Indianapolis Flip - What I've Learned
So you've got some tools and an eye for design, and you want to put your skills to the test in one of real estate's hottest trends: flipping houses. There's a lot of information out there to help get you started, from self-help books to podcasts to major network television shows. There are even extensive, expensive training programs, some online and some in person, that promise to educate you on every detail of the process. Add to that all of those trendy top-five articles with clickbait titles—such as "Top Five Must-Haves for Flipping Houses" or "Five Mistakes That Make House Flipping a Flop"—which are difficult to ignore during your research stage, but rarely contain actual helpful advice that you haven't read elsewhere (or know from common sense). It's easy to get discouraged, to feel like you're missing out on the one big secret to flipping houses effectively.
Where does one even begin?
This book is a little bit different. This is not a detailed step-by-step of how to flip a house, diving deep into the trivial details of the real estate market that may or may not apply to your situation. This is also not merely a motivational tool intended to cheer you along and keep you on task.
This is just the real story of one woman (a do-it-yourselfer looking for a challenge), one benevolent investor (with decades of real estate know-how), and one aging house in an up-and-coming area (with plenty of potential charm waiting within the woodwork—literally). Thanks to a little bit of luck and lot of hard work, only three months passed between closings. The final product sold within two hours of hitting the market for $20,000 over the asking price.
This offers no guarantee and no specific template; it only demonstrates that such a success is possible, regardless of the market—and may lend you some ideas for how you can do the same.
If you're an individual who enjoys improving your own home and wants to flip a house or two to see if you enjoy it (and can make money doing it), then this is the book for you. Laurie Layton is not a real estate agent; she is not a contractor or handyman; she's not even an interior designer. But she has made her own home a beautiful space, thanks to do-it-yourself websites, some personal creativity, and a lot of grit. She teamed up with real estate broker Mike Woods to track down the perfect property, establish a plan of attack, and then carry out her renovations with a small collection of helpers (and some contractors as needed). This is their story, and this is their advice on how you can get started on your own profit-worthy rehab project.
Chapter One: Finding an Investor and Building the Bank
The market is always changing, so you need to stay on your toes. Start with Google or wherever else you get your news, but skip past the flashy articles on house flipping—you can usually do this by weeding out clever titles full of puns, amusing as they may be. House flipping is a popular topic that's easy to write about and pulls in readers, even readers who have no serious interest in the business. You need to wade through the chaff and ground yourself in more specifics first.
Stay small and local. Look up the current real estate market trends in your city or area. This is mostly just so you can be aware and appear knowledgeable when it comes time to approach investors. In a buyers' market, you might be able to snag an old house at a ridiculously cheap rate—and by the time you're done renovating, the market may have had a chance to shift back so you can sell big. But if it's a sellers' market, that can be good, too. That means a lot of people are moving to your area and might be interested in your flip. You need to know what kind of market you're entering before you begin approaching investors.
Don't get discouraged by clickbait articles that claim to know the best places in the country to flip houses. While the math and research behind them is often sound, they don't show the whole picture. Pittsburgh, for instance, may generally offer one of the best ROIs for home renovation, but this means nothing if you don't live close to the city, or if you are unfamiliar with its various neighborhoods. And if you're planning to carry out most of the renovations yourself, you need to factor in the time and gas money it takes to travel to the house on a regular basis.
There are no Lauries or Mikes in these articles, or in the big books on getting your own rehab business off the ground and running. What will help you most is your unique knowledge of your area, your own personal taste and expertise, and your willingness to seek out help when you need it (again, Google will come in handy here).
Laurie has known Mike Woods and his family for many years, having worked for his real estate company in the past. The two already had an established trust and respect for one another before embarking on this project, which proved invaluable to the renovation process. Once they found the property together (see ch. 2), Mike took full ownership of the house. This is a risk that not every investor is willing to take, but will allow a lot more freedom and peace of mind for your project.
Not everyone, of course, has worked for a wealthy real estate broker. But everyone has known doctors, lawyers, and other potential investors. Because house flipping is such a popular phenomenon, people know a lot about it—but never quite as much as they would like to, given the sheer volume of information available to anyone who tries to break into the field. Everyone has caught an episode of Flip or Flop or read an article on the subject, and just about everyone has an opinion about it, as well as their own ideas for how they might carry out a flip.
