“Is there such a thing as ethically flipping a property?”
Well, I know both you and David to be thoughtful and ethical, but I can’t imagine you agonizing over the details of a flip-house the way you did your own. If you’d compromised on all those little battles (like window trim shape), how would you feel about the result? Would you think it’s “good enough to flip”, but not something you’d live in?
That’s fine: there’s nothing wrong with admitting that your real goal is the profit you’d make by flipping a house. (Aside: does this really earn you enough to replace a regular salary? What do flippers earn per year?)
But instead of buying to flip, you could consider becoming ethical design/build consultants. Work with people who want to move into the neighborhood, but don’t have the experience or contacts you do. Help identify a property, help them design a place they want, then help steer the renovation process. At one extreme, you have people like the owner of most of the property at the main Hyde Park intersection–he (she?) rules with an iron fist, only allowing businesses to rent space that he believes the neighborhood needs.

Yes. But – you need to treat the house as if it will end up one you might want to buy without having to do a lot of work on it, if not as your own home. Be serial restorationists, not flippers.
My family has done this for decades, starting with my grandparents who rehabbed a Queen Anne in NY state in the late 50′s, then had to turn around and sell it when my grandfather was transferred back across the country.
What you will do, if you choose this path, is leave a list of homes behind you that are worth more, and continue to be worth more, than comparable homes in the same neighborhoods. Even through boom/bust periods. I’ve looked up all our old addresses (that were sold since my birth) and they average 20-200 thousand more (both appraised and actual sale prices) than similar homes.
We treated all of these places like our home. I’ve got great memories of living in them while working on them, but while I learned a lot, I always had a feeling that we couldn’t always do what we wanted because we were eventually going to sell. That can be rough on a kid who wants to paint her walls, unless (like my folks) you specify that the kid is also responsible for appropriate repainting when it comes time to sell.
It will also take longer than the average “flip” – my parents never spent less than 3 years on a house, and sometimes as long as 10. However, they now own four properties, 2 of them rentals, and I’m on my first, with eventual plans to sell or use it as a rental property when we need to move (which will eventually happen). You will have more trouble getting financing, but if you treat it as though you are buying the home for yourselves, you also won’t get into the financial hellhole that flippers always have the potential to get into.
And, also, as long as you don’t become the type of flippers that often get referred to as the “PO who ruined the _____” you’re being ethical.

I think flipping is motivated by financial gain, where as restoration prefers to improve the quality of living standards. How often you buy/sell a home is not nearly as important as how well you treat it while it’s yours.

I don’t see a problem with flipping as long as you put as much care into the home and the design as you would if it were your own. I live in Austin, fairly young, recently married and I’m in the process of looking for a house. It’s difficult in Austin to find something in our price range in a decent neighborhood that meets our design aesthetic and is not located in the far reaches of suburbia. So we’re taking our time and waiting for something perfect and all the while learning more and more about the Austin real estate market.
We would love to do our own renovation but I don’t know that we would have the patience or the knowledge to accomplish that successfully. And to be honest, we don’t have the finances right now to do the renovation successfully. And I know many others in the same situation. There would definitely be a market for flippers, especially in some of the neighborhoods that are close to downtown and still affordable. I also agree with Andrew and I think there would also be a market for consultants to help pick the perfect property and with appropriate contacts.

Flipping vs. renovating – that’s the difference. The inherent challenge in “flipping” is the timeline. Whereas you may take a year to get your home remodeled (which is pretty quick all things considered), it would be hard to take that time on a “flip”, because of the carrying costs.

You can absolutely do an ethical job of flipping a house. The house down the street from me was lived in for 90 years by the same family (father built it and all the other houses on the street, his daughter lived in it until she died). As the daughter aged, she became more and more reclusive and did less and less with the house (a beautiful duplex made of stone with a big turret, just gorgeous). We were all worried about what a flipper would do with it, and when rehabbing started on in early last year we were skeptical. However, the guy who bought it did a fabulous job. He worked on it (mostly himself) for almost a year, stripping woodwork, repairing plaster, rebuilding porches, upgrading the electrical and plumbing systems, adding central air and heat, adding bathrooms and closets… (which integrated seamlessly with the house- I thought that the master bedroom closet had always been there) a truly beautiful restoration that anyone should be proud of. He sold the house for a premium, but the new owners are thrilled with it and it’s truly an asset to our neighborhood.

