Does it make sense to flip in the winter?

Question

I am a little gun shy about buying a house right now and trying to flip it. Let's say it is 45 days start to finish. THat puts the finished product ready for market on October 25th. Am I crazy? What is a good strategy knowing that winter is coming?

Larmon Cummings Jr · Answer

I would really think twice about this one@Adam  L. . My first property that I purchased to flip was this past January of this year in a suburb outside of south Chicago. As you may have heard, the Polar Vortex was in full effect, and that really halted any progress that I was going to make with that property :-(. The property was a complete gut rehab, including tearing off the roof, so there was a lot of work to be done. There was over foot or so of snow on the roof, so the roof couldn't be completed, and getting a roll off to remove the debris also posed to be a challenge considering the area around the property. Well, after paying holding costs for a few months I came across the concept of wholesaling (thanks a lot to BP), and I ended up going that route and profiting a few dollars at the end of the day( I wrote a short synopsis of how that took place a couple months ago in the success stories section of the BP site). I stood to make a lot more money doing the flip, but I think the lesson that I learned and the few dollars I did make were much more important! Doing a project in the winter poses a real challenge, especially to someone new to the game,  because you cannot determine what the weather is going to be, and especially being in MI (grew up with most of my family that lives throughout the state), the weather can get very severe. Depending on the extent of reno work that will need to be done, the weather can pose a real challenge at times for contractors. Then there is the point made by@J  Scott about making sure you price it right. If you know you may have increased holding costs, and at the end of the day you know you will have to discount the property just to sell it, you will have to be very careful with the price in which you pay to acquire the property. I don't know your level of experience with this field, but I just advise you to tread with caution. I give you this advise solely based on my experience as a newbie, which I am still very much so, and I just want you to be able to avoid the possible mistakes that can be made in doing business during that time of year. IMO....

Kirk R. · Answer

@Larmon  Cummings Jr - have a link to your wholesaling?

I am shopping pretty hard right now for a property to owner occupy and rent out rooms will be using a VA loan which can take a bit to close anyway.  Although think finding renters for the rooms could be really really slow.

I have one I am looking at tomorrow.

Should I hold off for a few months?  Or just negotiate very hard?

Lucie Billon · Answer

My crazy idea for my first deal is similar at Larmon experience. I found exactly the answers I was looking for, thank you all for the advise.

Adam L. · Answer

Thanks everyone. Great advise. I appreciate it.

Wendell De Guzman · Answer

Similar to what I said but J said it better :-)Market the house like crazy and price it 10% below market. That should make your house competitive and should sell even during the winter.

John Moore · Answer

I believe you have received excellent advice.  A lot depends on carrying costs; in my area very few prospects venture out when there is snow or ice on the ground.  Plowing and shoveling adds additional cost and work to the project and heating bills can add cost that you may not have anticipated.  If the numbers work, then you work.  It may be to your advantage to purchase at this time as the seller is well aware of the issues.  I am sure you can get a substantial discount if the sale is private.  Your sub contractors may give you a better price as many subs will adjust there prices during slow periods.

Darrell Shepherd · Answer

Am I the only one that plans on 6 mos.+ holding costs anyway?  If your business model has you in trouble if you cant cash out of a rehab in 90 days, you're gonna get burned along the way.  I had one last year I had to sell 4 times before it closed- took a year start to finish.  The rehab was like 3-4 weeks.

I don't know much about Michigan winters, so I may be a little ignorant on what that adds, and do know the market comes and goes at times, especially around Christmas, but a 50% drop in activity still leaves 50% of the buyers out there.  If you market it right, price it right and have good product, you still have a good chance at selling it no matter what time of year it is.  If the price drops 5% or the rehab goes longer, then you need to price that in to the deal, of course, but not doing one because of the time of year isn't something I'd ever do.  If the market drops off that much, its probably a great time to buy.

Some of it is how you're structured, I don't have monthly payments on my private money so an extra month or two on the market doesn't hurt me much, but in any case I'd WAY rather have a house out there with 30% equity taking an extra month or three to sell than me sitting on the sidelines waiting for the right weather to buy something.

IMO you are better served buying the thing with enough margin to absorb the extra holding costs if they happen than trying to time it right.

John Weidner · Answer

If you are in and out and need to move the cash quick its tough but sometimes deals just dont' happen that you can time it right.

My current project is going to start early October and will be a rather extensive rehab that will be ready to list by Feb 1.  I'll have all the roof off as Im building out the 2nd floor but I should be tightened up by Dec 1 with all exterior work done and move to interior finishes. Last year I saw increased activity around that time in Chicago so Im OK with the timing.

Does it make sense to flip in the winter?

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