You just need to get them talking. Bring it up in conversation at your next social or networking event and see who takes the bait. "I'd love to get into house flipping, but I'd have no idea where to begin," a colleague might tell you. You can respond with, "I would love to be in charge of the planning and execution, I just don't have the bank to get the project off the ground." It never hurts to ask!
Also, pay attention to the stock market in general, even if this isn't your area of expertise. When the stock market is down, investors begin looking for sturdier, more stable ways to get returns on their money. A brick and mortar house that has already stood for fifty to a hundred years is a solid place to start. And your potential investor need not be wealthy; he or she can put up their own home (or other large holdings) as collateral. There will always be some risk involved, hence the recommendation to team up with someone you already have a professional working relationship with. You also might not want to rely on your own finances or those of family and close friends; if something goes wrong at some point in the process, if something happens to the house itself or the market takes a dip, it could have a negative effect on your future prosperity and your close relationships. No house or potential profit is worth that.
When you sit down with your investor to work out an official budget, always plan for 10-15% more than you think you need—and possibly a few extra weeks of work as well. You never know what's waiting under the floorboards or behind the dining room wall. Last-second changes can lead to big expenses, and it's best to be prepared. Be sure to factor in the costs of insurance and appraisals as well. This is where having an investor with real estate know-how really comes in handy; they can predict these additional costs more accurately than the average investor. Once you've flipped a house or two and are more familiar with the process, it's safer to branch out and find other types of investors who might not be able to bring this type of background knowledge to the table.
In short, pick an investor you know and trust, but also have some distance from. If you can, get someone who has real estate experience and can help you pick the best neighborhood in your area to get started. The more that they can invest upfront—such as taking on the whole cost of the house themselves—the more profit you'll all make in the end and the better shape you'll be in throughout the process. Find a Mike to match your Laurie and you'll be in good shape. While numbers and costs are important, relationships are, too.
And remember that the final closing amount will be more greatly affected by the feeling a buyer experiences upon first entering the home than by a detailed list of everything that was improved within it. If the renovations are carried out thoughtfully and passionately, a buyer will know immediately. If you and your investor start off on the wrong foot, the disconnect could cost you down the road. You need someone who allows you the freedom to follow through on your own vision, but can also keep you disciplined, on schedule, and under budget (as much as possible). In this case, Mike and Laurie were the perfect pairing—it shows in both the house itself and in the closing price!
Chapter Two: Finding the Location
While Laurie was most worried about planning the renovation and staying on budget (see ch. 3), Mike knew that tracking down the actual property would be the hardest and most important element of the whole project. Little things can go wrong during the rehab process, and they certainly will. Small projects get cast aside, and some bigger ones turn out differently than initially expected. You can always correct for these in the moment with some quick thinking (and Googling)—but you can't move the house if it ends up being in a less-than-desirable neighborhood
This is why it's important to stay local. You know your own city better than that best-selling author of a large book on flipping houses does, even if that person has made millions in multiple markets. You've seen how nearby neighborhoods have changed over time, growing and expanding, or possibly going the other direction and losing some of their former glory. And if you don't feel confident about your area, ask around. If you know someone looking to buy a house, make use of the research they have likely already done. Which neighborhoods are they focusing on, and why? Which areas are growing quickly, and why? Where are the best schools? Which markets are generally trending up, and which are on the decline?
If you go with the cheapest house you can find in a neighborhood no one is moving to, then it doesn't matter how beautiful the final product is—you're taking on a major risk and potentially losing everything, from that initial investment to all of the costs associated with the renovation. It's better to put in a little more money upfront to get a property in a decent neighborhood that's already attracting homeowners, even if that leaves a little less for the renovation itself. This is the most counterintuitive lesson of home flipping: what you start out with is actually more important than what you end up with.
Take a day trip and drive around some local neighborhoods. What types of houses are already for sale? Are some houses already in the process of being flipped, or have recently been flipped? Schedule a tour of a renovated house with a Realtor®, just to see what your potential competition looks like.
