Flipping a House?

Last week, I mentioned that one of my long-term financial goals is to get into real estate as a hobby and a secondary source of income (since I'll always work primarily in non-profit as my day job). I also mentioned that Matt had no interest in saving up our money for such an endeavor, and it seemed very, very far away since we have about a trillion other things that we need to save for first (the house we're building, a pool, an orchard, raised garden beds, a couch, a washer/dryer--the list goes on and on). 

But then someone I know (hereto referred to as My Potential Business Partner) read that post and  mentioned that they, too, have an interest in real estate. Not only does this person have an interest in real estate, they also have capital to put into such a project! We quickly brainstormed how they could put in the capital and I could put in the work. Then we could divide the profits in a way that makes sense. 

And in some bizarre way, I am over-the-moon excited about this proposition. It's bizarre because all of my interests up until this point have been distinctly non-corporate. I value community and family and wholesome food and the handmade and eco-friendliness. I've worked in non-profit my entire life (even my first job as a 16 year old was at a museum and then I taught swim lessons at the YMCA). 

But there's something incredibly exciting to me about this project--buying a house, renovating it, reselling it, and hopefully making a little profit. I know a reader already cautioned me against the negative effects of gentrification. That's definitely happening on the east side of Austin. And I know that flipping one house on the east side does impact gentrification. I'm not making any excuses about that. But I will say that a lot of young families are looking for affordable housing near the center of town, since they have been priced out of Central Austin. Since we would be flipping a house in the neighborhood where Matt and I are moving, we would essentially be creating a home for a new neighbor. 

Matt and I moved into a flipped house in Houston, and we were extremely thankful to be able to move into a historic home that had been completely updated (without having to do any of the renovations ourselves while also trying to make it a home). 

I'm excited about this idea because 1) this kind of project sounds so stimulating and exciting. I would have to do so much research and learn so many new things in order to pull it off. 2) Any extra income I'm able to earn would be able to support a second maternity leave and help us make our dream house possible.

But then I remind myself that I need to make space in my life for pregnancy. I'm already working part-time as the Director of Operations and Compliance for a new charter school. I'm also working to start my own charter school. I also recently co-authored a book that I need to spend more time publicizing. I also authored a book that's coming out in January that I need to start publicizing. I also run an e-course about preparing your mind, body, and life for pregnancy and am writing a new e-course called Purposeful Parenthood.

So, yeah, when I write that all out, I feel like it's dumb to take on anything new. 

But can I at least think through all the steps involved? Maybe that would bring me to my senses:

Phase One: Research [October, November, December]

• Complete a table that includes the average cost per square foot, average time on market, number of rooms and bathrooms, extra features like garages, etc. for all the homes in our target area that have sold within the last six months.
• Make a prediction about how long it would take us to sell a house and how much we could get for it, per square foot.
• Schedule tours of renovated homes in the target area that are on in our target range.
• Schedule tours of potential houses that we want to renovate. Complete a table that includes the cost per square foot, number of rooms and bathrooms, extra features, and a list of visible renovations that we would want to make, estimates of renovation costs, and an estimate of the resale value. 
• Talk to friends/neighbors/colleagues to generate a list of recommended sub-contractors: flooring, kitchen renovation, bathroom renovation, landscaping, exterior painting, interior painting, roof, A/C, etc.
• Talk to contractors to understand the general costs associated with typical renovations.
• Read books about flipping houses, such as this one and this one.
• Watch TV shows about flipping houses.
• Get recommendations for a good inspector.
• Get a quote from the inspector.

Phase Two: Purchase [January, February]

• Once we find a house that works out well in our predictive model (potential resale price minus the cost + renovations + mortgage payments while on the market), we would put an offer on it.
• During the 10-day option period, we would pay for an inspection. If anything major came up in the inspection (like the need for a new roof), we would get two contractors out to give us bids and then negotiate to subtract that cost from the sales price.
• During the 10-day option period, we would get contractors out to give us bids on all the renovations we want to do (at least two different contractors per job for competitive pricing).
• If the sales price + cost of renovations still made sense in our predictive model, then we would move forward with the purchase. If not, we would lose our option money and the cost of the inspection.

Phase Three: Renovation [March, April, May, June]

• The sub-contractors would complete their individual projects. We would DIY small projects as feasible.
• We would be preparing to put the house on the market: finding an MLS listing agent, securing a lockbox, making flyers, and creating a website.

Phase Four: Resale [July, August, September, November, December, January]

• We would work to sell the house: e-mailing neighbors to ask them to spread the word and holding an open house for realtors (providing food and drinks).

I guess this idea appeals to me on many levels because 1) it seems like a lot of fun to tackle something so new and difficult 2) it's amazing to have a friend who is willing to take on all the financial risk if I do all the work 3) it seems like a potentially awesome way to raise a good chunk of change. Our non-profit salaries are not going to increase any time soon. It already feels like we are doing as much as we can to reduce our spending. This might be a way to help us work toward some of our financial goals. 

Thinking, thinking...

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