I’ve flipped a lot of houses. A LOT. Flipping a house is a phrase that I use meaning buy it, improve it, and sell it for a higher price to make a profit. I’d like to share some stories of how I bought some super saver houses and how I used money creatively to pay for them.
My first house was tiny, old, ugly, but a clean beginning. Here is how I made money on my first house. Price Tag? $6,000.
I bought a house for $6,000. Yes! I didn’t have $6,000. I went to the bank to apply for a mortgage loan and got turned down. Why? The bank did not even offer mortgage loans on houses that were that cheaply priced, that’s why. The house was to inexpensive that it did not even meet the bank’s criteria of a house they would loan money on. So, I borrowed $6,000 from the bank as a personal loan. I didn’t have bad credit; I was only twenty years old, so I didn’t have any credit. I opened a checking account at the bank to establish myself as a customer, and I asked for a personal loan of $6,000. I had a work history since my teen years, working at a small clothing store at the mall, Size 5-7-9 Shop. Since I didn’t fit into those clothes, as I was larger than a size 9, I was able to save money and not be tempted to spend all that I had earned on fancy new clothes purchases. First step: SAVE MONEY. Something. Anything. Start saving. Stop spending.
Let’s go back in time to 1989. I was twenty years old and in search of my first house. I looked for SOLID structure. This means that the house must have a roof that isn’t leaking, a foundation that isn’t bowing or caving in, and is structurally sound. I looked for a working furnace. I was not picky about decorations, colors, style. I also looked for a safe location.
I found a for sale by owner house in a small town of about 500 people. It was a safe town, had a post office, a tiny mom and pop grocery store, good roads, a volunteer fire department… and that’s about it. The house was right next door to the fire department. Upside? Response time in case of fire. Downside? Siren sometimes blared in the middle of the night. I could deal with that. This was in small, rural Ohio.
The house was owned by an elderly man who was selling it for his deceased elderly mother. It did not bother me if she had passed away in the house or not. To be honest, I did not ask. Some home buyers are stigmatized by the thought of buying a property in which someone has passed away in a violent or tragic manner in a home. This, however, in this case, did not concern me, since there was no violent news story or stigma attached to the house.
The house was a small white frame house built in about 1910. It had no indoor bathroom (we’ll get to that adventure). The living room walls were covered in wallpaper, orange flowers as big as pumpkins. The living room carpet was a dusty-grey floral center rug that was smaller than the perimeter of the room and glued down to the linoleum beneath. UGLY! However, the walls were straight, the floor was straight and strong. It consisted of three small bedrooms (without any closets), and one had to walk through one of the bedrooms to get to the other, known as a captive bedroom. It had a large enough kitchen with nice pine cabinets, no appliances. A deal at $6,000! I bought it.
Here is the way to make money on houses. LIVE IN THEM. Then sell them. The key? LIVE IN THEM. When you sell them, you recoup your investment. You have then lived for free with free shelter. (Also, later when you apply for mortgage loans for houses, you get a better rate if you live in them, and you don’t pay capital gains taxes on the profits when you sell them if the home was your residence.) LIVE IN THEM.
So, I moved into an ugly little house with pumpkin flowers on the walls and no indoor bathroom. It had an outhouse. No, I didn’t use it. First order of business: install a toilet and convert one of the three bedrooms to a bathroom.
Shopping for bathroom fixtures was not done at retail stores. That’s expensive! Free, perfectly working fixtures are taken out of houses and discarded every day to make room for fancy new. People will throw away many items that are re-usable and recyclable. Even toilets. I went to a plumbing salvage store in search of a free or very cheap toilet. What I found was an amazing discarded garden-styled bathtub! I bought the bathrub for $50 and I scored a free toilet that I cleaned with Clorox. I bought a new toilet seat. Cost? A $50 luxury bathtub, a few bucks for a new plastic toilet seat and a dollar-bottle of Clorox. We ran a plumbing line from the under the bathroom floor, dug it through the yard, and into the public sewer. We ran plumbing lines from the kitchen to the bathroom. In two days, I had a luxurious bath tub, hot bubble baths, and a functional and clean toilet. I also found a free bathroom vanity, cleaned it up and painted it white, and added a washing machine and drier to the bathroom. The old third bedroom was then successfully converted to a functional, clean and inviting bathroom, with laundry.
Over time, I removed the pumpkin flower wallpaper, found cheap and clean appliances for the kitchen, and added some new carpeting, remnants from a carpet store, for $70 total to carpet the entire house. CLEANING can make any house look better. Soap, water, and scrubbing. Dirt and grime removed, being neat and organized, and maintaining your surroundings with daily cleaning keeps a house in order.
I lived in this house for two years, keeping it clean and tidy. I sold it for $14,500, word of mouth, without a realtor. Today, one can use social media for free to sell their own home via word of mouth. I made a profit of about $8,000 on the house, considering that I had some small costs to plumb a bathroom where a bedroom once was.
Fast forward. By now age twenty-two, within only two years, I had:
- Established credit
- Bought and sold a house
- Learned where to obtain free or cheap bathroom fixtures and new carpeting
- Learned the value of hard work
- Lived in my own house for free and avoided paying any rent
- Walked away with $8,000 cash in my pocket to embark on my next house flipping adventure!
Stay tuned for more posts of my adventures of where I lived next and how I made a profit! ….