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Updated over 9 years ago on . Most recent reply

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Scot Howat
  • Investor
  • Hoffman Estates, IL
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1st time flip in chicago (chicagoland) was a flop

Scot Howat
  • Investor
  • Hoffman Estates, IL
Posted

I'm in the northwest suburbs of Chicago and this was my first rehab / flip.

I'm not happy that I'm losing money on this one, but I learned SO much from it. 

I will probably lose about 12k on this one, depends on closing costs and commissions.

Purchased 92,000

Rehab 39,000

holding costs 2,000

Listed at 149,900 and got an offer 4 days later (awesome!) for 145,000 (148,000 - 3,000 closing credit).

Here's some pics

What do you all think???

I've got much better before/after pictures on my laptop, but you get the idea.

Most Popular Reply

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Jeff S.#5 Private Lending & Conventional Mortgage Advice Contributor
  • Lender
  • Los Angeles, CA
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Jeff S.#5 Private Lending & Conventional Mortgage Advice Contributor
  • Lender
  • Los Angeles, CA
Replied

Bravo to you, @Scot Howat, for having the guts to share this. Most rehabbers would simply disappear, never to be heard from again.

It would be extremely helpful to others if you shared how and why you though you'd make money on this property. What was your evaluation process? What went wrong?

I'm curious what your original rehab and ARV estimates were. If they were close to your $39k & 145k actuals, you could have predicted a loss from the start from just a rule-of-thumb:

($92k+$39k)/$145k=90%

Here, the conventional wisdom says this shouldn't be more than about 70% to 75% or so to make a fair return. A rule-of-thumb to be sure, but did you run a detailed cost estimate when you evaluated the property? Did something get away from you?

If this were a 6 month project where you used hard money, in CA, where taxes and holding costs tend to be relatively low, you could have predicted nearly a $7k loss using a detailed cost estimate. 

Sorry to hear about this, Scot.  Nice job on the house though.

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