Fliperati

I was listening to a real estate investing podcast yesterday and was stopped in my tracks when the host remarked that perfectionists ought to avoid flipping houses.  This statement resonated with me because — at that very moment — I was on my hands and knees in the corner of the bathroom scraping a bit of dried grout off the wall behind the toilet (where it will be completely hidden unless the toilet goes kaput and needs to be replaced).  I knew this (tedious!) labor was entirely unnecessary, but I couldn’t stand the idea of rogue grout blemishing my freshly primed drywall.  Spending time on this class of tasks is simply not good business and I’m glad I heard someone verbalize that in the podcast.  I promptly abandoned the grout stains in favor of more important jobs.

That said, I don’t think perfectionism and house flipping are entirely mismatched.  While it would be near impossible to make everything in a rundown house built more than a century ago sparkle like new, attention to detail in the right areas can probably generate a lot of profit.  Quality workmanship in rooms that will be closely scrutinized (kitchen and bathroom) will likely pay off, but you can’t let yourself get carried away.  The trick is knowing when to spend a little extra time on something and when to do the bare minimum.  I’ll definitely do a better job making this distinction in the coming weeks as the open house draws closer and closer.

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I was spending too much time with my house and we weren’t getting along very well.  She wasn’t new and exciting anymore and I only saw her flaws in spite of my best efforts to dress her up and treat her well.  We needed counseling.

But instead we just took separate vacations.  I went to sit on a beach thousands of miles away while she stayed behind to be pampered by contractors and landscapers.  I haven’t seen her since my return, but I’m feeling refreshed and ready to tackle the next couple weeks of work in preparation for the open house in mid-September.  I hired out a few jobs to be done while I was away, but there are still a number of substantial projects lingering on my to-do list.  Installing a wood privacy fence in the backyard, tiling the kitchen backsplash and painting (everything!) are some of the biggies.  I never imagined that this would be one of the biggest challenges, but my motivation and my efficiency have eroded steadily over the course of this first flip as the excitement of the initial purchase wore off and the reality of all the required work set in.  This is partly my fault because I was at the property around the clock during the first few weeks (which was fairly easy since I was used to working long hours), but after a while this led to extreme boredom at the sight of the house that once inspired visions of grandeur and profit.  The finish line is almost in sight and I’m relying on the prospect of a successful sale to carry me through these last few weeks of work.

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Although I didn’t discover many of the sites on my blogroll until after I had gotten started on my first property, I’ve found reading about the experiences of other investors extremely helpful as I make this first foray into the real estate investing universe.  One of the best things about these individual blogs is that they are generally free of the usual REI guru cheese (“buy now and I’ll include the 8^th CD free along with an autographed copy of my patented low-income rental agreement!”).  Plus, they offer candid, personal insights into what other investors are doing and how they integrate investing into the rest of their day-to-day lives. 

I keep stumbling upon more and more of these sites and the standard blogroll format doesn’t do them all justice, so I am planning to add an “REI Blog Directory” page to Fliperati with a more comprehensive list of relevant sites I’m aware of.  I would like to include a summary of the following info for each blog listed:

• Blog Title / URL
• Author
• Location
• Blog Focus (wholesaling, rehabbing, rentals, etc)

If you have a favorite blog that’s not on my current blogroll (or a site of your own), feel free to e-mail me (viridian@fliperati.com) with some or all of the above info and I will add it to the list.  I was also thinking of creating a podcast directory, so please send suggestions for those as well.

Big thanks!

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Sorry for the dearth of posts lately but, as you might have guessed, I’ve been working overtime trying to get my first property ready to put on the market next month and haven’t had much time for blogging.  It doesn’t help that I have a mini vacation scheduled for next week (planned long ago) and I’m squeezing in some extra work this week to make up for time that I will lose will I’m sitting on the beach.  Also, this is supposed to be a real estate investing site focused on flipping houses and I’m trying not to let it completely transform into a renovation blog while I’m rehabbing this house.  Unless Fliperati readers clamor for more details about my day-to-day labor at the house (like how I taught myself how to install a sub-floor and lay ceramic tile in the kitchen this weekend), I’m going to resist the urge to discuss the renovations in excess.

