Flip Properties as Retirement Hobby/Job?

[LoneRanger]

I hope to retire after 32 yrs in my job, on or about January 2021. I will get a defined benefits pension. Kicking around open ended ways to supplement that. I have a significant amount of savings which I could tap into to buy some properties. Not interested in being a landlord, too much hassle these days with dead beat tenants and damage, etc. However, I am currently in the process of flipping a small condo locally in town which I'd bought in 2015 for son and daughter-in-law to stay in for a year as tenants while they get their ducks in a row. Well 1 yr turned into 4 and they've finally moved out and bought a house. However, as the saying goes, "No good deed goes unpunished" they left the condo in extremely dirty condition and with some damage. Pretty much as if it'd been standard issue non-family tenants living there who didn't give a hoot. I realize it was a mistake now but at the time I wanted to help out since his mother had (at that time) killed herself a couple yrs before and it'd been a tough time for all.

So as they say, I've now chosen to make lemons into lemonade of the situation and instead of brooding about the disrespect of my generosity providing a rent free place to live for 4 yrs to them and they more or less trash it, I'm instead looking at it as a Property Flip training event. I'm friends with a Realtor who's a top producer w/ 15 yrs experience and has a ton of contractor contacts for rehabbing properties in all sorts of conditions. I've done some light work in it myself but contracted out complete re-paint, new flooring for approx 2/3 of the floor space (tile & grout in remaining 1/3 cleaned up good). Bought it for 76K cash in 2015 (was listed @ 85) and Realtor is pricing 109K for this week's listing, and selling on a reduced commission. New stainless appliances and a new high efficiency heat pump in combo with the other work and I have put about 10K into it to bring it into Like New condition inside. And being a condo the outside is covered by the Association.

it was never about making a big profit on it in the first place but it has fallen into place a small low end flip, and to be honest it's not been too bad, just time consuming getting the painting done as it was a guy I work with who moonlights painting who hooked me up cost wise but trade off was slow completion. Worth the wait for the discount plus the finished work looks good including numerous drywall repairs.

So long story short, it's made me start kicking around the concept of flipping properties for retirement income supplementation. The real estate market here is cheap always has been compared to other areas of the nation, as a yardstick consider that this condo is 1050 sq ft two br two full bath eat-in kitchen but spacious living room with four parking spaces (yes four but non-enclosed parking), and consider that 109K is what the Realtor came up with given recent comparisons and the new paint, carpet, appliances, hvac. Elsewhere in the nation likely be higher valuation. But because you can buy cheap here, flipping might be a workable income supplement. I have to think about it.

 

[dadto2]

It sounds like fun, but do your research on the properties before you buy them... My father is a pretty new snowbird, so he needed a hobby in FL for the winter. He is VERY busy here in the summer, but hadn't yet created a routine down there.

Three years ago he bought a hurricane damaged house from his wife's friend. The HOA hired a firm to gut the houses in the development. Dad bought the gutted house, spent the winter rehabing it. Had it ready for sale by April when he returned to NY.

Found a buyer, but she couldn't get a mortgage due to roof damage. Dad isn't allowed to touch the rood, the HOA needs to do it. The HOA has that house way down on the list, so the roofing company is going to get to it eventually... Meanwhile, the potential buyer is renting with the intent to eventually buy.

Then the HOA refuses to pay the company who gutted the properties, over some dispute with the bill. That company sues the HOA and all the homeowners, so the buyer backs out after a year of renting.

I think it's resolved now, but all Dad wanted was a hobby for 5 months, and wound up with a couple years of headache.

 

[demarpaint]

As long as you don't get caught in a real estate marked meltdown it could be lucrative.

 

[BMWTurboDzl]

I wouldn't unless you can perform a lot of work yourself. My own anecdotal experience is that when it comes to the Midwest, those who live in college towns do fairly well buying up property to rent out to students (Parents almost always co-sign the lease) rather than flipping foreclosed REO.

