Lessons in House Flipping in Tampa
So I thought I'd share a little post on some of the lessons I've learned in the last year and a half. During that time span I have been involved in 22 flips throughout Tampa Bay as an investor, a developer, and an agent. There have been some common pitfalls on the deals that didn't work out and some common features on the deals that did. Hopefully sharing this information can help some of you along on your journey. I'm going to try to keep as much of this specific to Tampa as possible.
Housing Types
A large portion of the housing in Tampa Bay that you'll find when searching for a flip was built either during the 1920s or the postwar period of 1945 to 1960. The 1920's homes tend to be wood frame bungalows that were built on crawlspaces and the postwar homes were these G.I. Huts built out of block on slab. There are some common pitfalls in each of these housing types to consider.
The 1920's style bungalows often have foundation issues. The pier & beam system will often lead to foundation slips. The soft florida soil and high water table leads to these slipping overtime. Fortunately, this is easier to repair than it sounds. Avoid just taking your G.C.'s bid when they try to hit you up for a change order on this kind of repair. Hire the engineer yourself to draw up the plan to repair, bring it to your contractor and get the bid. Don't be afraid to shop for your own sub here either.
Another issue I've seen with the 1920's style bungalows is that some municipalities (*cough* St. Pete *cough*) will go out of their way to get you to bring the house up to the current hurricane code. Do yourself a favor and save yourself a failed inspection, any walls that you've opened, tie down the framing with Simpson connectors. They're cheap, it's a quick job, will add to the structural integrity of the house in the future, and the inspectors will take it easier on you. Technically, if you're doing a level 2 alteration I don't think you NEED to do this, but it will save you some grief from the building department.
The post-war houses have their own issues. Foundation issues are easy to spot (Just look for step cracks rising up the exterior walls.) Many of these homes started as 1200 square foot huts that were expanded on over the years by adding extensions, enclosing garages, etc. This can lead to some strange features such as different floor levels, varying ceiling heights, and strange layout choices. Today, most of these houses range from somewhere between 1300 and 2000 square feet of heated space. Central air systems in these homes would have been added later on, so ductwork is often located in a very small attic crawl space. Pray that your ductwork is in good order because it's a pain to replace and very difficult to work in these spaces.
Plumbing
Many of the 1920's style homes built on crawl spaces will have already had at least some of their plumbing replaced. It's usually easy enough to access the plumbing in the crawl space, so if you don't see PVC under there I'd strongly recommend considering replacing what is there.
On the post-war houses, things get really bad. Most of these homes were built with galvenized steel plumbing. It's brittle, and it breaks. As soon as that plumbing breaks, you wind up get backups constantly. Even if you're flushing the toilets fine when inspecting the house, oftentimes the second a piece of toilet paper goes down that line, it hits the break and starts to clog up. Even constant clearing of the line doesn't hold up after a few days.
Check building department records for any home you purchase build between 1945 and 1965, if there has not been a permit filed to replace the plumbing, YOU MUST REPLACE THE PLUMBING. Buyers know about this problem, agents know about this problem. Don't try to get away without doing this.
I had a buyer with a horror story. We had a flip and the plumbing had been inspected by the GC and the plumber, we were told that it was fine. I had a buyer for the house and her inspector recommended an inspection of the pipes. They ran a camera down there and discovered scale deposits in the pipes. My seller paid to have the pipes de-scaled, and the buyer closed on the house. A few weeks later I ran into the buyer at a party, turned out we had a mutual friend. I found out that right after closing they found out there was a collapse in the pipes and had to re-pipe the entire house. They were getting very high quotes and I felt terrible that this had happened to them. I hooked them up with my plumber and got them a better deal on the job, but it would have been much easier had we just done the work when the floors were opened. Yes, it would have cost my developer money, but we also could have lost the deal had the problem with the plumbing been discovered prior to closing. Frankly, any house that I put my name on as an Agent or a Developer I want to be perfect so I can stand behind the sale.
Water supply lines should be looked at as well. You can sometimes end up with a bit of rust in the lines but usually this is cleared if they are run constantly. However, if you've already got everything else open, you might as well run new supply lines as well. CPVC for underground and through the walls /attic and PEX anywhere that requires a weird turn. You don't need to use PEX here in Florida like you would in the North because there's no worry about pipes bursting from freezing conditions.
Bottom line: Calculate the cost of new plumbing when doing your rehab estimate, you're going to need it. Also, shop around. If you see plumbing trucks on a job site, talk to those guys. Oftentimes the project foremen are able to book their own jobs at a reduced rate than calling the plumbing licensee directly. The licensee will still oversee these jobs but you won't be paying the full rate.
