Lifestyle Design Flip
Many inspiration gurus and success authors like to talk about "lifestyle design" these days. You've probably also heard that real estate investing, with its eight essential vitamins and minerals, can be an important part of this philosophy.
When I was younger, single and had less common sense, my real estate investing/lifestyle design formula was not well-planned. This business model included 100% mortgages and house-hacking-flipping five properties on the island of Maui. It was great having roommates and tenants pay my expensive mortgages, so that I had a little more time for important things like surfing, exploring jungles, cliff-jumping and scuba diving. Now that I am mostly a grown-up, including the family responsibilities of a wife and three kids, I am a little more risk-averse. My goals and dreams of adventure have also been tempered a bit. Still, my wife and I look for opportunities to have real estate be the enabling tool for a flexible and fun lifestyle.
I currently live in Utah and the market is tight, but there are plenty of opportunities to flip homes, wholesale properties and also accumulate cash-flowing rentals. Last year, I was getting some pretty bad cabin fever after a typical cold Utah winter. I was missing my homeland of San Diego, where I was born and raised. I decided my family needed a change of scenery and latitude! So, I contacted a real estate agent in San Diego and we located a property to flip. The San Diego market is a little different than where I live in Utah. Homes are half the size and twice the price! Great deals are few and far between and cash-flowing rentals are as scarce as Trump supporters.
We finally found a good property by looking up expired listings in the North County coastal area. My agent made contact with about 10 sellers whose listings had expired in the previous six months. Some had simply decided to take their houses off the market, but a few were still interested in selling. The most motivated seller was a guy in his late 70s who rented out part of his house to some very delinquent tenants. They were really taking advantage of this nice, old guy and he just didn't know what to do. My agent, negotiated an offer with the seller. It was 352k, including his commission. This awesome RE agent, who is former military (and about 6' 3") then informed the squatters (posing as tenants) that they had a 30-day notice to vacate or be removed. He then, under my direction, gave them an offer of $1,000 if they could be out in two weeks or less. They were out in 15 days and were happy to take the cash as they drove away in their U-haul. The 77-year-old seller was also delighted, and when we closed in late May of last year he thanked us repeatedly as he drove away to Florida to be closer to his extended family.
The summer was spent managing subcontractors and doing many small projects. It was a full cosmetic renovation that cost about $45K. While directing tile-setters, painters, handymen, plumbers and flooring installers, my family lived in the home (more like camping really) and made frequent trips to the beach for surf and sea breezes. We bought an unlimited family pass to Legoland and also hit every other attraction or theme park within a 2 hour drive! The remodel took two and a half months and sold within three weeks of listing for $474k. After remodeling expenses, commissions, concessions, financing costs, and of course, after adding in the mileage and per diem deductions allowed by our accountant, the "net" gain was about 20K. The word "net" is in quotes because there are some really cool things you can write off on a two and a half month business trip! Without those write-offs, the gain would've been much closer to $40k.
In all, it was an adventure-filled summer with lots of great (and a few not-so-great) family memories. It was totally worth it for a lifestyle design experiment, but I think this year I will flip one extra property in Utah and just take three weeks off to lie in a hammock ... on the beach ... on Maui.
See some After & Before photos below: