Feedback on Flipping Houses for Profit

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Fixing up and flipping houses can be a profitable activity if you do it right, both by minimizing your expenses and delivering maximum value to future buyers.

Everyone loves a success story, and the article “Flipping Houses for Profit” by Mrs. W.G. McCusker made good reading. I’m sure we’re all delighted
that the couple were fortunate enough to obtain a $16,000
home in bad shape, fix it up and sell it two months later
for $21,950. Readers who follow the McCuskers’ advice
exactly, however, may not be so lucky.

First, Mr. and Mrs. McCusker were willing to accept
friendly advice from a real estate agent, from a tool
rental firm, and from almost everyone else, but they
didn’t trust the banker. Yet banks, too, are there to make
money, and generally find they can make more if they give
good service and win friends.

I suspect that the couple might have saved expenses if they
had explained their idea to a banker and found out whether
they actually needed to set up a mortgage at all. Some sort
of short-term note might well have lowered the closing cost
and spared them the other fees normally involved in
arranging a long-term agreement.

Also, substantial penalties are sometimes required when a
mortgage is closed out extremely early or excess payments
are made on it quickly. These charges are designed to cover
the costs which the bank incurred in setting up the
unnecessary mortgage.

Another point: My own feeling is that the McCuskers wasted
a lot of travel time by living elsewhere. It would have
been simpler to stay in their new house–in sleeping
bags in the spare room or something–to avoid the
additional cost of renting an apartment. Not only that but
fire insurance and some form of homeowners’ liability
insurance (necessary to satisfy the banker) are often
considerably more costly for an unoccupied dwelling.

Remember, too, that an empty house–no matter how
secure it is–quickly becomes a target for vandals.
Youngsters in a neighborhood know when a building is unused, and one or two small children armed with a brick and
a box of crayons could have done substantial damage to the
McCuskers’ face lift.

Speaking of face lift, I see no indication in the article
that Bill and his wife obtained a building permit for any
of their remodeling, especially the putting up of
partitions in the basement. Local building codes may ban or
limit this in some way because cellar rooms have little
access to the exterior and an occupant may be trapped in
case of fire. Therefore, it’s always smart to contact the
city, village, township or county building department at
the outset, get a permit and find out what you can and
can’t do. My own personal experience is that building
inspectors are pretty good guys and will spend hours
filling you in on things you need to know to do the job
properly and safely.

Finally–though Mrs. McCusker didn’t mention any
electrical work–might as well cover that too. The
electrical inspector will usually let the homeowner do
whatever kind of wiring he wants to in his own residence,
because he himself lives in it and takes the risk of any
hazardous connections. If you’re fixing up a place where
you don’t live, however, the official is apt to insist that
you have a licensed electrician do the work.

I hope these suggestions will be considered by anyone who
wants to repair an older home, as the McCuskers did.

— Craig Wilson, director of the Akron Beacon
Journal “Action Line.”

I want to comment on Mrs. W.G. McCusker’s article on
renovating a house for resale because of a
disappointing experience I had looking for a home in
Baltimore (I’m still looking).

I found an older house in a good, convenient location, with
plenty of room, a good floor plan and a large yard.
Unfortunately, the owner had bought it a year before with
the sole intention of making some superficial cosmetic
“improvements” and reselling it for a profit. He never
lived in the place himself, and his work showed it: He
consistently used materials and workmanship which I’m sure
he would not have used in his own home, but would
cheerfully inflict on someone else for a quick profit.

The prospective seller had even–as Mrs. McCusker
advises–covered a solid oak plank floor with cheap
carpeting. (“City set” notwithstanding, I have never met
anyone who preferred carpet to good oak.) The interior was
finished in contractor-grade, bargain-basement materials
from top to bottom, and painted in nice “neutral colors” to
give it all the personality of a loaf of commercial white
bread. The final insult was an outrageous price. What would
have been an almost perfect house for my wife and I to make
over for ourselves had been effectively ruined by the
owner’s remodeling for profit rather than for living.

I believe the McCuskers were more conscientious and
industrious than the owner I met, but they were working on
the same principle: the most obvious cosmetic face lift
with the least expenditure of money and effort, and the
intentional depersonalization of a home to appeal to a
market rather than an individual family.

The idea can still be a good one, but consider making
changes in substance rather than facade. A careful buyer
will appreciate a sound roof or heating system more than a
barrage of cheap paneling or neutral-color paint

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