 

[csandste]

I have two rental properties. I am inundated by "I want to buy your house" postcards-- especially for the stand alone property. I always assumed that there were tons of potential flippers who attended $$$ workshops and were fighting over a very limited amount of flippable property. I have a very naive stepson who is always getting asked to attend programs on this subject and I told him to stay away. Am I overly cynical?

 

[Mr Nice]

Be careful. Not as easy as some think it is.

Lots of 'HGTV and Flip This House' shows make it look like its easy money.

 

[SubieRubyRoo]

My brother and his wife started flipping houses about two years ago. She's a real estate agent and works with a guy who sells about $300M of real estate a year around Richmond VA, so they are very choosy about what they get into. They only buy foreclosures in areas where the market & comps significantly exceeds the purchase price, and they only flip one house at a time to minimize their exposure to market fallout. They're basically around 4-6 flips per year since they both have day jobs, and usually fully redo the kitchen and master bath, along with a full paint job and replacing worn carpet, and some minor projects to make sure the house is more in line with slightly higher priced comps. They've got one guy who works full-time for them, and contract out some landscaping and stuff. They've been averaging about $95k cleared after the sale and all the labor covered, so it's quite worthwhile for 2-2.5 months of work on top of their day job incomes. Around once a month I get angry because my brother sends me pics of the beach on Grand Cayman, or the Virgin Islands, or some other Caribbean island for a weekend getaway. Good for them though!

 

[JeffKeryk]

The overall market has been on a tear since 2008.
Everybody has been making money.
If you do continue investing in the flip market, please remember to "take some $$ off the table".
Or you will get hurt, sooner or later.

 

[krismoriah72]

If i was going to do that..i would probably want to be my own realtor.. what is their take? Why do you need a realtor? Facebook would seem to be easier to buy/sell than a Realtor listing i would think?

I would probably diversify and at least have one or so business rental locations.

You probably want to find a decent inspector as well.. or become one yourself. They can save you alot of heartache on unknown problems/code violations.

 

[Jimzz]

I flipped a house and can tell you its a lot of risk, hard work, and if the market/area turns you could lose money. We did well as I do a lot of the work myself but also we got the house cheap enough.

Some areas are better than others and you need to do a fair amount of research and also best if you can do at least some of the work yourself. I did all the plumbing and electrical for example.

 

[Fawteen]

Your local market will dictate the viability of flipping properties and making a profit. In some markets it can be very lucrative if you know what you're doing. Trying to do it as a "retirement hobby" is a really bad idea.

You really need to understand all the costs associated with a property. Not only do you have the costs of renovation, but there are significant holding costs involved. Insurance is significantly more expensive, you'll have real estate commissions on both ends, and there are still electric, gas and water bills that have to be paid while the property is under renovation. There is also the cost of having your money tied up during the renovation-with markets generating high returns in many cases it doesn't make sense to tie up your money for several months.

There are also always additional expenses when doing a quality renovation. You'll find issues inside walls, diy electrical problems (and in some areas knob and tube wiring). In many areas insurance companies won't even insure a property if there is knob and tube, even if it's not active. Plumbing can be a real problem in older homes, especially if there has been a lot of diy work. And once you start working on a property, when it comes time for code/permit inspections they can force to to make repairs that aren't part of your original scope of work. For example, if a plumbing inspector comes in to look at the plumbing before you button it up, and he sees a structural issue, you'll be fixing that even though it has nothing to do with the plumbing.

 

[Kestas]

Have you considered you'd have to pay a realtor to sell a house? This would cut deeply into any profit. The flippers I know have a realtor in the family.

Unless you're in a hot area. I have a condo in Florida where it would sell simply by word of mouth. It's been this way here for 30 years.

 

[Wolf359]

Originally Posted by Kestas
Have you considered you'd have to pay a realtor to sell a house? This would cut deeply into any profit. The flippers I know have a realtor in the family.

Unless you're in a hot area. I have a condo in Florida where it would sell simply by word of mouth. It's been this way here for 30 years.