You don't want to be the first house flip in the neighborhood—that's a gamble that may not pay off. But don't just blindly follow trends, either. Some neighborhoods have been flooded with beautifully flipped homes that all end up selling for close to their original prices, sometimes canceling out or even undercutting any hope of a profit. Keep in mind that some buyers might be interested in adding their own touches to the home—so don't feel pressured to change every aspect of the house just for the sake of change.
In this sense, house flipping is a bit of misnomer. You're not turning the property inside-out or upside-down. You're taking away elements that keep it from being its best self—such as claustrophobic walls or unnecessary fixtures—and adding back only what is necessary to get a potential buyer to see themselves living there. House flipping takes a lot more work than people typically envision, but is also less complicated than you might be anticipating. Be prepared and do your research, but don't overthink it, either. Remember that you already know a lot of what you need to know, just by having worked on your own home in the past and living in your community.
Laurie and Mike, for instance, are both Indianapolis natives who really know their city, especially the north side. They decided to take a look around Ivy Hills, an older neighborhood that has been revitalizing itself over the past decade or two. It's far from the city center, but close to the suburbs—as well as desirable shopping centers, hospitals, good schools, and some large office complexes for major industries. Young professional families looking to move to Indianapolis (but not a suburb) are definitely drawn to this particular neighborhood, with its mature trees, ample yard space, and rich history. Its residents' association is very active and involved; you may want to get in contact with the one in the community where you want to make a flip, if only to get some advice and make sure that your final product will fit into the rest of the neighborhood. And with two interstates nearby, transportation is generally a breeze.
The house that Laurie and Mike settled on had been through a rough life. It's rather young for a flip, built only in the 1970s. The couple who owned it initially purchased the house when they were newlyweds, and spent many happy years there. As they grew older, they moved out of Indianapolis but continued to own the property and rent it out to others. Like house flipping, renting can be a gamble—and over time, the house became completely trashed. Renters did not take care of the property or show any pride in its structure. The owners were left with an aging home that they were struggling to rent out at a fair price. They ultimately decided to cut their losses and sell the property.
The trick is to find a house like this before a Realtor® does. Mike suggests checking tax records for absentee owners—you can find better deals on properties this way, and can help improve the area, especially in urban spaces. Don't be afraid to explore houses that have been boarded up, either, but you may want to set aside additional funds for contractors and other experts to ensure that the structure is safe. A smart Realtor® will look for disclosures in listings that indicate a house may be in need of cosmetic or other improvements. However you go about searching for the perfect house to flip, you should expect to make a lot of offers before finally securing the right property for you and your investor.
This was not the first house that Laurie and Mike looked at, but they could tell right away that it was the one they wanted. From the street, it looks like a modest ranch house with a spacious front yard and cozy trees along the sides—though it's actually a two-story house with plenty of space and a double-decker back patio. It's perfect for a small family who likes to entertain guests (there's even ample parking in the back). Like many of the homes around it, it has a wonderful brick exterior with an inviting entry porch. It just needed a little bit of extra help to encourage people to actually live there again. And Laurie knew exactly what she wanted to do to make that happen.
Chapter Three: Developing the Master Plan (and Following Through)
Laurie and Mike closed on the house in late December, just before Christmas—a difficult time to get started on renovations, but not impossible. Your schedule will also likely follow the market rather than what's convenient for construction. Together they had worked out the budget, explored some potential locations, and made an offer on the perfect property—now all that was left was to make a plan and stick to it.
The first step is to determine what you can do yourself, as this will almost always be cheaper than hiring out for the work. The second step is to determine what you absolutely cannot do yourself and will require a subcontractor to complete. Be honest with yourself here—if you go beyond your skill level and end up making a big mistake, it could be a lot more expensive than hiring an expert in the first place. Laurie had built her own furniture before, knew how to pick out paint colors and apply them professionally, and even had some experience with plumbing and installing bathroom appliances. She felt confident in just about everything but the floors and the electrical system. She had a handyman helper, Kevin, who knew how to take down walls (and recognize which ones were weight-bearing) and could also complete the roofing largely by himself, but she and Mike knew that the wiring should be left to an expert and budgeted accordingly.