That said, I wanted to share an article I came across last week in the New York Times that had some encouraging real estate news (from a flipper’s perspective, at least).  While most real estate journalism these days had been focused on weak housing data and apocalyptic bubble bursts, this story was comparatively uplifting because it covered the high demand for houses with old school character and new school amenities.  When complete, I hope my property fits that niche and attracts tons of the wealthy, not-a-second-of-spare-time home buyers described in this article.  I particularly enjoyed a quote from one of the real estate brokers describing how people want things that look charming and rustic but function like new:

“The ideal is what I call the Pottery Barn formula house: shingle-style exterior, white Carrera marble kitchens and the white subway tile in the bathrooms, so it looks like the background in the catalog. It’s trite, but it’s so sellable.”

Although I have been trying not to make my house that trite (see past posts about spending a bit of extra time to preserve some of the original details in the house in lieu of simply buying new stuff), I did strongly consider subway tile in the bathroom or the kitchen and I definitely want my flip to be in the “so sellable” category.  I’m more than happy to abandon any further originality at this stage in the game to make a healthy profit on this project.  Rah Rah Pottery Barn!

p.s. I also loved the many investment banker references scattered throughout the article. 

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If you’re like me and you enjoy a bit of audio stimulation while executing mind-numbing tasks (such as sanding, priming and painting an entire kitchen cabinet set), then you may want to scan through the podcast universe for real estate investor shows next time you need to fill the airwaves.  Although I still haven’t grown tired of my college MP3 collection, I thought it might be nice to mix some educational materials into my playlist this week while I was working on some mundane jobs around the property.  The only problem is finding good shows to listen to.  Because it doesn’t take much to generate a podcast (or streaming audio or amateur radio program), the internet is littered with terrible real estate productions that contain little useful information and tons of boring blather (and of course, tons of cheese).

However, once you’ve located a good one, I’ve found it’s a great (free!) way to entertain yourself, motivate yourself, educate yourself and pick up new investing ideas.  There are shows out there that cater to all different real estate investing strategies (rentals, flipping, wholesaling, etc) and even some that focus on specific markets (California, Michigan, southern Florida, etc).  Searching iTunes, Google, Yahoo or any of the other internet portals will likely yield something of interest for everyone. 

One podcast I recently discovered that I’ve grown to like quite a bit is called Get Real REI and it’s hosted by a husband and wife duo in North Carolina.  What really sets them apart from a lot of other shows I’ve listened to is their professionalism and their focus on delivering useful content to their listeners.  While many real estate podcasts painfully wander from topic to topic without any structure (often interlaced with boring banter about the personal lives of the hosts), Get Real REI adheres very closely to a set format and the discussion rarely degenerates into irrelevant topics.  I particularly like the interview portion of each show.  I wish there were an equally good investing program based in the New York / New Jersey area, but I haven’t found one yet.

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Things were going too well and I knew I was due for some bad luck.  Here’s a summary of all the terrible things that happened today at my flip house.  When it rains it pours…

Leaky Shower Pipe?

I was pulling staples out of the living room floor late this afternoon when I noticed a small ribbon of water winding its way down the wall by the stairway.  I immediately knew it must be coming from the shower area directly over head and ran up to the bathroom to investigate.  It took me a few minutes to figure out that the water was simply spilling out of an open pipe that Clyde had cut while he was re-framing the shower area.  I couldn’t put a bucket immediately under the pipe and was forced to stand there trying to catch as much water as I could with a rag while I waited for Clyde to come take a look.  While I was waiting I grew very confused because I remember Clyde telling me that he had shut off all the water in the house.  I tested this by trying to flush the toilet and sure enough, nothing happened.  How could this pipe be dripping water if the all the water in the house is off????

