Five Tips For Finding Your Next Frank Lloyd Wrong Home To Flip (with Video)

Live-in flips are how Mindy and I built the core of our nest egg. The huge advantage of a live-in flip is that unless you’re making loads of money, you don’t have to pay taxes on the gains. As long as you’ve lived and owned the home for 2 of the past 5 years, a married couple can make up to $500,000 in profit and pay NO taxes (the limit is $250,000 for the unmarried). And if you’ve made over $500,000 and have to pay some taxes, I don’t feel bad for you.

However, making money from live-in flipping isn’t nearly as easy as those TV shows may lead you to believe.

• You have to tolerate living in a construction zone: A coating of fresh snow on the trees is beautiful. A coating of fresh drywall dust on all of your worldly possessions is infuriating. Been there, done swore at that.
• You have to find people to do the work or do it yourself: We’re big fans of DIY because here in Colorado, any worthwhile tradesman is already employed and won’t even return your call. If they do, they’ll give you a ridiculous quote. And good luck hiring help from Craigslist. Been there, swore at that.
• You have to find the right deal: This is actually kinda fun. To be successful, focus on a neighborhood and study it intensely. Be ready to pounce on a home once the numbers work. If you can swing it, offer to pay in cash to maximize your chances of sealing the deal. Remember that it’s better to wait a year or longer to find a great deal than to jump into an OK one.

And that last bullet point is what I’ll talk about today.

Five Tips For Finding Your Next Flip

The bad news is that you’ll probably never find the perfect home to flip. The good news is that perfection shouldn’t be your goal. The home we just bought (YouTube tour here) isn’t perfect, but it checks most of the boxes.

If you prefer video, check out the one I made below. If you prefer words, kindly scroll past and read on.

Note that you may also subscribe to our YouTube channel here. We’ll be documenting the entire flip on this channel, releasing a video about every two weeks.

1. Find A Fantastic Floorplan

The first thing we look for in a flip is a good floorplan:

• Ranch: A ranch floorplan (the house is contained to one floor) is very desirable, but you’ll pay a premium for it.
• Two-story: A well laid out two-story minimizes the home footprint, but has stairs which not everyone likes.
• Split level: These were popular 40 years ago but have fallen out of favor.
• Geodesic dome: Don’t, just don’t.

Our next home happens to be a split-level:

We owned one of these once before and swore we’d never buy another one again. I even had a name for the floorplan; Frank Lloyd Wrong (The famous architect would have spit and cursed at the split level). This is probably a conversation I’ve had:

• Mindy: So, do you want to make an offer on that house?
• Me: Hell NO! It’s all Frank Lloyd Wrong!

But, but, but… This one has a nice, open layout with vaulted ceilings that I enjoy. And, I get a good vibe from the home. And just like Limp Bizkit and fanny packs, maybe the split-level will stage a comeback!

Wait, what’s that? Limp Bizkit didn’t come back and fanny packs still look ridiculous? Ummm, ummm….

2. Avoid Unusual Features

Unusual features include urinals (although I wouldn’t mind one), wine rooms, hot tubs, and other adult areas. Our home has a pool:

WTF was that? Sorry. Here is a better picture of the pool:

In Los Angeles, Las Vegas, or Florida, a pool would be a good feature. Not so much in Colorado. However, this problem can be remedied with a jackhammer and a big load of dirt right before we sell. In the meantime, the girls will enjoy the water on hot summer days.

3. The Work: Hire Out Or DIY?

We don’t hire out, so we need to buy homes that have issues we can easily fix. We’re pretty good at:

• Flooring: Setting tile and installing wood floors is a lot of fun.

• Plumbing and electricity: With PVC/ABS, waste lines are easy to run. With PEX, it’s quite simple and fast to install supply lines. Electricity scares some but isn’t difficult. Take your time, study the job, and never work on hot wires. If you’re unsure of anything, consult an expert.
• Custom showers: I used the MMM method to build a custom shower some years ago and it’s held up spectacularly well.

• Decks: Working outside on a nice day while listening to good music is very satisfying.
• Cabinets, vanities, etc.: Easy.

Note the following about my list above:

• $$$$$: All of these jobs cost a lot to hire out. Most of the money is in the labor. I readily hire out for skills like drywall (especially the finishing) and rough framing where the calculus is the opposite.
• Cosmetic issues are excellent: Most don’t want homes with pink toilets or brown tile. Great! I’ll get a deal and then make the home beautiful.

4. Buy In A Neighborhood You Like

The big risk of a live-in flip is that a lot can happen in the time it takes to complete it. We plan on taking somewhere around three years to complete the work on the home we just bought. What will the economy be like in three years? I have no clue. The whole damn thing could implode and home prices may take a hit.

Buy a home in a neighborhood you love in case your flip takes longer than expected or the economy takes a break.

5. Price

And finally, we arrive at the most important consideration, price! Any home (except maybe that geodesic dome) can make a good flip if you can get it for a good price. If half the home is sliding down a mountain, find out how much it costs to get the foundation fixed and set your offering price accordingly. No big deal.

The best way to figure out what a home should cost is to look at sale prices for similar homes in the neighborhood. Comps!

We had been looking at homes in our new neighborhood for about two years and saw three other examples of the model we just purchased:

• $600,000: This one is on the same street, but a smaller floorplan than ours. We have a bonus bedroom and bath. However, this home was in pristine condition and all of the work was very high end.
• $500,000: This one is on a busy road and the interior is just OK.
• $420,000: This one is also on a busy road and needed a load of work. Much of the exterior was rotting and the interior was in need of some major help.

We purchased ours for $365,000 which still surprises us. We had the home inspected by multiple pros and the mechanicals/ foundation are solid. The home needs new windows but is perfectly liveable now. I think we got it for a low price because of the pool and the fact that we’re entering a slow-selling season.

Since our flip is long-term, it’s difficult to predict how much we’ll profit when we sell the home. We estimated that we’ll put about $100,000 into the home to make it comparable to the $600,000 one. At that point, we’ll be in at $465,000. Of course, that doesn’t include the cost of my labor which brings me to a final thought.

Make Sure A Flip Doesn’t Consume You

I was crazy when I embarked on my last flip way back in June of 2013. I put an addition on and gutted most of the original structure. I did this while maintaining a full-time job and raising two children with no family (babysitters!) in the area. It wasn’t a wise decision.

This time, I’m going about the flip a little differently. I’ll only work on it while my girls are in school. And I’ll make time for myself too. No more letting my health and social life go to hell while I swing a hammer non-stop. If it takes me an extra year to complete the work, I won’t lose sleep.

So, my parting advice to you is to enjoy life if you intend to flip a home. Don’t sacrifice sleep or quality of life to meet a monetary goal.

It’s pretty fun to have a lot of money. It’s even more fun to live life well.