Plenty of non-investor types have all sorts of heartburn — especially in this current economic climate — over people who buy houses for X, fix them up or maybe just mow the lawn and pressure-wash the cobwebs, then sell for X + profit. Some call that unethical.

I’m not one of those people, neither is Tyler. We pretty much both agree that there’s everything right about finding a great deal on a dumpy house, using someone else’s money to buy it and rehab it, then selling it for every possible penny of fairly-and-squarely-earned profit.

This sort of action has all sorts of benefits:

• It cleans up the neighborhood the house sits in, and raises the value of the neighbors’ places;
• It creates jobs for all sorts of contractors, suppliers, trades-people, and the like;
• It diminishes the vacant- or abandoned-house inventory, strengthening the market;
• It generates profit for us, which we then spend, infusing more money into our local economy;
• It’s an exercise in the American Dream of free enterprise, and it inspires more of the same;
• It creates a beautiful, sound home for the end-user, in our flip’s case an owner-occupant who happened to be a first time home buyer.

That last bullet-point above, the buyer, that’s the key. Buyer’s make the market. Not just with flips, but in all of real estate. Sellers gather data and hire appraisers and look for case studies and algorithms and fancy websites that claim to know a home’s exact price to the dollar, but that’s all mere speculation until a buyer comes forth and says, “I’ll pay this much.”

Only then do you know what a home is truly worth.

And in Tyler’s and my case, we had a unique opportunity to know our flip’s true worth way, WAY before it might’ve been sensible to know. Read on….

Remember in an earlier post when I mentioned the young family I was working with to find a home, and I’d called them about this one when I first saw it? They’d turned it down because of the new baby and a desire for a turn-key home. Well once we had this house under contract, I called them back and said, “It’s not turn-key now, but it sure will be!”

They drove out and looked again, but still said, “Not interested.” We looked at a few other places on the market, but found nothing that excited them.

Then they looked at our flip one last time. We hadn’t even closed on our purchase of it yet, nor had we cut one blade of over-grown grass or pulled one fiber of worn-out, green-shag carpet.

But through the wreckage, they had come to see it. They were buying into our vision.

We talked for maybe 15 minutes about our plan and what we were going to be addressing, sprucing up, fixing and upgrading. We talked about some of the material or color choices they could make as the job progressed. We talked about timelines, most importantly whether we’d be ready to close by the June 30th deadline to qualify for the $8K tax credit. Then it happened:

“We’ll take it!” they said.

“Hell Yeah!” we said.

And at that moment, all of us were genuinely stoked. Win/win, Baby! They’d get a freshly remodeled house in a supreme location, and we could go through the whole project knowing we already had the thing sold.

I smiled big. Through the stench of rat-piss and rotten wood, I could smell the sweet scent of pure profit!

I mean, what could possibly be wrong with that?

To be continued…