She and Kevin started with the floors, taking up the decades-old carpeting and revealing the original hardwood floors underneath—some of which was salvageable and some that needed to be replaced. Floors are often an afterthought, but Laurie insists that all good design should start from the bottom up. Just by lifting up the carpet, the house seemed to breathe a little, bringing in more light and air.
Old Floors With Carpet Pulled Up; Sanding In Process
Next, they knocked down some walls to open up the communal living spaces. In the original layout, one would walk through the front door and immediately be faced with a wall, with an option of going either left or right—both options presenting a dark, uninviting hallway. There wasn't even enough room for a small piece of furniture, rendering this would-be foyer nothing but wasted space.
Removing Walls Around Basement Staircase and Living Room
These entryway walls, which used to surround the staircase that led into the basement, were the first things to go. Laurie and Kevin knocked them down and replaced them with a bright white railing. Now the first thing you see upon entering the home is an open, airy living space. You can see straight across to the bright kitchen with a wall of windows overlooking the back deck, or to the upstairs living area with its bright wood floors, or even down the steps into the basement den. In your peripheral vision you can catch the end of the dining room table just off the kitchen, or the tall hallway leading to the bedrooms and upstairs bath. Essentially, as soon as you walk in, you can make out the general floorplan of the whole house—and you know exactly how to get to wherever you need to go. There are no unnecessary walls blocking your way or the sun's light.
Removing Walls Around Basement Staircase and Living Room
Redone Front Entry and Open Living Space – entrance to basement
If there is a big secret to flipping houses, this might be it: the best renovations focus on taking elements away rather than adding them back in. Most old houses are hiding beautiful hardwood floors underneath their shag carpeting. Formal dining rooms are becoming less and less common; people tend to prefer the open-air concept of a kitchen that flows into a comfortable eating area. Knock down the walls of the dining room and you'll feel like you have twice the space.
View from Living Room to New Dining Space
In just a few steps, Laurie had already drastically improved the lighting and layout of the house. From there, she turned her attention to the kitchen and the bathrooms—these are the changes that attract buyers, and what will turn them away if neglected. The kitchen is the first area to feel dated.
Old Kitchen Torn Out with Old Appliances and Cabinetry
The appliances don't need to be brand-new or straight from the box, but they need to be on trend, and they need to match.
Beautiful new kitchen with new appliances, cabinetry and island & Refinished Floor
Laurie spent less than $500 on each stainless steel appliance, and got them all from different vendors. It's helpful to look through discount stores to get an eye for prices and to see what's available, but don't forget about online sources such as Craigslist or OfferUp. You can even hit up garage sales (also advertised on Craigslist), or drive through college towns in May or August and see what's available on the side of the road (frazzled students tend to give away perfectly nice things at the end of a semester or summer). Spending a little bit of time researching the items you need—and possibly haggling down the price—will save you big bucks in the long run. For an area like Ivy Hills, there may even be a Facebook group you can join and possibly buy some appliances from (as well as learn some more vital things about the neighborhood).
Most of Laurie's home improvement knowledge involves kitchen renovation, which is why she began there. Her kitchen is where she spends most of her time in her own home, preparing meals, eating meals, cleaning up after meals, or just hanging out with her family between meals. She knows when a kitchen is missing something important, like plenty of counter space and storage. The 77th Street property lacked both. By taking down the wall that demarcated the kitchen from the dining room, she knew she was losing out on some good corner counter pieces—so she had to get creative in how she replaced them.
She decided to introduce an island to the floor plan. While it's good to keep things open and airy, it's also possible to have too much unused space, especially in the middle of a kitchen. This area was initially home to a small kitchen table—but now that the large dining room table was just a few feet away and not set off by a separating wall, there was no need for one here. Islands greatly increase counter and storage space. And because they can be taller than a typical counter, there's more room for cabinets and shelves underneath. She found a few trendy stools to go with the island and break up the large central area of the kitchen.
