Play by Play: An Accidental House Flip
This series gives you a glimpse into what real people experience when dealing with real estate. In this installment, we'll hear from Shawn Sinclair, who unexpectendly found himself the owner of a historic Victorian home, which needed some major TLC--to say the least. Do you have a real estate story to share? Email us!
How to Flip a House. By Accident.
Did I ever think I'd be buying a house in Bowling Green, Kentucky? Not in the slightest. My ex-wife and I were professional disc golfers when we bought it, and we spent all year on the road touring the country in a van, so the last thing we needed was a big home renovation project.
But we had some friends in Bowling Green that we would stay with every year for a big tournament. They lived in a beautiful old Victorian and they were always telling us we should buy one of the ones on the block that were for sale. So to shut them up we agreed to just go look. When we found this house, it was so cheap that it seemed stupid not to buy it. I mean, our mortgage for a 4,600 square foot house was going to be way cheaper than any apartment we could rent nearby.
So we decided to buy it.
Getting the loan
I was a professional disc golfer with no W2s or verification of income.
It was 2004, during the subprime lending and I was a professional disc golfer with no W2s or verification of income. We went on lendingtree.com and within 15 minutes we had three offers. We choose a 5/1 ARM with about 4 percent interest, and in 30 days we closed with no lawyers or anything. It's crazy how easy it was. Flash forward five years when we decided to buy a second, turnkey house to live in while we finished the Victorian. At that time we owned our own company and were making really good money, but we were only giving ourselves employee salaries of about $30,000. We were the perfect candidates, no debt, over 800 credit score, and a successful company. But since we had those small official incomes, we had to have one of our parents cosign with us to buy our second home.
Renovating an old home was not as simple as we thought
When we actually started the renovations, we thought it'd be easy. The house was broken up into 10 apartments and had three kitchens. So we thought we'd tear out a couple of kitchens, rip up the carpet to expose the hardwoods, fix some drywall, and then we'd be done. But as we got into it, we realized we had to redo everything. We had to choose between having very little time to work on the house and spending our time making an income or neglecting our business and spending all our time on our house. That's why it's 11 and a half years later and it's still not finished.
Plans change
Our original plan was to do the entire house, but plans change. My wife and I got divorced, and between everything that was going on with that, I didn't have the money to finish it the way I wanted. So, I planned on making the downstairs beautiful and turnkey. It's 2,400 square feet down there with bedrooms, bathrooms, and a kitchen, so it's completely livable just on the bottom floor. Upstairs there are four bedrooms and two bathrooms. I did all the electrical, plumbing, foam insulation, and drywall up there, but I didn't completely finish the space. I knocked about $80,000 off the price to compensate for the fact that the upstairs wasn't done and put it on the market. I had a lot of people come look and they loved it, but when they saw the upstairs they kind of freaked out about how much work it would be.
Taking a risk to increase the value of my investment
I ended up taking all my retirement savings to put in the house, which sounds crazy.
I knew I needed a new plan, so I took it off the market and went to go talk to my financial advisor. I ended up taking all my retirement savings to put in the house, which sounds crazy. But by doing that, I can double my money when I sell, so even the advisor said "heck, yeah, anyone would be crazy not to." The upstairs is almost completely done now. I just have some small things to finish on it, like the molding on the baseboards, doors, and windows, painting, and doing the light fixtures. In the end, I basically ended up just building a new house--that's how much work needed to be done.
A learning curve
Going into this project I had some knowledge of construction, just because my dad worked for a construction company and built our childhood home, so I grew up around it. But the biggest thing was I wasn't afraid to try stuff. What I didn't know I read in books, watched videos, or asked questions--and I wasn't afraid to fail. A lot of my motivation was that hiring people was so expensive that I wouldn't make any money if I went that route. And when I did hire people, it was just so hard to find people who did quality work. For example, I hired an electrician to do the electrical from the street to the house. Afterwards, I learned a lot about electrical work and realized he did such a bad job that I had to redo it all myself. When the inspector came out for a different project, he said he had no idea how that first panel had ever even passed inspection. It was that bad.
Looking back now that I'm almost done, I wish we had gone in with a plan. I wish we had lived on one floor and finished the other, or not tried to live in the house at all. But instead we just went in there and started knocking down walls. We were always putting up plastic and trying to keep dust and dirt out of our kitchen and living space.