Fliperati

I spent most of yesterday at my investment property taking care of odds and ends.  I have been trying to dream up new ways to attract more prospective buyers and I thought changing the sign in the front yard might generate renewed interest.  I got the old sign from my flat fee listing agent and I never really liked it but was too caught up in getting everything else ready to do anything about it.  Now that I have a bit more time on my hands I decided to replace it with a large, simple “For Sale by Owner” sign in red and white lettering.  Many of the buyers who have come through my house so far seemed to equate my lack of realtor representation with the potential for a good deal, so I’m abandoning my fear that a FSBO sign will deter realtors from bringing their clients to my house and advertising my independence with a new sign.  The flyer tube has MLS printouts inside, so buyers with agents can quickly see that my property is in “the system” and I’m committed to paying a 3% commission if they submit an offer through their broker.  I’ve gotten almost zero traffic from the local realtor community, so it’s not like I have much to lose anyway (sniff sniff).  Part of me wonders if I’ve somehow been blackballed for listing with a flat fee broker?  The other part of me just assumes that the majority of local realtors don’t have any buyer clients right now because the market is so slow.

Regardless of the FSBO question, I would probably be replacing the sign now anyway.  While I am generally happy with the service provided by the flat fee listing agent, the sign they provided (for a $25 fee!) was a piece of crap.  The only good part about it was the sturdy metal frame.  The sign itself was unclear and much too busy for media that is geared toward getting inquiries from passing motorists.  Also, it only listed the phone number and website of the listing agent, which meant that prospective buyers would have to go through a middleman to get in touch with me.  I doctored the sign by carefully covering the listing agent’s contact info with my own phone number and marketing website, leaving only the company logo exposed.  I liked this solution at first because it advertised what looked to be a traditional listing marketed by a lesser-known realty (which would hopefully prevent local agents from ignoring it) while leading people to contact me directly.  However, the sign wasn’t very tidy and I think the new one will catch more attention with its clean, bold lettering.

I also put a permanent “ß House for Sale” sign up on the corner, hoping to drive a bit more traffic down my sleepy residential street (sorry neighbors).  I feel like a nerd on prom night waiting by the phone all the time and am looking to try anything to make it ring.

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Having done my best to extract as much information as possible from all the buyers who have walked through my flip, I have gained a great deal of insight into what I could have done differently to make this project more successful.  My initial thinking is that, while I understood the local real estate market in terms of what comparable properties are worth, I did not have a true understanding of what the majority of local buyers look for in a house beyond the number of bedrooms and bathrooms.  Although I did have a vague sense of what a typical buyer in this area would minimally expect, I still fell into the trap that victimizes many new investors: their own personal tastes and preferences. 

Under the heavy influence of my friends, my family and my own perfectionist tendencies, I think I spent way too much money flipping this house.  While I was able to turn a run-down, ugly property into a sparkling new home with luxury finishes on a renovation budget of only $42,000 (which is pretty small by New Jersey standards considering all the work that was done), I could have probably gotten a much better ROI on a $10,000 budget.  I have come to believe this because I’ve noticed that the majority of people who have looked at the house are 1^st time homebuyers who are really stretching their finances to purchase a house (oftentimes looking to move from nearby rental units) and space and affordability are more important to them than high-quality finishes and complimentary wall/trim colors.  Although this town is definitely an up-and-coming place to live and about one out of every eight potential buyers have come from the more affluent, discriminating background that I was targeting when I renovated this house, the vast majority of serious inquires have come from people with very practical, no-frills housing needs.

It’s amazing to watch one type of buyer come into the house and rave about how beautiful everything is while another type of buyer (more commonly) is entirely nonplused.  Granted, some of these buyers could be hiding their true feelings behind poker faces in an attempt to bolster their bargaining position if they decide to make an offer, but for the most part you can just tell that they genuinely have no emotional response to the property.  I must admit that this boggles my mind to a certain degree, but I suppose that just demonstrates how I didn’t totally understand the local market.  

For example, one of the most serious potential buyers (she turned every faucet on and opened/closed every window in the house) told me that the first thing she would do is enclose the porch if she ended up buying the place.  She said something about grilling sweet potatoes out there in the winter (???!??!!?).  She also seemed entirely ambivalent about all the lifestyle upgrades in the house, from the automatic icemaker in the bottom-mount freezer to the Silestone vanity-top with a 10-year warranty against stains, chips and cracks.  This makes me think that I will have a hard time getting these amenities to command the premium that I had hoped for.  I still think I could sell it to the type of person who would really appreciate all the details in the house, but it will take much longer to get enough of those people through the house to find “the one.”

In my defense, the neighbor across the street a few doors down has made similar upgrades to her home and it is really beautiful too, so it’s not like my property is a total anomaly.  Also, I consulted with other neighbors over the course of the renovation and they all seem to appreciate everything that has been done.  One neighbor often jokes that she would like to swap houses, and I think there is more than a grain of truth in her statement.  Unfortunately, house-swapping with her isn’t going to generate any profit for me, so I must press on and try to get this property sold.

