# Flipping a townhouse, what a freaking mess!



## Melensdad

My wife and I, went in with a friend, and bought a townhouse in a very upscale community to flip.  The townhouse is located in Munster, IN, a town with some of the best schools in the state, some of the highest retail prices in the state, and a great local reputation.  Picked it up for $126,001.00.  Won the auction by $1.00.  

There are other units that were for sale on the same street, all in the $185-$195,000 range.  Our hope is to fluff this up with no more than a $5000 to $7500 investment, and move it quickly for about $170-$175,000.

From what I gathered from the neighbor, the owner went into a nursing home.  She kept the unit in beautiful condition, and then the kids trashed the unit with a party or parties.  The bank ended up repossessing it, in the process of the foreclosure the dishwasher vanished, parts from the range also vanished, but they left clean clothes in the dryer!?!

I've filled up my SUV 3 times and run useful things to GOODWILL that can go there.  There are probably no less than 20 large "lawn & leaf" size trash bags staged in the garage that need to be hauled to the dump.  Tomorrow we start cutting up some of the carpets to haul them out.

What a freakin mess


----------



## Melensdad

Not sure what was sacrificed, died and decayed on the master bedroom carpet 

That blood stain is about 18 inches by 2 feet.


----------



## Melensdad

2 bedrooms, 2.5 bathrooms, loft area, kitchen, dinette, living w/fireplace and a 1 car garage.  Its really a very nice unit.  Or it should be a very nice unit.


----------



## BigAl RIP

Man ,,, Kids !
 I honestly think you are a better man than me . I could never do a partntership with anybody. I just know what I want and will not be getting permission from someone else before I do it . The risks are higher ...... As are the rewards for being right . I am sure you have done your homework and will do well !!!


----------



## Melensdad

I don't mind doing quick partnerships like this.  The partner put up half the money and is really not active in any of the decisions.  He's more of a silent investor looking for profit.  Hasn't even been to the unit.  I sent him a photo of the carpet stain, his response is we are buying new carpet.  He seems to trust my judgement, and lets me have my say, but I do document anything we need to spend money on before doing so.  

It splits my profits, but also splits my risks.  I've done some where I am the sole investor, some where I am a partner.  All partner deals are short term deals.

Below is the 2nd bathroom upstairs.  You can't see most of the mess in the photo, but there is BLOOD?  Or red/brown paint all over the floor in front of the sink.  WTF?


----------



## 300 H and H

Just hope it isn't a crime scene.....

Just sayin...

Regards, Kirk


----------



## Melensdad

Crime scene?  No, not according to the neighbor.  Not according to the bank.


----------



## grizzer

I bought a house years ago where the woman died in bed, furnace shut off, pipes froze, then they found her.

Contractor (ex still held title) fixed up the inside, outside was still a mess under the snow, the RE law changed  during this time to require disclosures of death/crime scene at the property.

I picked it up for 1/2 price right after the State decided not to bulldoze the neighborhood for freeway expansion.


----------



## FrancSevin

The several times we tried flipping a house my partner was my wife. 

While I cannot speak to this townhouse project....I have some advice on that partnership arrangement.

Don't


----------



## Melensdad

As I said earlier, as long as expectations and roles are well defined, I have no real issues with a short term partnership on deals like this one.

Things tends to progress a little bit slower than if I was doing it on my own, but sometimes that can be a good thing rather than rushing to spend $$$ than might not need to be spent because there is some moderation in decision making.

I'm fully game for tearing up ALL the carpets, but honestly some are probably able to be salvaged with a good carpet extractor.  I'm also game to replace all the appliances except the refrigerator, but again, not all NEED to be replaced.

The fact is that when selling residential real estate we are selling a 'dream' to a buyer.  I look at it as fixing it up to give them the dream place.  Others may temper that and let them make their own dream by not supplying appliances, discounting it as appropriate and the profit is the same either way.


----------



## Melensdad

Well we are making progress.  It took an act of congress to get the utilities turned on but now that we have heat and lights the painting should be done shortly.  

