My brother and I made almost $42,000 on first flip!

[Shawn Nguyen]

Hi everyone,

My brother and I just made $42,000 on our first flip. Our business is slow, so we decided to flip house. My original plan was to buy a fourplex and invest in it, but the price was just ridiculously high, so we decided to flip house. Please excuse my grammar, but here are some details about it. Damn, I wish I took some pictures.

We bought this house for $386,000 in cash. This house was in bad shape, it looked like it has been robbed. Cabinet, countertops, sinks, oven, water heater, air conditioner, heater, and some doors were missing. The neighborhood was selling b/t 440,000-525,000. Because I am hvac/electrical contractor and my brother is general/plumbing contractor, it's no problem for us. We remodeled this house from sctach. All new Heating, air conditioning, water heater, kitchen, floor, painting, bathrooms, plumbing, and I even added solar panels. Everything was permitted according to city codes. The remodeling process took us about 2.5 weeks with three helpers. We put on the market for $475,000 and what amazed me is the amount of offers and how fast it was sold, only two days. Anyways, we are happy with our profits. After materials, fees, ect. We both profited about 21k each. The only thing I am weak at is real estate experience, but I am learning more and more now after the first sale.

I am looking for the next house as I am typing this. I will take some pictures next time
:lol:

[Ibrahim Hughes]

Congrats. I don't want to cast any negative over a positive experience. However, and this is really for the newbies out there, your margins were dangerously thin.

The rule of thumb, and this is for your protection, is to buy at no more than 65% of the ARV minus the repairs. You guys apparently purchased at 81% of the ARV and then put in another 10% towards the rehab. You were lucky. Had the market turned south or something popped up that you didn't anticipate (bad roof, contaminated soil from an underground storage tank, etc.) this could have turned out bad. The good thing was that you guys were able to do the rehab work at cost. Not everyone can do this and not everyone can buy at the margin you used and make a profit.

Again, congratulations but you really want to stick to the formula. There have been many an investor who got burned out of the business using the margins you used.

All the best and on to the next deal!