Clyde showed up a few minutes later with the answer and a fix to the drip.  Apparently the water shut off valve in the basement is ancient and does not completely stop all the water coming into the house when it is in the off position.  To fix the shower drip, Clyde installed a valve on the pipe he had cut and the drip was gone.  Fortunately, the damage to the wall and ceiling below the bathroom is fairly easy to repair, so I breathed a sigh of relief that we caught the leak quickly and took care of it.

Premature Relief

Then I went down to the basement to see what the main shutoff valve looked like.  I heard the hiss of spraying water the minute I set foot on the steps and my heart sank.  Our theory is that this was probably the first time in many years that the shutoff valve had been used and it likely disintegrated when we turned it off to work on the shower.  Water was spraying everywhere and Clyde did his best to slow the flow to a small, steady stream.  The valve was practically useless and the only solution was to shut the water off at the street and replace it with a modern ball valve.  This required an emergency plumbing service since it was now almost 7 p.m.  We called several and the earliest anyone could come was in 45 minutes.  This left me stuck in the basement changing the small drip bucket every thre or four minutes to prevent the floor from getting soaked.

Of course the plumber was late and didn’t come until almost two hours later, by which point I was starving and exhausted.  In spite of his tardiness, I was ecstatic to see the guy and he quickly diagnosed and repaired the problem.  It cost me $450 (not in the budget!), but that’s a lot less than I would have spent cleaning up a flooded basement if the valve would have completely ruptured.

Time to Think

My ride home tonight was consumed by the news I got from the design-build firm I hired to draw-up plans for the new garage.  As if the plumbing issues weren’t enough, I also learned today that it would likely cost in the neighborhood of $25,000 to replace that wimpy single car detached garage in the backyard of the property.  I had less than $10,000 budgeted for this project and I thought that would allow plenty of room for cost overruns in construction of a simple wood frame garage.  The architect informed me that the high cost was largely due to the fact that I would need to rip out the existing concrete slab and replace it with a foundation buried three feet underground and covered with rock and cinderblocks to build the new garage according to local building codes.  I could not believe that such a simple structure would have to be constructed so painstakingly.  I may as well build a full addition to the house if I’m going to spend the time and money constructing a garage this rigid.

Now I’m not sure what to do.  Even if I shop the garage plans around, I can’t imagine anyone is going to quote me less than 50% of what the design-build firm estimated.  I could potentially find someone to slap up a simpler structure on a concrete slab (against code) and save many thousands of dollars, but I’m worried about not being able to get a certificate of occupancy when I sell the house if I rebuild the garage improperly.  The project is already on the building department’s radar since the architect has been working with them to get the plans approved, so I feel like my only option is to leave the garage standing as-is.  Would anyone pay good money for a beautifully renovated home with a ramshackle eyesore of a garage in the backyard?  It’s certainly not a selling point, but I can’t imagine it’ll prevent anyone from making an offer if they genuinely like the house and the neighborhood.  I’m going to show the plans to a few other builders and continue to mull this question.  Unfortunately, I don’t have much time to waste now that my target open house date is just over a month away.

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In an effort to boost the sad number of “flip tips” available here on Fliperati, I wanted to share the good experiences I’ve had using craigslist over the course of my first flip.  In addition to regularly scanning the real estate section of craigslist for a general sense of rental costs and home prices in my area, I’ve also used the classified section to get rid of some of the stuff that was in the house when I bought it.  So far I’ve unloaded the fridge, the stove, 190 square feet of brick paving stones and about 50 linear feet of chainlink fencing.  It only takes a few minutes to advertise these items on craigslist and, if you’ve priced them right, you can usually sell them in a day or two.  Although I certainly didn’t mind pocketing a couple hundred dollars in sale proceeds, the best part of using craigslist has been getting other people to come to the house and take away stuff that I would otherwise have to load into a dumpster.  The paving stones are a great example of this because it was exhausting to rip them all out of the ground and stack them by the driveway, so I was ecstatic when I found someone who was willing to pay me for the privilege of coming to my house and taking them away.

I of course also plan to advertise the finished property on craigslist when I’m ready to put it on the market, so hopefully my house will sell as quickly as the paving stones did…

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