Island with Stool Seating
Sometimes it's still useful to look into contractors for certain larger projects—you might get more of a deal than you were initially expecting. At least you'll learn how much you're saving by going your own way. The kitchen needed completely new cabinets, which could have cost up to $15,000 through a contractor. So instead Laurie sent out for do-it-yourself cabinets, careful to measure everything as best she could. She didn't skimp on quality, either—the cabinets are full-wood (which will last much longer than cheaper materials) and even have a soft close, a popular kitchen trend that will definitely stand out during the big reveal (see ch. 4). She also included a wine rack above one of the counter tops, which allowed her to skip a cabinet and save some money while also adding class and function. If a buyer sees a wine rack in the kitchen, they will likely already picture themselves drinking wine there.
View of New Sinks and Wine Rack Cabinet
In total, she spend $6200 on the cabinets, a significant reduction of the initial contractor cost. And now she has the confidence and expertise to do the same in any future house flipping projects. This is an important fact to keep in mind: even if you think you made a mistake with your first project, now you know better for the next time around.
Another potential cause for concern was the counter tops. These can't be installed before the cabinets, but there was a slight delay in her order for the wood. By the time the cabinets were in and the kitchen was ready for counter tops, Laurie was already over budget and past the deadline. She initially wanted granite counter tops; they're popular and offer a nice sheen, which would beautifully reflect the additional light she was able to bring into the kitchen. But at an estimated $7200—more than she spent on building the cabinets—that choice didn't seem practical.
Instead of getting stumped, get Googling. If you run into any monumental snags on your way to completing your renovation, chances are some savvy flipper has already faced the same setback and has come up with a solution. When it comes to counter tops in particular, some rehabbers opt for butcher block or other wood grain counters—which are practical, trendy, and relatively cheap. Bamboo and glass are also popular alternatives. An additional benefit to using these materials is that they tend to give a one-of-a-kind feel to your kitchen. Even if someone else has a wood counter top, the grains might not look exactly like yours, or the edges might be more natural rather than carved.
Laurie made her own last-minute adjustment: concrete counter tops. This new trend is slowly catching on, especially among millennial homeowners who appreciate a more rustic or industrial look. She measured out a mold for her counter tops and actually poured the concrete herself, including with them an attractive beveled edge that takes away from the harshness of the concrete. The result is a strong, thick, sturdy counter top with a light gray color that's ahead of the trend. A darker granite counter top, even with its natural shine, might have taken away from this final effect, and perhaps turned off younger buyers.
Beautiful New Concrete Counter Tops
The bathrooms were another focal point for Laurie. The layout of the master bathroom prevented the addition of an actual bathtub. Restructuring the room would have been a lot more costly than its potential payoff. Stuck with just a shower, she made sure it was the best shower it could be, with bright tile and an attractive glass door. She also added a bath to the downstairs bathroom to make up for the omission. By anticipating any potential criticisms that a buyer might have, she saved herself the headache of a more complicated reconstruction.
Rebuilt Master Shower with Cabinet
Another draw of the house is its impressive back deck, which stretches across both stories. Laurie rented a pressure washer to loosen up any gunk on the exterior of the deck, then repainted and sealed the wood. She and Kevin secured the once-rickety railing so that it was once again sturdy and reliable. While the deck is not visible from the front of the house, she knew this would be an important selling point for the house—the way to solidify a buyer's interest and ultimately get them to sign. Rebuilding the deck was a potential option, but between a contractor and a big pile of new wood, the expense of such a project would have taken away from some interior renovations.
Deck After Pressure WashingThe pressure wash alone made a big difference in the appearance of the deck, and it wasn't difficult to re-secure the loosening railing. It's important to pick your battles during a large rehab project and know when to stick with what you were given. Again, work with what you have, and focus more on taking away rather than adding on or replacing completely.
Refinished and Cleaned Up Back Deck Area
Once the major projects were settled—the breaking down of walls, the electrical reconfiguration, the floor installation, the kitchen and bathroom renovations, and the sprucing up of the back deck—it was time to focus on some of the smaller details. The dining area was missing something, but Laurie found a beautiful Edison-style light fixture to hang over the table and bring the space together. These antique-like bulbs are very popular, but not always cheap; Laurie spent $269 on the fixture, not far off from what she paid for some of the large kitchen appliances. But it's important to allow yourself one big splurge per room. Without the Edison lights, a buyer might think the dining room looks pretty nice; with them, a buyer might instantly picture themselves showing off the room to friends and family. It could be the difference between taking some time to think about an offer and insisting on buying the house immediately.