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Similar to the plight of Seattle Eric, it seems the timing on completion of my flip couldn’t have been worse.  Since officially listing the house almost two weeks ago I have received only two calls from brokers wanting to show my property to their clients, in spite of the fact that I’ve dropped flyers off at almost every local real estate office and e-mailed every real estate agent I could find an address for.  I’m advertising that I will pay a full buyer’s broker commission but it doesn’t seem like any of the agents have clients that are interested in my property. 

After visiting so many real estate offices, I must say that I’m not terribly surprised with the result so far.  The mood in almost every office was pretty glum.  Many of them felt more like a funeral parlor than a realty and I would not have been surprised to see a casket in the reception area.  Several agents I spoke with flat out proclaimed that “there just aren’t any buyers right now.”  I had heard rumors of many real estate agents and mortgage brokers getting out of the business because they haven’t been able to make any money and I don’t find that too hard to believe at this point.

I don’t want to be chasing the market downward, so I sucked up my pride and made a $20,000 asking price reduction yesterday.  Even though I was already priced very close to the lowest of the three CMAs I got (which was itself $20k lower than the first two), it was obvious that something was deterring people from calling.  Lack of marketing certainly wasn’t the problem.  I don’t know where else I could have promoted this house without buying television and radio airtime.  My marketing strategy included:

• 10,000 postcards given out with customer receipts by cashiers at the local supermarket
• Print advertising in the “For Sale” and “Open House” section of the largest area newspaper
• A dedicated website with its own online marketing campaign to generate traffic, which has been getting 20 – 50 unique visitors per day
• Advertising on a multitude of “For Sale By Owner” websites
• Craigslist ads on both the New Jersey and New York (NJ subgroup) sites
• Signage in the front yard of the property
• Flyers distributed to all the local realtor offices
• Flyers left by the cash register at local businesses where I am friends with the owners (the hardware store, the diner, the convenience store)
• Individual e-mails sent to any area agent I could find an address for (more than 300 people by the time I quit sending them)
• Online advertisements with the local newspapers and the NYTimes
• Word-of-mouth promotion from 10 of my nearest neighbors and two of my contractors

The price reduction seems to have helped generate renewed interest (at least temporarily) as I have already gotten two calls since making the adjustment.  I think the property is very aggressively positioned now — especially considering all the amenities.  I hope potential buyers agree!

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Click on the photos tab in the upper left corner for more pictures of the completed renovations.  I’ve had a good amount of traffic through the property over the past week and am still working hard to get the word out, but I don’t have any offers on the table yet.  There were a few buyers that I’m optimistic about, but I’m trying not to get my hopes up too much…

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I know it can sometimes be difficult to piece together what I’m up to, so this post is just a general update on the status of my first flip.  In short, things are going okay but I’m going to be working really hard over the next two weeks to clean up the property and start marketing it before the open house.  Yes, this had originally been a 10-week project with an open house slated for mid-September, but you all know that my schedule has been extended by a few snafus and it has now become a 12-week project with an October 1 finish date.  Some of the smaller details like painting the bi-fold closet doors and installing the light fixtures have taken almost infinitely longer than I ever imagined and I’ve pared back some of the more ambitious renovations to minimize damage to the schedule and the budget.  My former contractor’s flake-out was a blow as well, but I found another guy pretty quickly and he has been doing great work since then.  I’m counting on his help to get me through this final week of work. 

Fortunately, there aren’t that many large projects left to be done.  Finishing up the porch railing and installing new spindles on the stairs are the last major “must do’s” and installing a privacy fence is the last major optional job.  The problem is all the tiny details left to be addressed, like painting the trim, re-installing the radiators, putting faceplates on all the outlets, putting all the shelves back in the cabinets, re-hanging the closet doors, cleaning, etc, etc.  I’m going to work really hard to get all this taken care of this week so I can focus on my marketing plan next week.  I’m 90% sure that I’m not going to use a seller’s agent and am instead going to go with a flat-fee open listing on the MLS.  I am also going to do a lot of my own advertising (local and regional newspapers, internet home search sites, signs, flyers, personal visits to local realtors, etc) and I’ve built a dedicated website for this property.  My goal is to make sure everybody and their brother knows that this house is for sale by the middle of next week.  My dream is that the open house is so packed with potential buyers that it creates a sense of urgency around the property and encourages people to quickly submit attractive offers.  I’m considering offering a bonus to the buyer’s agent (3% commission + $1,000 maybe?) to attract maximum attention and facilitate that high-energy open house that I’m hoping for.  We’ll see if my dream comes true…

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I’m finally at the point where non-construction workers can safely walk around my flip house, so I met with a staging consultant this morning to see what it might cost to dress up my investment before it goes on the market.  As you know, I’m already a bit over-budget thanks to the floor and plumbing problems, but I’m still toying with the idea of staging the house because I think it will really help buyers get over the modest size of the property.  I would particularly like to put beds and a few accessories in each of the bedrooms so people aren’t scared away by their small dimensions (the smallest bedroom is only 9’ x 9’).  Personally, I’ve always been surprised by how my perception of a space changes (for the better) after even the most basic furnishings are added.

