I’ve always loved (and was kind of addicted to) the HGTV shows about flipping houses. I was also always amazed about the insane amount of money some of these small homes cost and were then sold for.
I was talking to a friend the other day and explaining to him my fascination with real estate and how little houses cost around here. He lived in a much bigger city where a tiny apartment would go for about $220,000.
But here in southern, small town Ohio that’s just not the case. Foreclosures around here start as low as $15,000. And, that’s for homes that average around 1,100 square feet. I’ve viewed several of these homes and have successfully flipped one in the past. These houses do need work but they are houses that you can purchase for around $20,000, put $5,000 worth of work in, and then turn around and sell for around $40,000.
The Low Cost of Houses
Just in case anyone is doubting me about home prices in my area I wanted to show you some proof. Here is a house that I wanted to look at but that sold right before I had the chance! This house just sold for $29,000.
The sales record hasn’t been updated yet to reflect the last sale. When the property was first listed they had it listed at $49,900. They consistently lowered this home each month until it reached $29,000 and then someone scooped it up – fast.
Here’s what this house was all about:
- 4 Bedrooms
- 1 1/2 Bathrooms
- 2,125 Sq. Ft.
- Wood Deck
- Full Basement
- New Roof
- Black Top Driveway
- Decent Neighborhood
So, what were the issues with this particular home? All Cosmetic – wood paneling, scuffed up floors, really ugly kitchen, 1970’s carpet. This was, in my opinion, the perfect flip house.
This was on the nicer end of foreclosures in my area. But it was also on the higher end of my desired price range.
Here’s another house for $19,900 I plan on looking at.
My House Flipping Strategy
My house flipping team consists of a very good family friend who is also a real estate agent and my go to guy. He tells me straight up like it is even when I don’t ask for his advice. (Thank God!)
I am lucky that I have a completely honest friend to give me his advice when I start to get impatient and act a bit childlike!
It’s his advice that I follow. I followed it the last time that I flipped a house and I count on his advice now. So here’s pretty much the entire strategy of flipping a house in a small town.
Around income tax time home sales in the area see a significant rise. This is because a ton of people are getting large income tax refunds and that is the only way they have enough money for a small down payment on a home.
Homes in the $40,000 – $50,000 range start selling a lot. Which is why you want to be one of those sellers with a nice, move in ready home in that price range.
Here’s the strategy:
- Buy a home in the early winter for around $20k – $30k
- Home should only need cosmetic repairs: Total repair budget around $5k
- Make the house move in ready. Paint, new floors, etc.
- List the home for around $40k-$50k right before everyone starts getting income tax refund checks
- Watch the offers roll in
We all know that strategy is for perfect circumstances. Quite frankly, when buying a foreclosure you really never know what you’re getting into. Even home inspectors can miss something.
But the good thing is when you’re spending such a small amount on a house you can produce positive cash flow by renting the home if you’re unable to sell. Then in a year or so you could try to sell again.
That’s my small town house flipping strategy.
What do you think?