How much profit should you make on your first flip?
Engelo RumoraBusiness Member
Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votesHow much profit should you make on your first flip?
Most Popular Reply
Johnson City, TN · Member since 2014 · 586 posts · 705 votes
9yI will give you an example of a current deal that is scheduled to close on Friday. I live in one of the lowest cost of housing areas of the country so my numbers will seem small to most. I have had this house for 6 months and it was purchased for 82k. With repair costs and holding costs I have right at 100k in it. The contract price is for 138k and I will have a little less than 8k in closing costs so I will make roughly 30k. My original target selling price was 140k so my minimum profit level was 28k. I barely made it this time. A few times I might dip below the 20% but not by much. I also rarely do better than 30%. No grand slams here but a lot of solid singles and doubles.
67 Replies
- Real Estate Broker · Chicago, IL · Member since 2015 · 122 posts · 103 votes9y
Hi @Engelo Rumora !
Very impressed with your companies! Glad to see you're doing well in Ohio.
I always tell my first-time investors who I work closely with that a minimal profit is always "okay" on your first couple of deals. The trade-off is, you're gaining real-world investing experience that ultimately will be more valuable to you down the road than any monetary gains you make in the short run.
Rather than spending too much time and money on seminars (which are definitely beneficial, but don't offer the hands-on experience needed to become a great investor), spend that time and energy on your first deal and do your best to make a profit. You'll learn more on your first flip in a few months than any seminar or program could have taught you in a year.
Putting those lessons into practice on the following deals is the challenge!
- 9yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
I think the title of the post "How much profit should you make on your first flip" and the responses may make some first time flippers really optimistic about the profit they should achieve on their first flip. I wrote about this a little in the post: Newbies: Eager to Learn or Entitled.
I think @Bart H. had it right when he said that they should be happy to break even on their first flip if they are doing it on their own. I also think @Bob Okenwa has a good point that every market is different so expectations should be adjusted to the market one lives in. I know that there are better markets in the midwest but I live in Arizona and California and I would like to have some properties where I live so I need to adjust my expectations to my market.
The numbers that work for us when we flip is to get a property between 100k - 200k that we can sell for 100k more than what we bought it for within 3-6 months after we put 40k - 50k into the rehab. Those numbers usually yield 20k on a deal which gets split with my partner. So I am looking to make 10K personally on each flip that I do. Most of the money used in these flips is not personal money so my ROI is usually infinite since it isn't my own money invested.
Also, If I am set to do 20 flips in a year, doing this part time, and I make 10k personally on each flip, although it isn't a lot per property, I can still generate 200k in revenue. Which works for me.
- Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes9y
I think it totally depends on your market. If it's super competitive, then you might just squeak by with a $15k profit, but if your market is untapped, then you could make $25-$40k. For us right now, we're shooting for a min of $20k gross profit (in Utah) as it's pretty saturated with flippers in my farm area.
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Bob Okenwa:
I've looked into the Midwest market and it looks to be quite profitable. Are there any specific areas in OH that are doing better than others that you focus on or do you cover the entire state? Also, what is your typical rehab like in terms of project scope and cost? Total rehabs? mainly cosmetic? Basement redesign? etc. I've seen some great numbers in your area from my own research and other investors here. Thx.
My bread and butter is Toledo but I know that all of Ohio is good.
We are on track to do 100+ deals this year.
Mostly turnkey tho.
Get in and out as quickly as possible (Even when doing an A class flip).
The less walls you have to move the better.
I would never take on a full blown structural rehab unless the profit was ridiculously fat.
Ohio is a "kid in a candy" store type market so you can pick and choose how you want to go about flipping lol
Thanks
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Van Blackman:
Hi @Engelo Rumora !
Very impressed with your companies! Glad to see you're doing well in Ohio.
I always tell my first-time investors who I work closely with that a minimal profit is always "okay" on your first couple of deals. The trade-off is, you're gaining real-world investing experience that ultimately will be more valuable to you down the road than any monetary gains you make in the short run.