Dining Area with New Light Fixture
When working on a large, involved project over the course of several months, checking in with your investor and working with contractors and other handymen, it's easy to lose track of the overall changes. Laurie was sure to document every step of the process, to keep returning to the image of what she started with and thinking ahead to what she wanted the finished product to be. Remember that your unique vision is what will make the house so special. But you also need to keep things marketable. Think about how the house will come across to the average person—but don't just try to appeal to the average person, either. Buyers want a house with character, which is why they're looking in the neighborhood you've already meticulously selected. Design your rehab around the character of the neighborhood and the type of people most likely to buy the house. But don't forget yourself, either—this is your project that will be signed with your name. You need to be proud of it, too! And that pride will show during The Big Reveal.
Conclusion: The Big Reveal
It's important not to give anything away while you're working on the house. While it's fun to talk about your renovations (especially if you spend a lot of your time working on the project), you need to save that big "wow" moment for when potential buyers actually come through the front door. People in the neighborhood will know that the house is being renovated and may want to pop by to see the changes; friendly and innocuous as this may seem, it can hurt you later. You don't want anyone to see the full progression from start to finish; you only want them to see the before and after pictures, the stark contrast between what you started with and what you turned it into. That's what gets people to pay over asking price the second they see the final product. That's the moment you've been gearing up for, the whole reason you have poured time, money, and sweat into this endeavor. Don't sell yourself short by letting everyone in on the process—they don't need to know all the little hiccups or successes you've had along the way.
If you watch shows on flipping houses—which you should, if only for a little bit of inspiration and commiseration—then you know the most exciting part of the episode is the big reveal at the end. Triumphant music plays and the hosts reflect on what they learned from that particular project. You also know that the house they end up with is rarely the house they set out to design. Smaller concerns (such as landscaping or accent work) get lost in the shuffle, and sometimes even big projects—like the granite countertops Laurie originally wanted—end up going a different direction entirely. Sometimes this is for the better, and sometimes it's a bit of a disappointment for the renovator. But the buyers looking at the home in the end don't need to know any of this. They might see Laurie's hand-poured concrete countertops and assume that they were always a part of the plan, that the entire kitchen was even designed around them. Why let it be known that this wasn't the case?
Don't share the minutiae of your project with anyone who could potentially affect the outcome of the sale. Don't play up all the big changes you plan to make to the property—don't let anyone be disappointed if they fall through (and try not to get disappointed yourself!). If anything, play down the effect that you're hoping to have on the property. Let them be surprised by the work itself once it's complete, rather than by the way you discuss it when it's still a work in progress.
This is where the investor resumes a more active role in the process, and can be a good stand-in for the buyer. Mike was out of the state during most of the project, and his shock upon seeing the nearly completed house for the first time was a good indicator of how potential buyers would see the place. His fresh eyes helped Laurie finish up the last few touches and complete the picture she had set out to create.
It was mostly out of Laurie's hands at this point. She had worked through her plan, tracked down all the pieces she needed and contracted out for the work she couldn't do herself. She finished slightly later than intended and spent a little more money than Mike would have liked, but this didn't matter in the end. There was already a lot of buzz around the house, and when the doors first open, people immediately knew why. The open floor plan, the trendy concrete counter tops, the updated bathrooms and the new wood floors all came together to create a house anyone would want to live in. The tree-filled lot and great neighborhood around it might have been enticing enough on their own, but the real success of this flip comes down to Laurie's hard work and singular vision.
By bringing her previous DIY experience to the table—and researching anything she didn't know how to do before—she was able to create a beautiful, cohesive home that flows well and follows the trends of the day, but will also age well. She put a lot of love into the house on 77th> Street, and managed to make a decent profit as well. After closing, she and Mike split the profits per their original agreement during the budgeting stage.
From start to finish, from setting out to find the property and signing the final closing documents after the renovation, less than four months passed. At this rate, Laurie and Mike could potentially flip three houses per year—assuming they luck out in finding such great properties in growing neighborhoods again. This was a first flip for both of them, but it certainly will not be the last.
Want more? Here's a video of our second renovation.