Flipping Fairfield Series: Vol. 1 "The Search"
You may (or may not) have noticed my long absence, and I have to admit that not only have I taken a fair amount of time off from blogging, I also cut back on client projects until recently. But, I promise there’s good reason for it …we are pregnant with baby number 2!!!! Even though I had to reduce some of my workload (hello 2.5 months of the worst morning sickness I never knew could exist), I persisted in my search for the latest Fairfield Flip. Just a couple months after finalizing the sale of the last property, we had another one under contract.
Here are a few snapshots from the renovation of the last flip:
As of 2 weeks ago, we’ve become the proud owners of what I’m dubbing the “Fairfiled ‘U’ Flip". It’s name derives from the area that it’s located in- the “university” neighborhood in the town of Fairfield, Connecticut- one of the more desirable areas here. By now, we all know that location is definitely something to keep in mind when looking to purchase and quickly sell any piece of real estate. Which brings me to why I’m really writing this post…to lay out a step by step of our flipping process.
Though very entertaining, I feel like the reality tv shows, that so many of us home decor enthusiasts are drawn to, leave out way too much valuable information - and I get it, they only have 30-60 minutes to highlight an entire 3+ month renovation and it still needs to feel “fit for tv.” Yet, this is doing the public a disservice- I’ve had so many people, both locally and on Instagram or Facebook, probe me for the REAL details, and while I’ve tried my best to explain the ins and outs of the process and pass along as much advice as I can, I figured it would be more efficient and more helpful to put it all right here- where it’s always accessible to anyone who’s interested.
I plan to make this a series, adding a new post (or 2) every week until I’ve fully revealed all of my knowledge! And this week, I’ll focus on the search/buying process- or what to have in the back of your mind when looking for the right flip opportunity.
Before your search even begins, be sure to have all of your finances in order, a preapproval letter from the bank or mortgage broker, and a trusted realtor. The realtor needs to be one who you can speak with candidly, and someone who is responsive and willing to dig deep for information when unexpectancies arise. Like any professional relationship, things run smoothly when a good rapport is built- so if you don’t feel like you and the realtor are on the same page, it’s best to find someone else immediately! Our realtor is Andrea Viscuso of Higgins Realty Group- she is top notch and has become a great friend in the process. As soon as you have all of these items in order, your search can commence. Below is the list of everything that I examine when deciding if a home is a good flip:
As I mentioned above, this is at the top of our list of importance. Let’s face it, you can make a house gorgeous, but if it’s not in an area that people are attracted to, don’t buy it for a quick flip. If, however, your plan is to buy and live in it long term or rent it out for many years- more of an investment property- this wouldn’t necessarily apply. But, remember a true flip is one that you’re in and out of in a matter of months (longest a year) and a neighborhood isn’t likely to change that quickly. One popular saying that I like to repeat is “you want to buy the ugliest home on the best block.” Interiors and exteriors can change pretty easily- don’t be discouraged by an ugly duckling- you’re in this to transform it into a swan. Hopefully these before and after photos prove that:
Audience: School districts for families & Commute times for professionals, Etc.
This directly ties into #1 since particular neighborhoods align themselves with specific schools. And if YOU are someone who wants your children in the best schools, then it’s pretty likely that anyone else who will be living in that area will want the same. Also, certain communities, like Fairfield, are suburbs of big urban areas, where many people move to in order to get more space, escape the everyday chaos, but still retain employment in the city. So, if you know this about the town, then it may be important to find a flip home that is close to public transportation (in our case- within minutes of the MetroNorth train station). Now, this is all about keeping your audience in mind. If the town or city is one in which families dwell, all of the above is important, but if it’s a community of retirees, then what you’d consider as important features for the area will be much different- the better your flip home can serve its core audience, the better chance YOU have at selling it quickly for a profit.
Cost/ Value Per Square Foot
This is my husband’s absolute favorite thing to consider when we look over potential homes- he literally talks about it nonstop. I, however, like to remind him that while it is an important factor to keep in mind, it’s not the only thing that determines the value of the home to a new buyer- the quality of workmanship, the design, the layout, the finishes, the overall mood of the home and how much the buyers connect with it can have a major effect in determining how much someone is willing to pay. But, because cost per square foot is definitely not something to ignore (in fact banks will use this number to decide value and how much they’re willing to mortgage a property for), it should be examined carefully. This is how you do that:
Divide the sale price of the home by the total (livable) square feet.
(for example, if you are paying $500K and the home is 2000 square feet, it would be 500,000/2,000 = $250 per sq foot)
Next, pull comps in the area to determine what the average price per square foot is. This can be done through Zillow, Homesnap, Trulia, and your realtor. If you find that most homes have sold in the past year at $200 per square foot, then no matter what you do to improve this house (aside from adding on more square footage to increase its overall size or knocking it down and rebuilding) would make this a good investment because you are already starting out way behind the mark.
Use this number as a negotiating tool and Determine how much you can sell the home for after all the improvements are made, using the above formula. Decide how much money you will spend on those improvements to bring things up to snuff, then calculate how much that is per square foot ( if I know that I will have to spend 100K on improvements and I divide that by the home’s 2,000 sq ft, my improvement cost per sq foot is $50). If you have to spend $50 a sq foot on improvements and other homes are selling for $200 a sq foot, then you will have to buy this house for $150 a sq foot to break even. This doesn’t necessarily include closing and carrying costs, and I promise to get into these numbers, as well as provide a breakdown of exactly how much we spend on improvements, in future posts.
When completing the calculations, you may find you will be able to purchase this home, but I want to hit upon one last point that I strongly believe in before I wrap things up.
Do YOU get a good feeling about it/Your gut instinct
That’s right, I’m putting this out there. It’s one of those things that can’t be taught or analyzed with even a million data sets- it’s simply your gut reaction to the home that you’re considering as a flip. Look, I’m not saying to only use this sentiment and ignore everything else above, but what I would absolutely recommend is that AFTER all of the research and computations are completed, you MUST take your own feelings about the project into account. You’re going to be spending a lot of time planning and designing and managing and later marketing the hell out of this project, and people will notice if your heart isn’t in the home. Contrarily, if you give it your all, that passion and soul will be felt by everyone who walks through, so make sure this is a home you already love long before its transformation.
Here is the newest flip that we bought and I’m telling you, the moment I walked in, I felt like she was the one (Andrea, our realtor, can attest to it) :
That about takes care of things for this week, check back next Tuesday for Volume 2, where I’ll be hitting on the amount of funds you’ll have to set aside for purchasing and improving the home.
I hope you’re enjoying this new series and that I’ve helped answer some questions- please comment or send me an email if there is anything else you’d like me to talk about that is relevant to this post, or if you have anything in mind for future volumes.
As always- Love and Creativity,