Rather than spending too much time and money on seminars (which are definitely beneficial, but don't offer the hands-on experience needed to become a great investor), spend that time and energy on your first deal and do your best to make a profit. You'll learn more on your first flip in a few months than any seminar or program could have taught you in a year.
Putting those lessons into practice on the following deals is the challenge!
Definitely agree mate,
I'm the biggest anti-guru there is and I also believe in spending money on a rehab rather than a $50,000 seminar.
Even if you loose the $50,000 on the deal, the experience gained will benefit you forever.
I cherish my losses more than my gains as they teach me how to be better and not repeat the same mistakes on a $500,000 deal for example lol
Thanks
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Shiloh Lundahl:
I think the title of the post "How much profit should you make on your first flip" and the responses may make some first time flippers really optimistic about the profit they should achieve on their first flip. I wrote about this a little in the post: Newbies: Eager to Learn or Entitled.
I think @Bart H. had it right when he said that they should be happy to break even on their first flip if they are doing it on their own. I also think @Bob Okenwa has a good point that every market is different so expectations should be adjusted to the market one lives in. I know that there are better markets in the midwest but I live in Arizona and California and I would like to have some properties where I live so I need to adjust my expectations to my market.
The numbers that work for us when we flip is to get a property between 100k - 200k that we can sell for 100k more than what we bought it for within 3-6 months after we put 40k - 50k into the rehab. Those numbers usually yield 20k on a deal which gets split with my partner. So I am looking to make 10K personally on each flip that I do. Most of the money used in these flips is not personal money so my ROI is usually infinite since it isn't my own money invested.
Also, If I am set to do 20 flips in a year, doing this part time, and I make 10k personally on each flip, although it isn't a lot per property, I can still generate 200k in revenue. Which works for me.
Thanks Shiloh,
No offense, but I wouldn't get out of bed for a $10,000 profit.
If I'm putting $200,000 cash in a deal, I better be making a $100,000 profit minimum.
I guess we are just use to such huge numbers here in Ohio.
Now, I don't do $200,000 deals here but have partners flipping such properties all day long.
We focus on turnkey B class deals and have numerous other ventures like a brokerage, PM company, etc...
This is just my opinion and I'm not saying that it's right.
Much success
ps. 20 flips per year is a headache and not "par time".
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Caleb Rigby:
I think it totally depends on your market. If it's super competitive, then you might just squeak by with a $15k profit, but if your market is untapped, then you could make $25-$40k. For us right now, we're shooting for a min of $20k gross profit (in Utah) as it's pretty saturated with flippers in my farm area.
Look into the outskirts of your area.
You might find some good numbers there.
I've always believed in running away from the crowd lol
- 9yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
@Engelo Rumora 20 flips per year isn't a headache if you have a system. Also the money we put into the deal is usually not our own. It is either from a hard money lender or an investor or one our our credit lines. We usually need about 60k of available credit for a flip in the East Valley of Arizona.
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Shiloh Lundahl:
@Engelo Rumora 20 flips per year isn't a headache if you have a system. Also the money we put into the deal is usually not our own. It is either from a hard money lender or an investor or one our our credit lines. We usually need about 60k of available credit for a flip in the East Valley of Arizona.
Sounds like you have it figured out mate
Well done and much success
- Rental Property Investor · Lehi, UT · Member since 2015 · 195 posts · 133 votes9y
On my first flip, we bought a bank owned property for about $45,000. Our plan was to sell it for $80,000 and make a $25,000 profit. We did all of the work that we could ourselves thinking that we would save money, so it took 10 months before we had it sold. It was right next to a freeway overpass that went over the largest street in the city and some train tracks. It had a well and a septic tank system all on .04 acres. Our buyers were smarter than us and decided they wanted a survey so they could put up a fence to protect the kids from the busy road. The result of the survey was that only the front yard and 1/4th of the house was on our property; the rest was on the neighbor's land. I took my mentally handicapped child to the appointment to meet with the neighbor to talk about buying the land from her. She had us over a barrel and she knew it, but after some negotiations, she and the surveyor met us at the property and she strung a line along the path of what she was willing to sell us for $10,000. After $2500 in survey costs and recording fees, we were able to close and sell the home (6 months before the new owners had trouble with the septic leach field that was still on the neighbor's property).
