Flipping Houses

Investing can take all different forms. It can be as simple as taking care of your home and being willing to move every couple years as your home appreciates, to renovating an entire home and flipping it for a profit. My husband and I never intended to get into flipping houses, but the opportunity somewhat fell into our lap and we decided to run with it.

How it started:
My husband and I were travel nurses. When we first started traveling, we had a house that we rented. As a travel nurse, part of our income was our hourly pay, but the other part was a housing, gas, travel, and meal stipend that remained tax-free as long as we maintained a tax residence elsewhere. It didn't make sense to continue to pay rent on a house we technically weren't living in, so we decided to buy an inexpensive house at the end of 2016 and start putting money towards a mortgage instead of giving our money to our landlord to pay their mortgage.

When we returned from traveling mid-2019, we still had no intention of selling our house. Initially, we just wanted to make our house a home. The house already had nicer LVP (Luxury Vinyl Plank) flooring and the bathrooms had been updated, but there were still a couple things we wanted to do. We got a couple quotes and had new windows installed. In order to save some money on the rest of the rehab, we decided to take on the DIY challenge. We gutted the kitchen- new tile floors, new cabinets, put up tile backsplash, and then had granite countertops installed. It was a learning experience, and we made a ton of errors along the way, but we did it and it looked pretty fantastic! Not long after our renovations were completed, one of our neighbor's houses went on the market. We watched it, and it went under contract in less than 30 days for more than we expected it to sell for. That was the turning point. We decided we were going to sell our house.

We cleaned up the flowerbeds and yard, power washed and repainted the exterior of the house and both of the decks, and called a REALTOR to give us a consultation of what he thought our house was worth. He estimated its worth as higher than we had hoped, and within a couple days we had pictures taken, a sign in the yard, and our house was on the market! The house went under contract in 3 days and it was time to search for our next home! We decided that instead of searching for our forever house, we would find another property where we could get in for a lower price, do some cosmetic rehab while we lived there, and sell it again in a couple years for a profit. Lather, rinse, repeat.

I had always been interested in Real Estate, but never previously had the financial stability or push to take the leap. Once we purchased our 2nd investment property and inherited our 3rd, my husband and I reopened the conversation about me exploring the opportunity to become a REALTOR. We decided it was a great time for me to take the leap. I signed up for the class, took the class, took the exam, passed, and was hired with MKB before we finished renovations on our 2nd and 3rd investment properties. I was even able to help a couple clients purchase and list their homes before ever listing one of our personal properties. Since then, we have flipped and sold 4 properties. We recently finished renovations on our 5th property and just moved in, and will plan to stay in this property for the next 2-3 years. With each flip, we have learned from our mistakes, learned new skills and become more efficient in completing every task. Each flip has had its own challenges and each one has been a little more complicated and in depth than the last one.

Why we live in each flip:
When we started, we didn't have much up front capital. Since each of the properties will be our primary residence, we have been able to purchase properties with an FHA loan or a conventional loan and a much lower down payment (3%-5%) than if we purchased the home as an investment property, which usually requires about 20% to 30% down. We have been able to avoid paying capital gains taxes on our profit because when you live in a home as your primary residence 2 out of the last 5 years, capital gains tax does not apply. Another huge benefit of living in each flip is to potentially rehab the property without needing an official permit. There is a statute in Virginia that allows an exemption for a homeowner permit…but only if it's primary residence and once every 24 months. (Roanoke City Affidavit can be found here). However, all tradesmen would need to get their own permits if the work they are doing is permit-necessary.

How to we pick the property to purchase:
Research and patience. We constantly look at the MLS and other local investor groups for available properties. We look at more distressed properties with price ranges less than $125,000. When we tour the property, we look around at the potential work that needs to be done. We start by examining the high-ticket items like roof, windows, HVAC, electrical, plumbing, kitchen, and bathrooms. The more of these items that need to be repaired or replaced, the less likely it is for this home to be an option for us as a flip property. Ideally, we like to stick with properties that need more cosmetic work than anything else. We are ok with renovating kitchens and bathrooms, but we plan our rehab around existing plumbing and electrical and save money by not moving those items or having to hire a contractor to replace/move those items.

Once we figure out the repairs the property will need, we research comparable properties in the area and try to determine our ARV (after repair value). Each investor has their own profit they look for on each project. Some investors are ok with $5,000 or $10,000 profits and others are looking for much higher returns $50,000-$100,000 or above and anywhere in between. All of it depends on the investor, time the rehab takes, the profit needed, and the market at the time the property is resold. Ideally, the best properties have the potential for multiple avenues of profit (flip, live-in flip, house hack, rent, buy and hold, BRRR (Buy, rehab, rent, refinance, repeat)). That way, when rehab/repairs are completed, if one avenue doesn't work, another will still allow you to produce income on the property.

If you are looking to get started in investing in Real Estate, but not sure where to start, reach out to a local REALTOR (specifically an agent with experience in working with investment properties). A REALTOR can help you find properties on and off the MLS and help you determine your ARV and potential profits. The best part is being able to see the finished product and look back on pictures of where it started. Sometimes, the transformation is unbelievable!