One house keeps coming back around on my live-in flip list

I've had a list going since January and one house keeps coming back around. 1974 ranch, 1,450 sq ft, three bed one and a half bath, listed at $289k and sitting 60 days. Original kitchen, one bathroom with a soft floor, roof is at end of life per the listing photos (curling shingles, I haven't been up there). Nothing structural that I can see from outside but I'm not qualified to see much.

What I have: $62k saved, W2 income that supports about a $2,100 payment comfortably, and a friend who does tile and would work weekends for cash.

What I think it looks like: buy around $270k with 5% down, roof $14k, kitchen $22k, the bad bathroom $9k, paint and floors maybe $12k. Comps for renovated ranches in the same few streets are $370k to $395k. I'd live in it while doing the work and sell after two years so the gain qualifies for the primary residence exclusion.

What I'm unsure of: whether a 5% down loan even works on a house with a bad roof, and whether I'm fooling myself doing this as a first deal instead of buying something boring and renting it. Also I have no idea what living in a house with one working bathroom for eight months actually feels like.

The decision in front of me is whether to write an offer this week or keep looking through the summer.

3 replies

2jordan_ellis2ActivePRO6

The roof is the part that decides whether you can write the offer at all. Plenty of low down payment programs get twitchy about a roof with little remaining life, and an appraiser can call it out and make the repair a condition of closing. That puts a $14k job on the seller's side of the table before you own it, or it kills the loan. Ask your lender directly what their appraisal review does with end of life roofing, and get the answer in writing since it varies by program and by lender. That one call changes your whole plan more than the kitchen number does.

1luis_carrera Get yours

Your reno total is $57k and your cash is $62k. Take out down payment and closing and you're funding the work out of income month by month, which is fine for a live-in flip and is actually the normal version of it, but it means your timeline isn't eight months, it's however long your paychecks take. Write out the order you'd do the work in and put a dollar figure and a month against each line. When I did that for a house I was circling, the roof and the bathroom ate a full year before anything cosmetic started.

1bmoreno23AB1B

One working bathroom for eight months with a friend doing tile on weekends is going to be more like fourteen months. Not saying don't, just move the number.

One house keeps coming back around on my live-in flip list

3 replies