The buyers bought it for $92,000 and our final profit was about $8000. So we made $800 per month as our only job. Yes, we went into credit card debt to buy groceries, gas, and even to pay our own mortgage. We LEARNED! The next home we had seller financing and made a $24,000 profit. Still made a lot of mistakes, but less mistakes and less serious ones.
The main thing new investors need to understand is that it will take more cash than they think. You will likely go over budget and need a safety net. When you use other people's money, you still need to respect it as if it were your own since you will want to use their money again for the next project. Poor returns can shut down your credit line.
Short answer: If you break even on the first one you are doing well. Always have 2 to 3 exit strategies. If you can't sell it for a profit, can you get long term financing and rent it profitably? Can you Lease Option or seller finance it to improve down payment and cash flow? Would you want to live in it yourself if your home home will sell easier? Does your city allow airbnb?
- Rental Property Investor · Lehi, UT · Member since 2015 · 195 posts · 133 votes9y
If I had it to do over again, I would have changed a lot. Instead of keeping it as a home, I would have converted it to a business with a store front. I would have been able to get away with not buying the neighbor's land since the building had been there for 80 years, but I still think I would have paid the fee to buy it and make it legal. I would have turned the front yard into a parking lot and Rented it for about $800 per month then, about $1200 per month now. This was in 1999 and by now we would have it paid off in full and cash flowing nicely. Even with the costs to tie into the cities water and sewer lines, it makes a better rental than a flip. But it is always easier to see it after the fact.
- 9yKuba F.Pro MemberReal Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
Some people get lucky and do well on their first flip, with the most common factor being that the market shifted their way despite all of their blunders. That's generally the exception, and not the rule and one should expect that there is a price to learning on the job.
So another way to look at the question that was posed could be: how much will on the job training cost you on your first flip?
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes9y
Originally posted by @Engelo Rumora:
Originally posted by @Shiloh Lundahl:
I think the title of the post "How much profit should you make on your first flip" and the responses may make some first time flippers really optimistic about the profit they should achieve on their first flip. I wrote about this a little in the post: Newbies: Eager to Learn or Entitled.
I think @Bart H. had it right when he said that they should be happy to break even on their first flip if they are doing it on their own. I also think @Bob Okenwa has a good point that every market is different so expectations should be adjusted to the market one lives in. I know that there are better markets in the midwest but I live in Arizona and California and I would like to have some properties where I live so I need to adjust my expectations to my market.
The numbers that work for us when we flip is to get a property between 100k - 200k that we can sell for 100k more than what we bought it for within 3-6 months after we put 40k - 50k into the rehab. Those numbers usually yield 20k on a deal which gets split with my partner. So I am looking to make 10K personally on each flip that I do. Most of the money used in these flips is not personal money so my ROI is usually infinite since it isn't my own money invested.
Also, If I am set to do 20 flips in a year, doing this part time, and I make 10k personally on each flip, although it isn't a lot per property, I can still generate 200k in revenue. Which works for me.
Thanks Shiloh,
No offense, but I wouldn't get out of bed for a $10,000 profit.
If I'm putting $200,000 cash in a deal, I better be making a $100,000 profit minimum.
I guess we are just use to such huge numbers here in Ohio.
Now, I don't do $200,000 deals here but have partners flipping such properties all day long.
We focus on turnkey B class deals and have numerous other ventures like a brokerage, PM company, etc...
This is just my opinion and I'm not saying that it's right.
