$150,000+ Profit on Subdividing Homes - Analysis

[Aaron Anderson]

Some Before Pictures

After Pictures

Intro

August of 2016 I moved my family out of our nice 3/2 in the suburbs to pursue a deal that had it's ups and downs. This is an analysis of my FIRST REI deal and will hopefully inspire other investors to look outside of the box a little.

Spring HIll, TN is a suburb of Nashville and Franklin with a BOOMING residential growth due to the GM plant and good schools.  I found this deal by Driving for Dollars and mailing all of the absentee owners a typed letter saying something along the lines of "After driving by your property, it seems your tenants aren't keeping your home up to par with the neighbors."  The landlord called, gave me a walkthrough and named his own price of netting $120,000!  

The Property

5007-5011 Joe Peay Road Spring Hill. TN

This property was originally a 3/2 1400 sf built in 1970 with a barn behind it. The previous owners gave the barn a septic tank and kitchen and gave it a new address; however, this was still 1 Lot and 1 Tax Parcel.  My wife and I moved into the barn and started flipping. Fortunately, it already had electricity, plumbing to the kitchen and bathroom and other necessities, but the condition was very poor.

5007 Joe Peay Road was immediately filled with a tenant paying $1,200/mo (on the low side for SH) while we flipped the barn house.  Below is a detailed list of repairs and costs.

Repairs and Costs

$120,600 Purchase price

$3,000 closing costs

$950 survey to split lots

$800 drywall patching and repair

$5,500 for new water meter and installation

$500 wire fence

$1,600 new paint

$300 plumbing repair

$250 new carpet

$600 new laminate

$100 gutters, drainage, french drains

$500 front porch

$600 new kitchen sink and countertops

$2,000 other misc costs, like new blinds, touch-up paint, gravel, necessary tools.

Total Costs

$137,300

The Sale

In May, our tenants moved out and we sold the rental home for $145,000 after finding structural issues. Because of this, we were hesistant to hold long term.

We are currently under contract with a cash offer on the flipped barn for another $145,000 set to close in a couple weeks.

+$145,000 (A)

+$145,000 (B)

=$290,000 (Total)

-137,300 (costs)

=$152,700 (profit minus taxes)

Taxes are currently TBD by my CPA. We are unsure if I can 1031 an investment property that I also lived in.  It's not looking likely