Sticking to the Numbers!

[Lauren Cutchen]

We have been looking non-stop for a house to flip for the last 2 months. We have been really eager to get started and have signed up with wholesalers in the area, been driving for dollars, and sending direct mail. And then I came across a listing on the MLS for a flip house. It was an inherited property, the started to try and renovate, and didn't complete it. I brought in 2 GCs for estimates before the offer and it would have made a small profit - around $25,000. But it seemed too goo to be true - cosmetic changes and roof replacement. Nothing big.

To our surprise, we beat 15 other offers, and the agent said ours wasn't even the highest offer. We won by having the best terms (short inspection period, quick close, etc.) We lined up 7 different contractors including home inspection, plumbing, roofers, other GCs, and flooring estimates. We were organized and ready to show up Thursday for it all. Well, thank goodness it rained Wednesday... It showed to be a total train wreck of a place. 

We pulled out of the contract after the other agent gave the cold shoulder to our counter offer. It wasn't the outcome we wanted. But the inspections and estimates came back way too expensive to make sense. Although disappointing, I'm glad we stuck to the numbers and not our emotions. This was our first actual flip my husband and I were going to do. 

[Evan Polaski]

@Lauren Cutchen, glad to hear you dodged the bullet.  Personally, my wife and I won't go into any project that we don't see at least $50k in profit potential.  After a dozen flips and 2 dozen rehabs, we have seen 20-30k disappear too quickly in a renovation.  In fact, the one we are working on now (full gut of a rental I have owned for 10 years) seemed to be a $60k rehab that is now a $100k rehab as we started opening walls and realizing there were some former leaks that rotted studs.  

I mention this as an example to make sure you have a very healthy margin in all deals , measured in real dollar profit and not percentage return.