My First Flip - An Amazing Experience!

[Tim G.]

Wow! Where to begin!?!

A quick background on how I got involved in real estate investing.  I started a new job a couple years ago.  About a year in, my boss asked me if I was interested in retiring in 10 year.  I obviously said yes!  He started talking to me about real estate investing.  He has 3 duplexes in an upscale neighborhood of Cincinnati that cash flow very well.  So I started digging around and found Bigger Pockets.  I spoke with the wife about this and she wasn't really on board with the whole rental thing.  So I brought up fix and flips, which she was a little more cautiously open to due to the "short term" nature of owning the property and not dealing with tenants.  Now that the first flip is done, I think she's more on board with fix and flips or rentals. ;-)

Looking back on the last 6 months, I really didn't know what I didn't know!  Thankfully I have a good realtor that has worked with investors and knows what's needed to buy a house at the right price in order to make a profit.  They say you make money when you first buy a home - well without him, I probably wouldn't be writing this success story!

We put together a search in suburbs on the north side of Cincinnati primarily in 3 good school districts - Lakota, Mason & Sycamore.  It probably took us about 2 months to find the right property because it was my first 1 and I really didn't want to deal with a "train wreck" for my first property.  The house had been sitting on the market for about 8 months and was extremely overpriced - starting at $109k and had slowly fallen to $90k.  We took a chance and put an offer in at $60k.  After a little back and forth, we agreed on $62,750.  We closed on the house on 2/25/14.  I used a construction loan for $84k and borrowed $20k from a good friend to fund the down payment on the loan.

Over the next 3 months, with the help of my parents and my father-in-law we rehabbed the home.  As with any first time rehab, I completely whiffed on the budget!  I had $21k budgeted for the rehab.  Once it was all done, I came in at $27,637.94.  Taking a step back to look at what happened, I really only whiffed in 2 areas.  I had a new roof, gutters and soffits put on the house.  I had budgeted $6k for this.  Ended up being almost $9k.  The other item was windows.  I wasn't planning on doing windows as they didn't look horrible - just needed a little work.  Well that didn't work out and we ended up replacing the windows for $3k.  The rest of the budget items weren't way off - saved here and overspent there.

Put the house up for sale on 6/9/14 for $139,900.  Had 5 showings in the first week and received an offer for $135k after 7 days on the market.  Had a few minor things come up in the inspection that were taken care of and that was about it.  They had some issues on the loan that delayed closing.  But ultimately closed on 7/31/14.

Purchase Price - $62,750

Rehab - $27,637.94

Carrying Costs - $3,098.39

Commissions, fees, etc - $8,316

Seller paid closing costs - $1,000

Interest on hard money loan - $5,000

Total Expenses - $107,802.33

Sale Price - $135,000

Profit - $27,197.67

It was a pretty grueling 3 months of work, but in the end it was a great learning experience and I have a degree from the School of Hard Knocks!  I've learned that in order to grow this business, I need to get out of the rehab part of it.  I'm already in talks with the contractor that did the roof to do the whole rehab.  We've looked at a couple houses together and his prices are inline with where I think they need to be.

Sorry for being so long winded and thanks for reading!

BEFORE PICTURES!

AFTER PICTURES!

Random before and after shot of the hallway.