I do agree with you that flipper sometimes put icky bandaids on problems (we actually saw some that had put linoleum over totally unlevel floors). Our neighborhood is in the same predicament. I understand the need to make money (and even admire that) but frankly when they do it to the detriment of the house and the new homeowner is going to have to redo everything they’ve done, then YUCK!

I think you’d be providing a public service, as well as filling a market demand. There are people who want to live close to the city, but can’t find anything large enough for their family, in decent condition, and at a reasonable price. If you can find that sweat spot where a house can actually be salvaged, you can personally turn a profit, and you can provide someone with a nice house at a reasonable price, you’ve got the makings of a good business model. As a bonus, you make the neighborhood look better, which, frankly, wouldn’t be hard.

Err..that would be “sweet spot” in my above comment. Must start proofreading…

Huh, huh, huh, Bruce said “sweat spot,” huh, huh.
Ya’ll certainly have an opinion on this issue. Thanks for sharing. I think we have a very diverse set of views here, which is greatly helpful.
Andrew said: “But instead of buying to flip, you could consider becoming ethical design/build consultants. Work with people who want to move into the neighborhood, but don’t have the experience or contacts you do. Help identify a property, help them design a place they want, then help steer the renovation process.”
The only problem with this scenario is that a lot of people don’t want to renovate, they just want to buy a house. And if there isn’t one available in the ‘hood they like, they go looking somewhere else… or they settle for a poor rehab job because of the location. Kristin exemplified this when she said: “We would love to do our own renovation but I don’t know that we would have the patience or the knowledge to accomplish that successfully. And to be honest, we don’t have the finances right now to do the renovation successfully.”
Andrew said: “I can’t imagine you agonizing over the details of a flip-house the way you did your own. If you’d compromised on all those little battles (like window trim shape), how would you feel about the result? Would you think it’s “good enough to flip”, but not something you’d live in?”
Funny you mentioned our trim. In the end, it was our contractor’s call to replicate it. It cost him an arm and a leg, and it was something we were just sure we would be compromising in the redo. But I have to say that I wouldn’t be willing to stand by something that wasn’t done tastefully. We probably wouldn’t make much of a profit on a project like this one, but we’d sure have fun. Maybe we’re renovation hobbyists and not flippers

Christiane replied: “a lot of people don’t want to renovate, they just want to buy a house.”
Well, you don’t need “a lot of people” to buy the house you restore, you need a few, maybe just one. The first step down the road to flipper is to assume that you want to hit that lowest common denominator…next thing you’ll be planning out two-car garagemouth houses!

LOL–an old friend called them “snout-outs,” but I think I like “garagemouth” better. Like the house is going to eat the neighbor’s yard or something, a la Hungry-Hungry Hippo.

You’re definitely spot-on about one thing, which is that a lot of people don’t want to renovate, which leaves the door open for speculators of all stripes to fill the void with housing infill that may be great or may suck mightily.
Personally, I think the ultimate solution lies in better design guidelines and building codes (with real enforcement) that would prevent developers from doing such shoddy work to begin with. But I know that’s a pipe dream, especially in the land of unfettered property rights…
I’m curious–in this hypothetical scenario, would you guys start acting as your own general contractor, or would you approach it the same way you did with your house, working with somebody like Ace? I would think it would be a lot harder to make any profit that way (not to mention that the contractor might not be as willing to eat any unexpected overages when he knows that this is a for-profit project rather than your lovingly, painstakingly designed new home).

