$43k First Flip

[William Allen]

I am primarily a buy and hold investor but I had a great opportunity come my way that I couldn't pass up.  Initially this property was going to be a rehab and rent but when I looked at the margins it made more sense to try to flip it with a rental as a backup exit strategy.  

I wrote a post about my home search.com experience.  If any of you want the details, have a look at my profile and read that post.  It was quite the learning process and I'm glad I did my research ahead of time.  The short story was that we bought the property on the auction website for $120k with a $6k buyer premium fee and closing costs of about $2k for a total of $128k.  

Initially I had a $40k budget for the property but I changed the scope in an attempt to increase the ARV after I walked through the other resales in the neighborhood (the neighborhood could support a higher price than I originally planned on).

We ended up doing a $62k renovation on the property to include a new roof, all new mechanical systems (including A/C compressor, hot water heater, furnace, sump pump), full kitchen and bathroom renos, all new flooring, paint, landscaping and deck.  Plenty more little things but too many to list.

Holding costs were close to $3k and selling costs were $28k (RE commission, my closing costs and help for buyers closing costs).  

Selling price of $264k giving us a pre tax profit of $43k!  

I am very happy with this experience and will likely continue to look for a few flip deals a year to supplement my rental income.  I had a good time and learned a lot.

One of the things I learned during this project was no matter what you plan for and how many times you walk through the property you will miss something.  One example of this was when I went to have the gas company come out to turn on the gas to the house, the guy wouldn't turn it on because the meter was under the deck.  The previous homeowner built the deck (which was obvious due to the poor construction) on top of the gas meter and I hadn't noticed it.  I was already changing the railings and stairs on the deck so we ended up cutting 1/3 of the deck off to expose the gas meter.  Fortunately the deck was large enough that this still made for a very nice entertaining area outside.  

I look forward to the comments and questions.

-Bill