18 Months Later - Same 'Ole Shady Shit
About a year and a half ago, I paused operations at House Partners, my house-flipping company, because I needed to focus on other business.
With the other stuff mostly under control, we resumed operations this past weekend.
In this business, the name of the game is finding the houses.
Not just any house, but one we can buy at a price that allows us to renovate it, sell it, and earn a profit.
Finding houses to look at is easy.
We advertise that we buy for cash, and the phone starts ringing immediately.
Most of the calls, though, are for a house that won't work for us.
Like a miner, we dig through mountains of "dirt" to find the one nugget of "gold" - that being a house & seller that fits our criteria.
Occasionally, we'll find a great house that looks good.
We talk to the owner - they understand what we do and how we work and are eager to sell to us.
We check out the house - it needs a ton of work, but that's no problem.
We crunch our numbers, determine our costs & projected sales price, and calculate the highest offer we can make.
It's a fair price (because if we can't make a fair offer, we don't make an offer at all).
We present the offer to the owner.
Everything looks good.
And then they say, "Sorry, but so-and-so has offered me 50% more!"
Damn.
That's a bummer.
Not for me, but for the future owner.
When someone is paying 50% more than us, I can guarantee the renovation work is going to be shit.
As I crank the operation back up, I'm looking at some of the houses we'd tried to buy a while back.
On one in particular, we'd made an offer of $75,000.
It needed everything: major structural work, windows, doors, roof, and all interior trim.
Our offer was rejected; someone else was paying $125,000.
The house was back on the market 36 days after they bought it, listed for $250,000.
It sold within a week.
Good for the seller, I guess. That's a hell of a profit.
But for the buyer, well, they have a shit show. Because despite being advertised as a "complete renovation," this house was little more than "lipstick on a pig."
There's no way under the sun it could have been adequately renovated in 30 days.
Not one permit was pulled.
Not one inspection took place.
All that happened was replacing the things you could see and covering up the things you couldn't see.
I drove past the house yesterday, and the defects are already visible.
I feel bad for the new owner.
House Partners would make a lot more money if we were willing to do this way.
But that's not our style.
It may take us a little longer, cost us a little more, and we might get outbid more often than we'd like.
But if we can't turn a reasonable profit while turning out a nice house without a bunch of hidden defects, then we're just not interested in buying it in the first place.