I've always read/heard people say kitchen and baths but kitchens can get real expensive, especially if cabinets are involved. ...

If the kitchen layout and the guts of the cabinets are ok, then you can simply remove the doors, refinish the framing and replace the doors and save a lot of $$$. Or if the layout and cabinets are ok, sometime just refinishing the frames, doors and drawers will work at even more savings.

If you start changing the layout, you might be able to reuse the cabinets if they are still in good shape. In our new house, we reused our kitchen cabinets (which were only a few years old) and were able to buy some additional cabinets from the same manufacturer to complete the new layout. Saved us a lot.

 

[daylatedollarshort]

In our kitchen we put in new countertops, a stainless steel sink and will put in new floors and just paint the cabinets as they are. I don't think the ROI is there on a $50K kitchen remodel including replacing all the cabinets, though some of our neighbors do this. A different kitchen layout just isn't that big a deal to me. I'd rather have the money to invest. The houses in our neighborhood with more open kitchen layouts just don't sell for $40K more per house.

 

[kgtest]

Might be hard to duplicate. 2010 was the very bottom of the real estate market. Prices are up and the number of investors is up which makes finding good investment properties much more difficult. You do have the advantage of being an owner occupant which gives might let you bid on some houses ahead of investors but I still wouldn't expect to find many $100k flips the next time.

I agree...
It's almost as if someone turned the investor rock over and all of these investors came crawling out again. I know a few who ran to Maui thinking they could score something...I know I was originally thinking that.

I have bought and sold a couple pieces of real-estate as described and it does help shelter the tax benefits.

I fully intend to do this maybe 4-5more times in my life and hopefully begin paying cash. I stay away from the 30k properties and go for the middle-income first-time home buyer types.



PS...right before I sold my last property I was gearing up to gut the kitchen as I had some cheap labor / supplies. In hindsight I doubt I would have realized a 10% ROI afterwards... not in the neighborhood it was in. I shoot for 10%+ ROI on anything I spend effort on. Buying property, investing in index, increasing salary...aim high! After commissions I had 15.5% ROI on my last place...but it took some minor operating costs as well and it's hard to keep track of all the little things you put money into and the time it takes to manage.

 

[aja8888]

Last year, my daughter and I fixed up a local house we bought out of an estate for back taxes (lots of them!) and fixed it up and flipped it. It took us all year (part time of course). New roof, siding, inside and outside paint, tile floors, carpet, three new doors, three new windows, a security fence, two sinks, three toilets, etc. We made ~40% over costs.

It's a lot of work. You need time and good help.

 

[golftrek]

Original OP here,

On the remodeling issue, we try to buy a house that does not need MAJOR work. My best advice is PAINT PAINT PAINT. Paint everything a neutral color, we have found a color we like and use it every time. the paint is Sherwin Williams Sawyers Fence, we call it "Relocation Beige".

Regarding the kitchen, we always keep the same layout, too expensive to do a total tearout. We usually buy new appliances. If there is no dishwasher you need to add one (take it from me no woman will look at it without a dishwasher!). If at all possible, keep the cabinets, cabinets are expensive. We usually paint them. Someone else mentioned getting new doors.

We usually put in new countertops, but do not overprice for the neighborhood. If most houses in the neighborhood do not have granite, use a good laminate. We also usually put laminate on the kitchen floor.

On the bathroom, we always buy a house with at least 2 bathrooms. It is too expensive to add a bath. We try to leave the bathroom layout the same and just paint, put in new fixtures and floor. My husband can lay tile.

We spend extra money on the front of the house. We try to brighten up the entry, we usually have a brightly painted front door (the last house had a burgundy door). We also spend some money on the front yard landscaping for curb appeal. We don't worry so much about the back yard. Right before we list for sale we buy colorful plants and flowers for the front.

When we are ready to sell, we go ahead and get an inspection done and fix whatever needs fixing. Then we advertise that fact of the inspection and fix ups. This saves the buyer money and you avoid having the inspection come up as an issue. Of course the buyer could always get it reinspected, but most do not.

We also stage the house for sale. We try to make it look like a model home.
We depersonalize and declutter. We used a real estate agent to sell the last house. We did a lot of research to choose the right agent. Then we left the house and stayed in our motorhome.

We live in North Carolina, and all our houses have been in NC, don't know anything about California real estate. Most of our houses were in the same city we had lived most of our lives in. The next to last house was in a mountain resort, we got stuck with that house an extra couple of years in the crash, but it was a nice place to live, on a golf course and we came out OK.

The last house, a foreclosure, was in a different area of the state where we wanted to live, a college town. We like it here and we are looking for another place here.

Except for the house that we owned in 2008, none of the houses have taken more than a few weeks to sell.

Jo Ann

 

[Dreamer]

My hat is off to you. I admire people that can fix up houses. I am currently living in a house that need major remodeling. I have to say that my DH and myself do not have good taste. We have tried to do a few things and do not like the results a short time later. I simply get overwhelmed and have no idea how to get started. This usually ends up with nothing getting done. I desperately need the lady on Love It or List It to come to our house!