Electrical
You should probably budget a re-wire into any rehab budget you have as well. Typically, the 1920's style bungalows were built with old knob and tube style wiring (often this will have already been replaced, but the quality of the replacement work is questionable and sometimes features a lot of code violations.) The post-war houses usually have their original wiring which is aluminum wiring covered in cloth. This wiring is a fire hazard because of resistance issues and the point of contact.
Now, you'll hear some terms thrown around like "alumiconn remediation". What they'll do in these cases is use a lug to connect some copper wire onto the old aluminum wire before the point of contact. I'd say this is the bare minimum in what you should do during a flip to prevent fire hazards, but truly this really isn't enough. Oftentimes there's a lack of ground in these wire runs, no GFCI's in wet areas, combined with aging electrical panels.
The right way to do it, is to replace all the wiring in the house. Have your demo crew cut a chase along the walls leading to all outlets, open the ceilings where you need to, and get your electrician to rewire the entire home. Make this part of your plan, you'll be glad you did. I recommend adding modern features like USB outlets in the kitchen islands to add to the "new home" feel that's gonna get buyer to pay top dollar. You can upgrade the electrical service to make sure you have plenty of current for the entire house. Plus you can sleep easier not worrying about aluminum wiring in a house you worked on starting a fire.
Bottom line: Budget for a rewire
Air Conditioning
We all know how hot it gets in Florida, so central A/C is a must. Many of the units you'll find on your flips still use Freon, which is no longer being manufactured as of 2020. The prices on Freon are rising and will continue to rise in coming years as it's only available from existing stock and aftermarket sales of refrigerant recovered from decommissioned systems. Do your future buyers a favor, put in a new system with R-410a. The newer system will be MUCH cheaper to run from an energy efficiency standpoint. And any buyer looking at a flip-house will like knowing that everything is brand new, they don't have any big expenses coming down the road in the immediate future.
Roofing
There's plenty of info out there on roofing issues when flipping, so I just want to keep this Tampa specific: flat roofs. On many of the post-war houses, you'll find extensions that were built out of old exposed porches with flat roofs. Almost always, you're gonna find leaks here. These flat roofs don't last very long, and wear away in the Florida sun very easily. As someone who has learned this lesson multiple times, I promise you this: If you don't replace your flat roof, it will never leak . . . until just before you put the house on the market.
I think the best solution for these flat roofs is to get a TPO roof installed. They're inexpensive like a rubber roof, but the seams get welded so it's very durable like a PVC membrane. Make sure they run the seams up below the roofing tiles where the flat roof meets the pitch.
Location
One thing to say here: don't buy on a busy street. I don't care if it's the best house, in the best school district, with the best backyard, in the best neighborhood. If it's on a busy street, buyers will be scared away. I have a client that did a deal on a house on a quiet street but with a retail store across the street on the side of the house. This property is selling WELL below what the value would be a few doors down.
Tampa has some streets that although they aren't 4 lane thoroughfares, they're busier (especially many of the streets in South Tampa that run North/South and Euclid which runs East/West.) Homes on these busier blocks sell for significantly lower than those on their surrounding quieter streets. If you are going to do a deal on one of them, only comp them against other homes on the busier blocks.
Managing The Flip
For many of you from the area that are reading this, you'll be managing your own flip. For those of you who are from out of the area that are considering investing in Tampa, I can't stress enough how important it is to have "boots on the ground", ideally someone with a financial stake in seeing the project succeed.
I strongly recommend against simply turning over the project to a G.C. and hoping it all goes well. You'll be hit with a constant barrage of change orders, ridiculous mark ups, and work delays. I've seen too many GC's that roll money from one job into another, leading to work stoppages. They over-extend themselves too often, and try to make up for it any way they can.
Of the 22 houses I was involved in during the last year, I served as developer on 6 of them. The other 16 I was not involved in the development outside of providing some consultation when things went bad. Of the 6 I was the developer on, 5 turned a healthy profit. The final one was a small loss (roughly $5,000) however I wasn't brought into that project until after things had gone sideways.
Working with a developer will cause you to give up some of your equity in the house, leading to a lower profit. But if you've got someone driving the project on, with an incentive to keep costs down, it will be worth every penny.
Outlook
One last thing, I think the future coming out of Coronavirus is going to be very bright for Tampa. Most of our major development projects were too far along to be stopped (Waterstreet, Midtown, Marina Pointe, etc.) People are fleeing down here from the North East at a record rate. I'm amazed at some of the calls I've gotten since lockdown started.
As we start to emerge from this period of lockdowns and slowdowns, we're going to see what I predict to be a very brief period with alot of deals on the market. When eviction and foreclosure moratoriums end, you're going to see a period this summer where there's an opportunity to buy a bunch of houses below market value. With what I believe to be a long term outlook that is truly bright, Tampa is a great place to invest in in the near and long-term future.
I hope this helps some of you. Feel free to send me a colleague request if you have any questions or if there's anyway I can help you out.