Paul, I think you’re on to something with the comment that “the ultimate solution lies in better design guidelines and building codes [with real enforcement] that would prevent…shoddy work to begin with.” In some cities in the country, zoning laws allows “covenants” to be drawn up by developers and/or owners in a specific development or subdivision that require certain contingencies for homes, new or remodeled. They may have to have any of a number of different kinds of appearances, square footage, or whatever.
While this may seem far-fetched for a neighborhood such as the one this blog is about, why not explore it with the Community Development Director (or whichever office in Austin serves that function) and with alderpersons, or even the Mayor’s office. As an ex-alderperson in a fairly large city, I think that beginning such an initiative could be seen by politicians as getting out in front of redevelopment in their fair city, even leading the way to more sensible planning. Capiche?

there is nothing wrong with working hard and expecting to make money from it.
as homes are appreciating in austin I would EXPECT for folks to invest in their neighborhood. if you improve your hood at the same time, you will also be protecting the investment you have in your own home.
paul

“I’m curious–in this hypothetical scenario, would you guys start acting as your own general contractor, or would you approach it the same way you did with your house, working with somebody like Ace?”
Hm, that’s a good question. There are pros and cons working with someone like Ace. The upside was his industry experience. He knew a lot of tradesmen to call on as subs and even had his own crew for certain jobs. He generally knew where to find materials on the cheap, and he could bid accordingly. I think the project went a LOT faster than if we had tried to line everything/everyone up ourselves.
The downside with working with him was that we paid more than if we had acted on our own, and we had to make some design compromises according to his knowledge and abilities. I think we would have more creative control if we did it on our own.
As for profit… well, I certainly wouldn’t want to lose money on a project, but I think my main interest is in the design and completion, not the profit. I would be willing to give up a bit of the profit if it increased the quality of the product. I think that would benefit everyone: me, the owner, the neighborhood, the city, etc.

my objection to flipping is the standard of taste applied to “improvements” — it’s the flipper’s taste, and huge amounts of money are spent on things i don’t like, don’t care about, and won’t pay for — granite, stainless steel, the usual cliches of developer taste. the waste bothers me. if they spent their money on real sustainable insulation, preservation of clapboard/brick, good roofing, plumbing, heating, solar power, etc. i’d be more supportive and more willing to buy a flipped house.

I periodically get obsessed with flipping because I think I’d be good at it — avoid a lot of the problems those idiots on shows have, etc. (I don’t think Iowa is a particularly hot flipper’s market like Austin tho) … anyway, I think that the above comments are right on – the way flippers make profit is turning around houses really fast so that they don’t have to carry mortgage payments and stuff — and to do a quality renovation, it’s gonna take time. You have to ask yourselves if you will be doing it mostly for pleasure and partly for profit, or if you will need to be making a certain amount of money to make it worth the trouble. I think the idea of being design consultants is great — you get the pleasure of the details that you clearly enjoy without the worry of cash flow. Or just enjoy renovating for the sake of renovating… however, it seems like a lot of people live in the houses they renovate, and I think (as a kid who moved around a lot) that if you can avoid constant moving, that would be good for the kids.
But yes – I think there can be ethical flipping… but it might not be as profitable.

You named the control and profit issues. One renovation may not be enough to make that decision. I GC’d my own work; but I was in no hurry because I lived in. Not-for-profit incorporation is one option that(depending on Texas laws) may allow you to do what you want, pay yourselves a “salary” (based on the profit in a job) as Directors, zero out the balance, go for otherwise unavailable government and other grants, etc. That also gives you credibility when you try to work with governments because you don’t have a financial conflict of interest when you ask for something: you can demonstrate that it is not about the money.
Partnering with someone like Ace – who seemed like a caring person when I met him – might take away all concerns. But, then, you might have to factor in more profit depending on how altruistic he is. As the trim demonstrated, profit isn’t his only motive, either. He is proud to do good work. If you talk with him about renovating other homes to build up the neighborhood for the long term, as long as he comes out “OK” financially, he might really jump at the opportunity. Alliances are really precious even when you don’t write a partnership. By the way, if you do partner, one HAS to be legally contracted at 51% – no 50/50 deal is safe if there is a major rift. Once, I lost a house that I was renovating and all the time and money attached.
GC-ing also gave me time to make quality decisions that time constraints would not have allowed. Profit was never my motivation; quality of life was. I knew that if I did quality work, the money would come when resale happened – as long as I didn’t spend more than the neighborhood pricing would support.
In St. Louis, “flipping” is a dirty word referring only to those who quickly renovate to make a profit. If the work is quality, the term isn’t usually used. In that case it is “renovation” or “redevelopment.” Most of what is being done here, even condo developments, are very high quality, turning deteriorating buildings into very nice areas.