The lovely Mrs_Bob and I got the first coat done upstairs, plus we got the accent wall color painted on the chosen walls that got that treatment.  The ugly mural on the staircase wall, which was hand painted, is now covered with 2 coats of paint and it looks much better now!  We have a couple guys finishing the painting and doing several odd jobs.

Carpet is about 1/2 pulled out.  

Blood??? has been cleaned off the tile.  

We purchased new light fixtures, which are a nice upgrade from the cheap hardware store fixtures.  New faucets for all 3 bathrooms were also picked out and purchased.  

Its all coming together.  Hope to have it done by April 1 and listed for sale.


----------



## BigAl RIP

I was wondering how it was going ?? Thanks for the update . 

  I love fixin old homes but the wife won't let me do diddley anymore . She is a mean old bat !!


----------



## Melensdad

BigAl said:


> I was wondering how it was going ?? Thanks for the update .
> 
> I love fixin old homes but the wife won't let me do diddley anymore . She is a mean old bat !!



My wife wants to do another one ASAP.  So if we find something we'll buy it.  I've already talked to my real estate guy and he said he has a lead on a condo in the same town as where this townhouse is located.  It looks like a short sale opportunity.

Some of the updated light fixtures.  The old fixtures were the 2 for $12 cheap-ass hardware store pallet close out types!  These look a heck of a lot better.  They were modestly priced but look 100x better than the crap that was in there.

Living room and dinette both got coordinating 5 and 3 light chandelier type fixtures that match these shown upstairs.


----------



## Leni

BigAl said:


> I was wondering how it was going ?? Thanks for the update .
> 
> I love fixin old homes but the wife won't let me do diddley anymore . She is a mean old bat !!



Maybe for your own good?


----------



## Melensdad

Hung the last light fixture this morning.  All the light fixtures in the hallways, and main rooms are a rubbed bronze look.  Beats the heck out of the cheap, mis-matched crap that was scattered about the place.  All dis-similar metals/styles.  WTF?

New stainless steel range and microwave were delivered this morning and are installed.  The WRONG dishwasher was delivered this morning . . . and returned.  They will be bringing the correct one ????

Granite counter tops should be installed within a week, and all new carpets get installed on Saturday.


----------



## Melensdad

Granite counter tops installed today.  FINALLY.

About 3 weeks later than I would have hoped.  But they look great.  

Showing is lined up for tomorrow, we have about 20 real estate agents/brokers coming in to see the unit.  We are priced $10K below the market and $19K above what we had originally anticipated.  But with the upgrades we made, and with the asking prices of similar units being $10K higher than we are, we expect to get a fairly quick sale at, or very near, our asking price.

Our original target selling price was $170-$175K.  We are asking $189K and have some upgrades that no other units offer.  Paid $126K, invested under $15K so we should return a gross profit of almost $50K.  I'd still be happy if we sold it at $175 as long as the sale is fairly quick.


----------



## Dargo

I don't know if it's because we had a couple of record setting 6" to 8" rains in one day time frames earlier this spring, but I've passed on 5 houses in a row now because of *major* foundation damage that some buyers may not notice.  IMHO, when you can set a ball bearing on the floor of any room in a house and it immediately rolls towards the same side of the house, I'm out.

For some reason some real estate agents must think that because I have quite a bit of heavy equipment that I'm into jacking up 2 story brick houses that are 4-5" out of level.  From what I'm willing to do, those are simply tear down houses and I devalue the lot by about 10k for the expense of tearing down the house and base my offer on that.  In many cases, they would have to pay me to take the homes!

What is sad is that a LOT of these homes are being sold via some "HomePath" program that allows people who really don't qualify for the mortgage to get a mortgage for those homes.  Those are honestly the worst possible buyers for these homes that need MAJOR repairs.  Some paint, carpet, decorating and appliances is one thing.  Trying to fix a house that has an 8" bow in a basement wall or is way out of level due to a failed foundation is quite another matter.  The one house that was 4-5" out of level sold to some first time buyers for almost 100k!   You just know that's a foreclosure waiting to happen.


