How We Pick Our Flips And The Process Of It
After sifting through a few feelings on whether or not we qualified to answer this type of question, I caught my breath. That imposter syndrome was slowly sneaking in & I had to kick it in the butt asap. Our short amount of experience flipping & fixing up houses can very well help someone, why not put this info out there! After being asked by a few Instagram followers, these are my answers!
Disclosure : This post may contain affiliate links, meaning I make a commission if you decide to make a purchase through my links at no cost to you. This is made for full transparency.
In this blog post you will happily find…
The first steps in starting a house renovation or flip process.
How we determine our budget & other financial aspects of remodeling.
Know when to do the work yourself & when to hire it out.
Where do you decide the starting point & do you wait to move in?
The First Steps You Should Take When Renovating a House
The no brainer answer is budget. This changes if it is a house that you want to purchase to flip & sell, to live in or if it is a house you are currently living in & want to remodel to increase the value. Today I want to talk specifically from our experience which is purchasing a home that need remodeling that we plan to sell shortly after.
Our time frame looked like roughly two years. In Indiana (check your state) if you live in a home for at least 2 years & you sell it after, you will not be taxed on your capital gains. Your capital gains equals the selling price of your home minus your purchase price minus the money you put into it. Sadly, personal sweat equity does not go towards the renovation total (we tried lol), so keep that in mind. This could be a difference of thousands of dollars in your pocket - so if you are in a similar situation, stay the 2 years. It goes by fast especially if you are living in the home & there is quite a bit of work you can do.
With that in mind, I highly recommend finding the sweet spot for a home that needs renovation. We always live in the house while we remodel. It isn’t always pretty & isn’t always fun, but it helps the wallet. I suggest finding one that has good bones & has minimal to no big ticket item needs to make it livable. Meaning, if it needs a new furnace, fine, but maybe move on from the house that needs to be completely gutted. You should have a good idea of what a house really needs after the home inspection is complete, but take an extra set of experienced eyes with you to any showing. You will never be completely aware of everything that’s behind the wallpaper, but atleast you will have a good idea if there are issues beyond your repair capabilities.
Last piece of advice when getting ready to purchase a flip house is something that I was raised to know. You make your money when you buy. Theres a simple formula to think about - what is the purchase price (how low do you think you can get the seller to go) + how much money can you generously say the house will need to strictly bring value in both price & seller inclination + what do the comps say is the market value for what the house will be after remodeling. You can figure that information out by looking at the market, check houses in the same area, same square footage, rough lot size, bedrooms, bathrooms, etc & you will get an idea of what the house could be worth. Please, please, please do NOT bank on what ever the “zestimate” is. Hire an experience realtor to pull this information for you if needed to, but their time & knowledge should be compensated for. Based on these numbers, if the gap between the money you would put in is pretty close to what the house will be worth in the end - walk away. ONLY if you are looking for a good investment flip. If you are look to stay in this house for a while, that changes things, but if you are wanting to do a turn & burn, you want that gap to be substantial.
Our first house we were not intending on doing a big flip renovation, but in the end it turned out to be a decent investment. We owned the house for 2 years & lived there for 2.5. We made around $20k after all was said & done. Our second house we lived in just shy of 2 years & made around $45k. I am not getting into all the tiny details, but maybe that gives you an idea of what a good 2 year flip could look like. I am not sharing this to brag or anything. That investment was used to turn into the next one. I wanted to share this because renovating a house (if you’re handy) does not have to be intimidating. We didn’t have all the money upfront, we had a mortgage, we couldn’t just pay for everything upfront. It is possible!
Below is a picture of the bathroom we added to the second house we flipped. This was the biggest project we did at that time & made living there so much better.
How We Determine Our Budget and Remodel Process
Again, this is going to change often. It all depends on the house, your living situation, if you plan on staying a while or not, but I will go based on our experience. Giving ourselves a 2 year timeline helps us financially support each project. First things first, plan out & determine what projects need to happen first. Pay attention to any domino effect projects (projects that affect other rooms so that you will have those projects to do first or right after before another one). Weigh out the dollar amount of each, roughly, & spread those out. If a kitchen is on the list, figure out where you will wash your dishes & cook your food in the mean time. If you need a bathroom done first or a laundry tub installed before hand, note that. For us, each project was pretty clear when it needed to be done based on the other items on the list.
Here is an example of our current situation to give you an idea…
Add a toilet to the future powder room $$ (was a pantry) on the main floor so we have another toilet.
Start adding the upstairs bathroom $$$ so that we have a toilet & shower upstairs before renovating the master suite.
Adding this bathroom affects the 4th bedroom $, so after the bathroom/during the bathroom remodel work on the adjustments on the back bedroom.
Powder room is on a pause until the upstairs is done because we need access to the wall & ceiling for running pipe. The upstairs bathroom addition is a pricey item on the list, but the bedroom isn’t bad so doing them at the same time works.
Last item on the upstairs list is the master suite - add a walk in closet & remodel the bathroom. The other bathroom will be done so we can use that in the mean time. Meanwhile, we can work on the master at a slower pace if need financially since it is another $$$ item.
Once the master is all done, the upstairs is complete. We can now work on the first floor items because we won’t need to access the ceilings for pipes anymore. This means the powder room can start getting finished & we can work on the kitchen area.
The kitchen & butlers pantry are the two main projects on the first floor. The pantry is small & relatively simple $$ but the kitchen is intense. First we are choosing to do the butlers pantry so that we have a sink & counter to work from while the kitchen is out of commission.
That might seem all over the place & you might do better with a map & pictures. However, once you know the flow, the projects lines each other up themselves. Figure out what your home needs, if a project affects another & spread out the big ticket items. If you are only working on one project like a kitchen remodel, well you lucky duck lol.
Knowing When To Do The Work Yourself and When To Hire It Out
This will be the biggest indicator if flipping homes on a budget is right for you or not. I am so blessed with Luke that he is so capable of so many things. This saves money, obviously. Not having to hire every task out helped save money & also time in a way. However, sometimes hiring out means the work can get done faster. One thing I will always stand by is hire out a professional where a professional is due. Plumbing, electric, framing, get permits, do it by the book. When you go to sell, you could get flagged for certain things & if you don’t have permits pulled you could get in trouble. Also, hiring a professional keeps you, your family, & your home safe. They are licensed for a reason! With all this to say, you can still very well make money flipping a house & not do all the work yourself.
Renovating Houses has Become so much more Apart of us than we Ever Thought
When we got our first house it was a rental. A family friend was ready to be done with some rental properties & it was our only option at the time. We agreed on a future purchase price & when we were ready we bought it. At that point we had already finished some projects to make it feel more like home. We knew that we wanted a cozier, cleaner place to live that had our touch, but in the back of our heads we knew we added some value. After selling that house, our budget wasn’t huge for the next. Our main issue was keeping our monthly payments attainable & there wasn't much on the market for us to handle. It turned out to be the biggest blessing in disguise.
Now as we hit our third home, we are hoping this is a forever one. Doing these projects that we learned the skills for over the years is so fun because now we get to do it for ourselves. We kept the same mindset, however, when we purchased knowing we would want a solid chunk of equity. We may not have huge savings accounts or money in stocks, but thats okay. Our money is in the shape of a house, a very chippy, old house. We get to do what we love & help support our financial future in the process.