Does house flipping still pay?

From the article headline, “Does house flipping still pay?” What a great question right now!┬áHere’s the link from the article in The Real Deal (SEP 6, 2018):

It depends on the financing, the location (of course), how much a rehabber pays for a property (let’s avoid multiple offers, shall we), the experience of the rehabber and their connection to quality contractors, the timing of when it’s ultimately offered to the market, and other factors.

According to the article, Chicago’s market for flipping is stronger than other big cities. This would make sense, because at the moment we have pricing of homes in need of improvements below that of what people would pay on the Coasts.

So, let’s pick up a hammer and get to work!

End-unit Townhouse

Money While You Sleep

It’s a classic model for wealth building, if you’re old school. We’re talking about getting a building that’s got two or more apartments, living in one, and renting out the other(s). The property type would be called ‘multi-family’, and one can get a residential loan to finance the purchase, up to a 4-unit building. More units than that, and one would need a commercial real estate loan.

So I keep thinking about these two new listings of mine, one at 2609 w Jackson, and the other at 109 s California, in the area of East Garfield Park. We have listed the properties at $160,000, and $150,000.

With Jackson, the downstairs brings in income of $920 per month; the upstairs $950. Both tenants have been there for years, which means they’re happy to stay. Let’s say that an owner, who wishes to occupy takes the upstairs. I’ve been told that, because these properties are in underserved areas, special loans exist whereby an owner occupying buyer can put down as little as 5%, or $8,000. Taxes go for a penny less than $3,700 per year, and insurance, let’s say is $1,200 per year. With the simple math, the monthly payment works out to be around $1,245.

So with the income, the rent covers 76% of the monthly payment.

Over time, rents will increase, which means that percentage increases.

I’m thinking that if one continues to pay ‘rent’ of $950, into like a building fund, the first year, that fund value would be around $7,500. After five years, if nothing is used from that fund, A person would amass $37,500.

Other uses for part of that money, could go towards paying down the mortgage, which would start at around $152,000 the first year, and get reduced pretty quickly with an additional amount, like say $300. Of course once that mortgage goes away, the rental income becomes regular, monthly income, just like payment from a bond.

Pretty sweet deal.