Much success
ps. 20 flips per year is a headache and not "par time".
I think flippers in my area average 200k to 300k on the conservative side. I don't think they would be interested doing all that work for only 50k. If that is what your area can support for the same work it is all good too. Personally 100k would be ok with me.
- Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes9y
Thanks for the insight. Much appreciated. How much do you spend on an average deal out there in terms of rehab?
- Contractor · Vienna, VA · Member since 2016 · 42 posts · 6 votes9y
Who are buying your properties in Ohio or are you renting them out?
- Contractor · Vienna, VA · Member since 2016 · 42 posts · 6 votes9y
Originally posted by @Account Closed:
My partner in Austin & I just bought a 3 bed 3 bath for $100 down. We are taking over the mortgage of $185,000 with $8,000 to the seller for moving. (We are into it for $8,000 total Plus closing) There is no work to be done, it is a 4 year old house. We have it on the market for $239,900 30 days later with us doing the marketing. No real estate agent involved. Does that count as a flip? I don't know the ROI but I like the numbers.
Keep on buyin'
Ken
Ken,
I'm curious how you found this deal? What's the story behind it? Home owner defaulting? House sold yet? How did you market it? Someone came to you with financing? Home was priced undervalued to attract buyers? What were some of the closing costs involved. Sorry for all the questions, I'm new to real estate investing : )
James
- Loveland, OH · Member since 2017 · 21 posts · 4 votes9y
Originally posted by @Engelo Rumora:
Originally posted by @Brian Garrett:
Originally posted by @Engelo Rumora:
Originally posted by @Account Closed:
Sounds like you have already laid out our guideline for success. My personal goal is to pocket 20% Of ARV before taxes.
Good one mate,
Can you reveal the numbers on any particular deal?
We are just finishing up an A Class flip that we should make 50-70% net.
Crazy numbers but they only come along a few times per year lol
Thanks
Those are some very impressive numbers. Kudos!
Thanks mate
Those profit margins are very rare.
We always shoot for 30%+ and tend to get it often.
Ohio is a "boring" market when it comes to growth.
But from a profit or cashflow perspective, it's freaking amazing.
I know many folks from the West Coast that brag about a $50,000 profit on a $500,000 investment lol
We can make a $50,000 profit here all day long on a $100,000 investment.
There are many great deals and home owners still have the capacity to purchase, meaning the exit strategy is solid.
Thanks again
50% profit on a $100k investment - I'll start looking into those in the Cincinnati area!
- Engineering Consultant, Investor · Seattle, WA · Member since 2013 · 213 posts · 61 votes9y
50k profit on a 100k investment is insane. A typical rehab takes 4 to 6 months from key to key (from when you close to when you get paid). That's 100% to 150% annual ROI. Is there another industry that offers a better return than this?
If I could net 50k on a 100k investment, and can repeat it on a regular basis, not just one home run deal, I'd keep my head low and won't tell anyone else about my market, lol. So @Engelo Rumora , thank you for sharing with us. Is anyone else packing up and gold rush to the midwest?
- Flipper · Oklahoma City, OK · Member since 2017 · 3 posts · 2 votes9y
Averaging 20 percent is always good and then hit a homerun now and then
- Houston , TX · Member since 2017 · 31 posts · 11 votes9y
hi would say 20-30% would be acceptable. Not trying to get rich overnight, looking to earn what I get.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes9y
@Engelo Rumora I am curious you reference 30%, but isn't the percentage partially dependent on the property? If you were flipping a house that sells for $100K, then 30% is $30K, but a million dollar property would be $300K. I would expect higher percentage return on lower priced houses.
Also you mentioned finding a diamond and getting really high return on some deals. Do you also find with larger volume that you have some bad ones that make really low returns. I am just curious if in the end it just balances out to an average of 30% for you or is your average actually higher than that?
- Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes9y
you can shoot for the moon (30-50% net margins) but the reality is, competitors will get the deal, especially now that inventory is so low.
the question should be, how much $ do YOU wanna make? and you really need to know your numbers.
here's one for ya you probably don't know; if you are marketing to 1st time homebuyers, you will have to give them a closing cost credit of anywhere from $1k-$5k. guess what? that comes straight outta your pocket; so does the $350 survey (at least in my area), the attorney fee, obviously, real estate commissions.
another big surprise people find is building depts. making you do stuff to code; "you opened a wall? now you have to update everything.
you probably won't include your personal credit card interest as part of your costs (you should).
you also need to include your time? so how much are you making per hour?
for me, personally, the loan flip I did, after all the costs above and beyond considered, I made a 13% NET (not gross margin which can be skewed depending upon your rehab budget) and made $19k before taxes.
too many newbs have no idea on their costs in this biz.
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Rebecca Belnap:
On my first flip, we bought a bank owned property for about $45,000. Our plan was to sell it for $80,000 and make a $25,000 profit. We did all of the work that we could ourselves thinking that we would save money, so it took 10 months before we had it sold. It was right next to a freeway overpass that went over the largest street in the city and some train tracks. It had a well and a septic tank system all on .04 acres. Our buyers were smarter than us and decided they wanted a survey so they could put up a fence to protect the kids from the busy road. The result of the survey was that only the front yard and 1/4th of the house was on our property; the rest was on the neighbor's land. I took my mentally handicapped child to the appointment to meet with the neighbor to talk about buying the land from her. She had us over a barrel and she knew it, but after some negotiations, she and the surveyor met us at the property and she strung a line along the path of what she was willing to sell us for $10,000. After $2500 in survey costs and recording fees, we were able to close and sell the home (6 months before the new owners had trouble with the septic leach field that was still on the neighbor's property).
The buyers bought it for $92,000 and our final profit was about $8000. So we made $800 per month as our only job. Yes, we went into credit card debt to buy groceries, gas, and even to pay our own mortgage. We LEARNED! The next home we had seller financing and made a $24,000 profit. Still made a lot of mistakes, but less mistakes and less serious ones.
The main thing new investors need to understand is that it will take more cash than they think. You will likely go over budget and need a safety net. When you use other people's money, you still need to respect it as if it were your own since you will want to use their money again for the next project. Poor returns can shut down your credit line.
Short answer: If you break even on the first one you are doing well. Always have 2 to 3 exit strategies. If you can't sell it for a profit, can you get long term financing and rent it profitably? Can you Lease Option or seller finance it to improve down payment and cash flow? Would you want to live in it yourself if your home home will sell easier? Does your city allow airbnb?
Thanks for your detailed comment Rebecca and great advice.
I lost $25,000 just last year on a deal that was 2min from my office hehe
That was the 300th deal I did in my career lol
Mistakes will always happen and money will be lost.
As the saying goes "Those that try, they also make mistakes"
Well done and it looks like you're making some good profits now.
Keep up the good work.
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Kuba F.:
Some people get lucky and do well on their first flip, with the most common factor being that the market shifted their way despite all of their blunders. That's generally the exception, and not the rule and one should expect that there is a price to learning on the job.
So another way to look at the question that was posed could be: how much will on the job training cost you on your first flip?
Cost me $300,000+ hehe
That would be my first 10 flips lol
- Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Bob Okenwa:
Thanks for the insight. Much appreciated. How much do you spend on an average deal out there in terms of rehab?
Sometimes $5,000 and other times $25,000+
Don't forget that we mostly do B class and turnkey.
Our profit margins are amazing and we still deliver a turnkey product at market or below market value.
A true win/win for all.
I'll tell you this tho.
I can rehab a house for pretty cheap in Ohio.
Many folks here want work and with a company like ours, they are willing to accept lower rates for the consistency we can offer.
Thanks
Join the conversationCreate a free account to reply, vote on answers and follow this thread.