2nd Utah flip - profited $22k!

[Caleb Rigby]

Another one bites the dust! We closed yesterday and have officially sold off our 2nd baby, aka our 2nd flip. This project wasn’t nearly as extensive as our 1st, but it was very fulfilling and still learned a ton. This property was purchased through Auction.com and is located in Roy, UT. If you’ve never been the winning bidder on their site but are interested in the process, leave a note and I can tell you about my experience.

We closed on this property 10/7/16 but didn’t begin work immediately because my contractor was working on another project. Once we began, it was about 2 months of work, which is excessive for the amount of work that was done, so I’m not happy about that, but I’ll share why it went longer in my lessons learned section below. I borrowed funds from a private investor to fund this purchase. They covered about $85% of the required cash (repairs and actual purchase), and I covered the remaining 15%. Here are the numbers for this project:

Purchase Price: $140,999

Purchase closing costs: $1,706

Materials and Labor: $31,822

Holding Costs: $9,019 (includes repayment to investor)

Final Sales Price: $220,000

Closing Costs, Commissions, and Staging: $14,667

Total Profit: $21,788

Here are some before and after pictures:

Fireplace before/after:

Kitchen before/after:

These are the major items we replaced/redid on this house: converted the carport into an additional one car garage (not as hard as I thought it’d be), carpet, updated fireplace, paint, updated lighting, appliances, laminate, granite countertops (also added a little shelf to the counter so you sit at a stool to eat), backsplash, painted cabinets, new furnace, new windows, and removed 3 dead trees from the yard. This house already was 6 bed 2 bath, so it had great bones, just cosmetically it was fugly. My wife pretty much managed this project from beginning to end and did a great job. We only had it listed for a week before we received an offer $4k less than our listing price (but $5k more than I had always forecasted, if that makes sense), so we accepted and closed 4 weeks later.

What did I learn this time?

Lesson Learned #4 (to add to my previous post):

Too many cooks in the kitchen. We wanted to help out a neighbor and give him a chance to earn some side income on this flip. We laid out 3 items that he could do and then we would pay him once the job was completed (he wanted to be paid per hour and I didn’t agree). My general contractor advised us NOT to bring anyone else into the rehab, but we still went ahead with our decision. This decision probably single-handedly cost us ~3 weeks of repair time as he kept promising us he’d get his part done. Well, he didn’t, and so we had to call an electrician to tie a couple of loose-ends at the very end so that we could list the house. Lesson: Be wary of hiring friends, family, or neighbors.

We just started our 3rd flip in Ogden this past Monday. It was an MLS purchase. It's only 1000 sq ft so we should be re-listing it within a month.

[Caleb Rigby]

@Brandon Rindlisbacher; @Brendon Grover Alright, here goes on the Auction.com process and what I’ve learned. Most properties (at least in Utah) listed on the website won’t ever make it to the online bidding part – they get sold at the courthouse steps and then the house gets delisted from the website. 

Only about 5% get listed as ‘online auction’ and they always begin with a ‘pre-auction’ time frame about 10 days before the auction begins. If you click on one of those properties, you’ll notice on the right hand side of the page they provide a ‘previously valued to’ price. I’ve found out through trial and error, to even get on their radar and have your initial bid get reviewed that your initial bid needs to be at least 75% of that price. So, for example, on this house, my initial bid would have to be at least $96k to be considered.

Once you submit a bid, you’ll get an automatic email response from auction.com that says they’re reviewing your bid. Then (and I’ve never not had this happen) you’ll get an email from an actual auction.com employee about a day later that says “We received your pre-auction bid for (property address). We’re in a multiple bid situation and are giving all prospective buyers the opportunity to provide a final highest and best. Please reply with your highest and best offer by:2/1/2017 7:00 AM PST, a decision will be made within 24-48 hours after the Highest & Final due date.”

You simply reply to that email that either (a) you’ve already given them your highest and best, or (b) you want to increase it to xxxx.

If you don’t win the auction, you’ll receive a rejection email once all offers have been reviewed and that’s it. But, if you’re the winning bidder, you’ll receive a phone call from an auction.com employee and they’ll walk you through the next steps, which are: (1) sign the purchase and sale contract, (2) submit your earnest money wire, and (3) provide proof of funds to close (as most properties can only be closed with cash). On the property I closed on, from the date I won the auction to the date I actually closed on the house was about 25 days. They have to get multiple signatures from the seller and that is generally what held things up for me, but I didn’t really care.

Let me know if I didn’t answer one of your questions.