So, back to my meeting with the stager.  Upon arrival, she spent about 10 minutes walking through the house taking notes and then we went room by room to review her ideas.  I didn’t agree with 100% of her interior design philosophy, but I liked most of her thoughts and would be happy to have hired her on the spot to spruce up the whole house if her price was right.  Unfortunately, Bob Barker was nowhere to be seen and I think I’d have to scale back the staging significantly in order to justify the expense.  I’d prefer to spend less than $1,000 on this phase of the flip and her estimate was more than two and a half times that amount.  She is probably the least expensive stager in the area and I don’t think it’s an outrageous price given the amount of work required, but I’m still not sure if it’s a good investment.  I haven’t seen the formal written proposal, but she should be e-mailing it to me soon.  Once I have that I may go back and try to cut out everything but the basics (beds and a few other items for the smaller rooms) to see if I can I can dress up a portion of the house without breaking the bank.  Feel free to chime in if you have strong feelings one way or the other about the value of staging a flip.

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I had just finished posting the wood floor update when there was a knock on the door here at the flip house.  When I answered I found two very chipper middle-aged women who immediately bombarded me with questions about the house.

“Are you the owner?  Are you fixing it up?  Will you be living in it or renting it?  When will you be done?”

Apparently they noticed the construction waste in the side yard and were wondering if I was fixing the place up for rent or for sale.  I told them I would love to keep it and rent it but was planning on selling it at the end of the month when the renovations are complete.  One of the women is moving to Jersey from Pennsylvania and she and her friend are out trolling the area looking at rentals, although she said she was also considering buying a place if she found a house/neighborhood that she really liked.  It seems like my property fit the bill and she is bringing her husband back this afternoon to take a walk-through.  They seemed very excited about the house and were extremely complimentary about the work that had been done so far.  While I don’t think anything concrete will come out of their interest in the house, it is encouraging to get such positive feedback from real-life prospective buyers.  I’m definitely anxious about the final outcome of my first real estate investment, so this was much-needed encouragement.  I’m interested to see what the woman’s husband will think and I really hope they come by before I leave this afternoon.

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You would never know that I had planned on having all the original floors in my property refinished if you saw the mountain of brand new oak strips sitting lazily in the dining room (which, through the magic of the internet, you can see pictured below).  Did I win this wood from a timber baron in a high stakes poker game, you ask?  Unfortunately not.  (Note to self: play poker with more timber barons).  The wood is in my dining room because the refinishing crew discovered that the entire ground floor of my flip house is peppered with deep, dark stains sent from hell to ruin my otherwise perfect renovation budget.  No amount of sandpaper or stain is going to get rid of these marks (the exposed nails from excessive sanding are there to prove it).  I don’t think I could easily sell the property with nasty black spots throughout the first floor, so I have broken down and bought new wood.  This has been by far the largest unexpected expense I have encountered over the course of this project (setting me back an extra $2,000), but I think the new wood is going to look awesome and I might even earn some of that money back.  My only concern is that the new wood will not harmonize well with the more rustic original floors upstairs.  The floor guys think they can stain it a similar color and I’m hoping that it meshes well in the end.

Also, even though I usually do tons of research before making any major purchases, the new wood was a snap decision and I hired my refinishing crew on the spot to do the new floor installation as well.  I know that any new flooring will take some time to acclimate to the temperature and humidity of the house and I can’t afford to delay the project any further, so I did my best to negotiate a fair price with the existing crew to make sure the job would get completed as soon as possible.  I’m already behind schedule thanks to Clyde’s flakiness and because my countertops have been on backorder, so I’m trying to do some damage control and prevent this flooring problem from delaying me any further.  I knew these issues would come up and I’m (pleasantly) surprised that there haven’t been more problems, so I’m trying to take it all in stride.  The target open house date is now September 24^th and it’s going to be a marathon of work to get everything finished in time.  Cross your fingers for me…

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I’m definitely in the final stages of the renovation process, but it is still overwhelming to think about all the jobs – large and small – that remain to be tackled before the house is ready to show.  Although having the floors refinished was originally going to be the last major project, I still haven’t dealt with the front porch (needs new bead board on the walls and a railing around the perimeter) or the back fence.  There are also a million smaller projects that are constantly ignored in favor of more obvious tasks.  For example, the crumbling medicine cabinet doors (see picture) continue to elude repair and I haven’t figured out how to put new spindles in the upstairs railing. 

It doesn’t help that my once beloved contractor has managed to destroy his spotless record by flaking out on completion of the shower tile job.  He finished 90% of the work and conveniently went “on vacation” the day after I paid him and was supposed to return a week later.  The remaining 10% of the job (touching up the grout and installing the shower trim) has now been sitting unfinished for more than 3 weeks.  I’ve tried to tempt him back to the house by soliciting estimates for work on the fence and the porch, but it’s been three days since I gave him the go-ahead on these projects and I haven’t heard a peep from him.  I was pretty crushed by this turn of events because I had high hopes of hiring Clyde to play a larger role in future investments.  While he certainly wasn’t a master craftsman, he had been doing very solid work in a timely manner at an excellent price.  His recent absenteeism has been a nuisance, but I’m not going to let it derail the last stage of the renovations and I’m moving forward with or without his help.

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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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