Depends on the commissions in the area. If he's talking about a 109k house, even at 6%, you're talking about $6.5k, but usually the broker has to split that with another party so even if you're your own realtor, you'd only save about 3%. For me, it's probably a little over 1k for me to maintain my real estate broker license and be a realtor. I think annual realtor fees are a little over $500 a year, license good for 2 years is under $200 and then continuing ed is actually pretty cheap now, used to be over $100 but now some online places are under $50. Then there's local MLS fees which are under $400 a year. So as long as you do at least one sale a year, you probably break even considering all the time you will need to put in to maintain the license. Oh and when you're a realtor, you don't keep the full commission unless you get a broker license. If you have to split it with a firm, traditional splits are 50/50 so you only get 1/4 of that 6.5k. Some places go up to 70-90% but some of those have fees to make up for the higher split.

Being a realtor is probably an easier retirement job, you can do it up to 70+ in age.

 

[Wolf359]

I never got into flipping because the numbers didn't work and when I got in the business, I saw lots of brokers selling their own property who took a bath when the market went down. Been easier just being a landlord. Housing prices go up and down but the rents don't really go down. For me, the biggest indicator whether someone was going to be a good tenant or not was what they had in their bank account. Those that had 10K or more were good, the ones who could barely scrape the money together to move in were sometimes shaky. Even those with good credit ratings but no money weren't always good, at least they didn't trash the place, but they also tended to move more often and more turnover meant more money on cleanups of the property.

All those flip shows don't show tax consequences and holding costs. A few months with no income and mortgage payments. Plus when you sell, it's short term capital gains so that might boost up your income tax bracket, then add that to state income tax, you could be paying 30% or more of your profits in income tax. Most profitable way to flip would be to live in the property for 2 years so there's no capital gains and then keep moving every two years, or at least until they change the laws which they threaten to do, but still haven't done yet.

 

[Andrew1972]

If you have cash in hand to buy them cash try it out and go for it. If any mortgage is involved on personal residence or flips a highly risky hobby/job.

That advice is coming from flippers I know who got burned and did well also. The flips that actually make money are typically difficult to finance and are picked up at auction.

The only pause in your limited post is you learned handing something free to someone does not work. You are very good hearted which does not work well in the business world of flips.

 

[Kestas]

Another thought... Flipping houses is a way for contractors to even out their work when there are slow periods. Some auto repair shops are like that too. Every once in a while you'll see a number of cars for sale in front of these shops.

 

[Win]

You have $86K in it, and after four years might realize $16-17K profit, out of which you will lose whatever the current long term gain on real estate tax, is..

Just rent it out. You could have saved the $10K you spent on the new appliances, etc..

 

[skyactiv]

Your not retired if your still working.
Ever meet a door great at a store or the old guy working at a golf course who thinks he's retired because he retired from GM.....? Yes, you worked at blah blah for XX years and now your working here at 70 years old on the weekends and you call yourself retired?

 

[Imp4]

Originally Posted by skyactiv
Your not retired if your still working.
Ever meet a door great at a store or the old guy working at a golf course who thinks he's retired because he retired from GM.....? Yes, you worked at blah blah for XX years and now your working here at 70 years old on the weekends and you call yourself retired?

Right, but if he feels retired then he is retired.
His beer money side gig may be an absolute hoot in his eyes.
He makes his reality, not you.
The fact that you don't think he is retired is completely immaterial and irrelevant.

 

[Wolf359]

Originally Posted by skyactiv
Your not retired if your still working.
Ever meet a door great at a store or the old guy working at a golf course who thinks he's retired because he retired from GM.....? Yes, you worked at blah blah for XX years and now your working here at 70 years old on the weekends and you call yourself retired?


Maybe more accurate to call it a post retirement gig.

Some people don't like to retire. I remember my dentist in his late 70s who still worked part time. He used to say he didn't want to retire because all the dentist he knew died soon afterwards so his method to avoid death after retirement was not to retire. He did eventually retire from dentistry but he was still a landlord til he died.