----------



## Melensdad

I've just run across 2 of those HomePath offerings.  Looked at one of them, because it was a duplex sitting in a neighborhood surrounded by single family homes.  From what I understand there is no way for a cash buyer to buy one of those things?  Is that true?


----------



## Dargo

Melensdad said:


> I've just run across 2 of those HomePath offerings.  Looked at one of them, because it was a duplex sitting in a neighborhood surrounded by single family homes.  From what I understand there is no way for a cash buyer to buy one of those things?  Is that true?



You can, but you'd either have to wait or put the home in your daughter's name.  In my case, I have a wayward daughter who lives 'with a friend who lives with her grandma'.  I've been looking at some of those homes to purchase, fix, and let her live there with a couple of roommates who would pay me rent.  The standard annual 'gifting' amount would apply, the best I can tell, and any amount over that (on the original purchase price only) would be subject to tax.  I'm at the age where I don't finance anything, have nothing financed and, barring any huge disaster or something, never plan on financing anything again in my life.

Still, I literally "bought" one for my daughter.  Bought her appliances to go in the house once we got a closing date, then waited...waited...waited...and finally one day my daughter told me that some people were "moving into my house!"    I'm yet to get any answer to how that happened.  I got my 'earnest money (clearly bullshit) back, but the house was sold out from under me.  However, after around 2-3 weeks of sitting, those homes are opened up to regular investors if they are not sold.


----------



## Melensdad

Dargo said:


> ... However, after around 2-3 weeks of sitting, those homes are opened up to regular investors if they are not sold.



Ah, OK, then if I just wait a bit it may end up on the market.  

What happens to the price when it goes on the market?  

The duplex I looked at was well under market value and needed a good number of repairs _(replace the missing ceiling!)_], but appeared to be structurally sound.


----------



## Dargo

Melensdad said:


> Ah, OK, then if I just wait a bit it may end up on the market.
> 
> What happens to the price when it goes on the market?
> 
> The duplex I looked at was well under market value and needed a good number of repairs _(replace the missing ceiling!)_], but appeared to be structurally sound.



It should go up for the same asking price. I've learned that some investors will offer more than the asking price if it is a real deal. I thought I'd bought a cute little house with 3 acres only about a half mile from my home for $21K, but apparently some more savvy investors also had put in bids to be offered as soon as it became available on the open market and they all had made offers ABOVE the asking price. I would have gladly paid that for the home but mistakenly thought I'd get it with the first offer of full list. It's a really screwy system, but a guy can really make some money on them once you learn the ropes. Unfortunately, I learned the hard way that most real estate agents don't know how the sale works.


----------



## Melensdad

Ahhhh, so there is a chance.

The duplex in question is sitting at 1/2 its real value.  It clearly needs some work.  But even if the work equals 25% of the value (50% of the cost) it would still yield a very nice return.  

Submitting an offer above the listing price could still yield a decent return if sold or be a very sold buy & hold income producer.


Honestly I don't know this game.  My real estate guy has typically brought me only commercial/industrial properties and I buy/hold/lease those.  We have done a residential flip, but it was all handled by him, I never even saw the property, we split the profit, I simply provided the cash to buy the property.  

But now that the lovely Mrs_Bob wants to get involved in this to make a bit of money, occupy her new found time _(she submitted a resignation to her school effective the end of the school term)_.  So now we need some specific learin' on this aspect of real estate investing/flipping.


----------



## Dargo

After learning to offer what feel I should (and still be able to make a nice profit), I've flipped two homes when they came available and paid over the asking price on each. It's just hard for me to stop thinking that I paid too much, but you never know if you would have submitted the accepted offer if you offered less. As I mentioned, I missed one of he best buys by not knowing the game. 

As you correctly deduced, you just basically have to make your offer based on what you are comfortable paying. I think that is part of the government's selling game; to get as much as possible if it doesn't sell on their HomePath program. Now that I think about it, I probably ought to watch and see if that property by me gets foreclosed. I feel confident the buyers have no means to make the repairs to even make the home livable.


----------

