Last week I looked at my first property for investment purposes. I doubt I am going to get involved but it was exciting nonetheless. The experience made me question whether I actually want to get involved in a short term flip.
Looking at my First Possible Flip
I took a look at the house with a buddy of mine and his contractor. This particular buddy and I are very good buddies and I think we would work well together on a real estate project (however, I have stated in the past I have no clue what makes a good partner).
It is a short sale that has been vacant for the better part of 2 years. The vacancy didn’t give me a great initial feeling but I figured what the hell if my buddy and I could get a “steal” why not. To say I left overwhelmed is understatement. The house was/is a disaster.
I figured there would be cosmetic problems, but the list of problems were too ridiculous for me to get involved on my first deal:
- people had come in and stolen the copper piping from the house as well as the coils from each of the baseboard heating units
- There was a crack in the foundation that may or may not be serious
- No hot water heater
- Boiler was completely busted
- Contractor said we would have to redo most of the kitchen
- Bathrooms were dated which may be a problem if we were to flip it (if it were a rental wouldn’t be that big of a deal)
- The house had been sitting there for a very prolonged period of time I would be shocked if an engineer doesn’t come in and find mold
There are other problems that aren’t fixable such as being on the corner with a very busy road next to it, a boat I would somehow have to get rid of and an unknown amount of dumpsters of garbage that would have to be removed (which would provide issues in terms of renting a dumpster and actually putting in the hours to remove the rooms full of stuff).
As soon as I walked in the house I knew this project wasn’t for me. I think my buddy might still go for it if he can raise the capital (b/c of the problems with the home it can’t qualify for a traditional mortgage). He could make some good money, but I didn’t think my stomach could handle it.
Why I don’t Think I’ll be Flipping a Home Anytime Soon on Long Island
Talking it out with a few people I came up with a statement that is not original, but seemed to sum up my situation perfectly. For me, flipping this type of home provided a limited gain with an unlimited downside.
The house is going to go for $X eventually (my guess is no where above $300,000 – which is low where I live I know that is shocking for most) but the work I would have to do could be unlimited. Concurrently, I have no idea what kind of town inspections would come after the amount of work that would be needed.
I can’t see myself flipping a home anytime soon on Long Island. The stakes are too high and I only have access to construction services at retail cost compounding the cost issue. It is possible that I buy a rental on Long Island, but the likelihood seems like appealing then the option of working with my brother-in-law down in Philly.