Should you buy a house flip or renovate?

house flipKNOW WHAT YOU’RE GETTING INTO

 

When looking at buying your first house or your dream house, picking a house flip or choosing to renovate should be a question you ask yourself.

As a household we’re not generally what you’d call nosy but sometimes going to see an open house can give you great ideas when you see renovations in real life.

This is always an excuse for the wife to put on her shoes and drag me out because she’s seen another house that we must go and see.

I’ll agree with her on some things and not on others. You don’t have to agree with each other on everything, which would be boring.

As a husband, I will take interest in what my wife has for ideas around the house because 99% of the time I will be the one doing the install. Having an interest and input on what can and can’t be done makes dream renovations a bit more realistic.

Looking at interior design magazines can give you great ideas but having a look at other houses and the renovations that have been completed is a good indication what would add value and sometimes what would be good to avoid at all costs.

 

House flip


A recent visit to a house flip earlier this year in our local area was quite an eye-opener especially since it was being sold by real estate agents who were out to make some fast money. The house was renovated top to bottom in less than three months our agent said. She also said she believes they overpriced it by $100,000 and would be shocked if someone bought it.

Guess what? Someone bought it which is not surprising because some people get drawn in by the “new” look of a remodeled house rather than looking deeper behind the scenes. The overall effect was a nice blend of the original house but remodeled to bring it into the 21st century.

The problem was that as we walked round the finishes of the supposedly professional installation became apparent. I’m the kind of guy that can look straight past the decor and on to the more important tasks at hand which is, how was it installed? I’m not afraid to get on my hands and knees or climb into small spaces or look behind furniture to see what’s going on.

The brand new kitchen cabinets didn’t fit together properly and there was gaps everywhere although the kitchen had a nice look to it.

The new front door was rubbing on the frame when you opened and closed it probably because it was no longer square as it was the original frame. The bathroom extractor fan didn’t work because the electrical wasn’t hooked up to it but to fix the electrical you had to remove the brand new ceiling they had just installed. There were brand new pot lights in the lounge/sitting room yet the original ceiling was still present which begs the question, how did you wire them in?

I won’t bore you to tears with all the rest of the problems I found or saw, let’s just say there was more than a few. For me, that house wasn’t worth the money it was advertised for because I knew I would have to correct a multitude of problems and risk finding even more.

Questioning about why someone would want to buy a house like this was answered within a week when it sold. They should prepare themselves for unexpected costs for all the problems that have yet to be discovered.

This led me to wonder if people would rather pay the premium price for a fully renovated house which may include a house flip or buy a house like we did that needed renovations. Either way making sure you know what you are getting into financially and emotionally is important. Not all house flips and renovation jobs are disasters but being able to spot a mess before you go to the bank should be a priority for you.

 

Inside our home



Now our house isn’t falling apart but it has seen better days in the decorating department. Doing your own renovations takes time and this is the only reason I can think of that would deter the average homeowner from buying such a house. I’m a bit of a perfectionist when it comes to renovations, which probably annoys the wife no end until she sees the result.

The house we live in isn’t old, in fact it’s only about 20 years in age but that doesn’t mean it’s fault free. I have found problems in our house from when it was built.

The corrections involved taking up of floors and accessing ceiling spaces. The destruction was minimal compared to a fully renovated house though. Having completed all the necessary fixes before renovations commenced, it now leaves me with nothing to worry about when I come to renovate. 

An apt phrase to use right now would be “The best things come to those who wait” and play true if you can wait to do things in your house. You might not have the money right away but if you budget renovations each month little bit at a time you can finish off updating your house. In our case, we’ve finished paying off our mortgage and can now concentrate on renovations.

Buying a house flip is nothing new, but the amount of bad house flipping is becoming increasingly more apparent. Shows on the television like Holmes on Homes aren’t playing the problem up. There have been instances on the news where houses have become uninhabitable due to bad renovations.

There have been a number of houses in our local area that have had renovations performed on them to varying degrees of success yet continue to sell regardless. Am I being too picky about floor drains higher than the actual level of the floor or live electrical hanging out the ceiling in the basement? Maybe, but why would I want to pay good money for something I’m going to rip out straight away?

The problems don’t have to be mechanical or electrical in nature either. A house close to us had hardwood flooring installed by a flooring company. When it went up for sale we took a sneaky peek. The hardwood floor which apparently cost $4,000 was sealed at the edges where it meets the door frames with clear silicone sealant.

Call me strange, but aren’t you supposed to remove the door trim, lay the flooring and then replace the trim so it covers the edge of the flooring? It leaves you with the dilemma of paying for $4,000’s worth of flooring upgrades that you’re going to throw away.

Some real estate agents may be able to pull the wool over some people’s eyes but not this boy. Don’t just think it’s real estate agents either, for sale by owner is just the same. Sometimes agents and homeowners truly believe the job is well done but if you bend over and take a closer look you might just surprise yourself.

I’m not trying to put you off buying a house flip but if I were you, I’d be doing some research and paying professionals to come in and inspect rather than just relying on a home inspector.

Flipping houses in Canada is different from in the UK, we don’t have home inspectors but you can have a structural survey performed on an old house. Any other inspections can be done by a trades-person in that field.

 

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Photo Credit: Freedigitalphotos.net/khunaspix

 

Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
Mr. CBB
Mr. CBB

Comments

  1. Christine Weadick says:

    The older houses we have had over the years have tended to be “handyman helpers” so we have done a lot over the years with repairs/renovations. We’ve seen some choice ‘work’ too. The current house had to be completely retired the first year as the wiring when we bought was a fire hazard. We had some one come in to switch the fuse box over to breaker and up-grade the service so the inspector form Ontario Hydro was here to look that job over. We showed him a few things around the house and all he said was that he was glad we were redoing all of it. We had a permit for the wiring and it was inspected when we were done….passed too. A lot of people will do things like plumbing and wiring without the permit so you have to question whether it was done to code. Personally I would not bet on it……
    Other than that my main complaint with flips is that when they do the work it’s either all boring neutrals or done to the latest current fad for colours. Which, right now, seems to be a lot of browns and muddy and greyed out tones. Sorry…this girl loves clean clear colours…. Brown doesn’t do anything for me.
    Back when I had considered taking courses in interior design, I still look at the house plans in the paper and look over the flyers and catalogues from the building centers to see what they have. In my mind I plat around with the plans and such and do designs in my head to the point now that I know exactly what I want. I either see what I want or I don’t. If we are doing something here the problem isn’t picking something out …it’s finding what I want at a price I’m willing to pay. And I can wait until I find it….

  2. My aunt just bought a house and I think it’s really a good deal! When she saw it, she immediately paid it because she was afraid that somebody might get it. The house is just 5 years old and the paintings are still very fresh.

  3. We are waiting for our mortgage to be paid off in 4 years and then start saving and doing kitchen and bathroom renos. Congratulations on meeting that milestone! I can’t wait to be able to do this, because the house as it is, is getting on my nerves.
    debt debs recently posted…Worth IT Wednesday! ~ Blog Reader ChoiceMy Profile

  4. That’s the same with new builds as well, they’re just really poorly built. I have to say though, I’m pretty inspired by the house flipping shows on HGTV and would consider doing that in future if it’s still doable.
    Lauren @ Cheapstudents.ca recently posted…Post Grad TransitionMy Profile

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