Flipping Homes - 1. Budgeting Lesson

[Chris Stephens]

Hello BP!

I thought it would be a great opportunity to start posting some of the current and past flips my team and I have completed. My goal by doing this is to allow the BP community to learn from our mistakes, connect with new investors, or maybe even help encourage others to start investing.

Link to my partners previous Flipping Post: Flipping Homes - My Exciting Journey (Post 2 of ?)

Palm Ave... This property could have had a much prettier ending if only for one thing. Communication. After purchasing this property, we realized how tight our margins actually were. Instead of reiterating how tight our budget was, we allowed for unnecessary spending... Lack of communication between our finder and project manager forced us to spend more money on the rehab than needed. But, after completing our endeavor we're able to list the property, making a remarkable 10% ROI.

Subject Property: Palm Ave, Redlands

Details:

Purchase Price: $394,000

Estimated Rehab: $40,500

Estimated Time Frame: 4 months

Listed Price: $499,000

Actual Costs: Approximately $22,000 with escrow fees, agent fees, carrying costs and rehab

Net Profit: $42,500

Before Pictures:

What We Learned:

- Communication is key regarding the entire Flip Process.

- Don't go over budget unless you truly feel the improvement can bring more value

- Make sure you're buying the property at a reasonable price to make room for repairs.

- Even if you disagree, announcing your opinion or idea can be beneficial.

- Having your team on the same page allows you to complete the project under budget and with great results.

After Pictures:

Summary:

Although our margins were tight and our budget was reached, we managed to come out on top with a 10% Return. Completion of this project allowed us to realize how crucial it is to communicate about our budgeting. The best way to think about this flip is to recognize it as a learning experience. In total, there were 3 partners on this flip: 2 Family Friends and our company. We were able to manage all 3 funds using an excel file. This excel file organizes all of the contributions along with costs, profit, and time it takes to complete the project. Even though we have this we are still constantly learning how to automate and organize the entire transaction from beginning to end. In the end, this flip turned out to be a great learning experience while at the same time still making good profit.

I will try to post one previous flip every couple of days and answer questions in-between. If you think I can improve on the formatting of the post or if you think I am leaving out crucial information, please let me know. I will try to answer every question.

[Cornelius Charles]

@Chris Stephens

awesome stuff. Thanks for sharing with the community. can I ask a couple of questions?

- "Estimated Rehab: $40,500"  what did the final rehab cost turn out to be?

-  "Listed Price: $499,000"  what did the property actually sell for?

- "Actual Costs: Approximately $22,000"  - wouldn't the realtor fees alone be more than this (assuming 5%)?  and I see that you say rehab is included in this, so now I'm a little confused on what your numbers were for each item.

Thanks again Chris.