"Flip house" or wage work?

[BMF1102]

Seeking opinions/advice

A house just came up for sale across the block, I literally can see it from my house, for $12,000.00. It is fire damaged and would basically need a complete remodel (floors, walls, ceilings, appliances, plumbing, electrical, roof, windows, siding, etc;) which would require a large chunk of time and money, I estimate getting this all accomplished for less than $20,000.00 being all DIY. Which makes about $32,000.00 all in cost, not imputing any time cost. Comparables in the neighborhood are going for $50,000.00 to $65,000.00, OR possibly could rent it out for $750.00 a month.

I have the time, knowledge, skills, tools and cash to do this. I know very well what is involved because it is exactly what I did with my house.

Or I currently have the oppourtunity to go work and make the same amount in about 14 weeks, working 12 hours a day 7 days a week. Which requires a 2 hour roundtrip commute and working nights.

I could also buy the house work on it slowy and take jobs I want to along the way.

So I guess I'm looking for thoughts, opinions and things I may not be thinking of. Assuming you like doing one just as much as the other.

1) Buy fix sell and profit $20-30,000.00

2) Go work for the how ever many weeks to make the $20-30,000.00

In my situation buying it is almost a no brainer. Just looking for feedback and maybe different ways to frame and think about it. I'm sure it will sell quick as well. Not many 3 bedroom houses with a full basement in this neighborhood.

[BMF1102]

Yes I am not attempting to replace work with this house. I have a couple jobs in September and October whether I buy this house or not. It may very well take me a solid 6 months (or more) before I finish the house, if I bought it.
I'm thinking it's a good way to leverage my time between busy seasons, like this coming winter, to add a nice chunk to the stash.
I'm also thinking it's a better investment of cash I do have in the short term to help build the stash to a level where the stock market would really be beneficial.

[Riggerjack]

I don't know where you are, but those numbers seem very tight.

Compare the house, with demo costs, to a comparable lot. How does that look? Compare repaired value with depreciation for age and damage, to a similar house.

For instance, in my neck of the woods, a newly finished house has a very different price from a remodeled house, which is different from and older, fixed house. I would be using the older, fixed house as a comparable.

Fires destroy a lot. Smoke, and the associated damage does far more, then the months between the fire and your rehab will do more, yet. I have turned down deals with a lot more room for error.

Be aware that you will need a certificate of occupancy, from your planning Dept, and they will require all work to be up to current code, with inspections, and if the value of the work (using a table that doesn't favor the applicant) is half of the appraised value, they may require all of the structure meets current code. (Think access to foundation anchor bolts, or seismic bracing, though this may not apply to you, specifically).

Clearing the smoke smell out will be it's own challenge.

But if I were considering it, I would be thinking in terms of landlording. Either rent out my place as I finish the other, or finish it to rent. Flipping is a game played by people to raise capital returns, with hired labor. And by a lot of amateurs who find the numbers only work to give them an independent income, from an extra (hard) job.

This is the same advice I gave my cousin, regarding a house he inherited from his father, in his small town in Ohio. If the property values aren't there, it doesn't matter that you do the work yourself.

But if this is something you would like to do, the education brings value, as well. How to value it is up to you. Good luck.

[Kriegsspiel]

Those numbers looked really tight to me too. I think it's smarter to get a guaranteed income that you enjoy equally than to try to flip a house in a $55,000 or so market.

[BMF1102]

Thank you for the responses.

@Riggerjack - I always enjoy reading your thoughts and comments. I am in Battle Creek, MI. In this neighborhood buying a lot and building would not be cheaper nor would it bring more profit. Landlording is something I've been back and forth on. Yes I used "Flipping" is completely different than what I'd be doing but with the same goal of rasing capital in my slow time between busy seasons.

@kriegsspiel & Riggerjack - I was quite surprised you both thought a 60% profit is tight.

@Augustus - The skills are easily learned (in my opinion) but being good at all of them is something completely different. There are certain things I would probably hire out next time I take on a project like this.

Again thankyou everyone. At this time I'm letting it sit see if the price comes down. I will also be going back to work in the next week or 2.

[Riggerjack]

I estimate getting this all accomplished for less than $20,000.00 being all DIY. Which makes about $32,000.00 all in cost, not imputing any time cost. Comparables in the neighborhood are going for $50,000.00 to $65,000.00, OR possibly could rent it out for $750.00 a month

Let's try that again.
Sell at 55k. (Middle of estimates)
Subtract sales costs,
4-6% realtor fee
1-2% excise tax
Title and escrow

Let's say you do amazingly well, and only lose 5k in costs.

50k-32k is 18k. 18k, to cover overages, compensate for time, taxes, and risk, and assuming that your numbers are accurate, seems very tight. Like unlikely to generate any profit, tight.

Now there are good reasons to still go forward with this kind of project. Education, development, lack of better opportunity. But if you are going into this kind of thing for those reasons, do it for those reasons, not as a backstop for what may go wrong with a project you are undergoing for a profit.

Or I could be wrong.

[BMF1102]

No I would not be going into it for an education or development, although the selling aspect would be an education.

I see your point. It's possible I'm being optimistic when I think of what it could sell for, I see it selling on the high end.

Looking at your numbers, the realistic 18k profit I could make in about 8 weeks at work.

Thinking about it, like you said in your first post, landlording and renting it out would be the bigger opportunity here. Honestly though, besides the cashflow I have zero desire to deal with tenants and will probably let this pass on by.

I suppose I better just grind out more time at work to get to where I'd like to be.

[Riggerjack]

Finding the opportunity that doesn't work is great practice for finding the one that does.

Looking is free.

So look, and find, and practice, and then you can tell when you have found the right opportunity, and have the confidence to pull the trigger, when the time is right.

[Michael_00005]

I’ve considered doing a flip as well, but what is noted above sounds like doing it the hard way. Another option:
1. Sell current home, and rent M to M, while you look
2. Get on Zillow and get familiar with the market, also become familiar with Google street view
3. Watch market and look for a great buy – if you are patient and can make a cash offer you can almost always find a home below market value… patience, research, cash and timing are the keys. Cash puts you in front of everyone getting a loan, and buying in the Fall / Winter you avoid the market frenzy. When I purchased my last home, it felt like it was under-valued by at least 13%. In fact I was prepared to make an offer simply from the photos. If it's a good deal, you will likely need to make your offer the same day.
4. Ideally find a home with simple repairs; why bust your butt if you don’t have to? Besides major repairs are risky when it comes to costs. Many people will sell a home that is not even painted, requires simple dry wall repair, or swapping out a sink and faucet, etc..
5. It should be in a city with a solid job market, with price growth, and where the market is not over priced or crazy like NYC or CA
6. Live in the home while you work on it, and then sell it with less worries.
7. Avoid Seller agent fees and list the home on the MLS using a flat fee service. You still need to pay the buyer agent, but that should be no more than 2%
8. I’ll like do this after giving up the corporate job, and then stay in the home months or years before selling it.