Sorry for the long post, but I wanted to give a full review of my first flip. I’ve had been lurking around BP for around 2 years now, and the amount of information is amazing. Here is the story on my first flip.
I had been searching for houses for some time looking for the right deal. A property from auction.com came up I liked, but it was one of those with no showings allowed at all. The back door deadbolt was not locked and I was able to use the old credit card trick to get in. Being a rookie and overlooking all the things that add up I figured I could rehab it for around $15k or less (new roof was half of that) and sell for about $115-$120. I made a “Pre Auction Bid” of $60,000, a day later I got an email about multiple offers requesting highest and best. Not sure if they were just saying that, or just trying to get me to increase my offer. I moved up to $65k, they called me later saying they had 2 offers for $65k and asked if I wanted to increase. $65k made me comfortable and I didn’t know if they were being honest, so I went up to just $65,500 and got the house 10 minutes later. Hurray!
The house was a total mess inside with junk left, and the yard was a disaster with overgrown everything and a thick later leaves all over the yard. Like I mentioned, I purchased this prior to the actual auction starting. To my surprised, auction.com reps showed up a few days later to put up auction signs, and clean to clean the whole thing out and clean up the entire yard. It took them 2 days. They must not have received the memo that the house was already under contract and they did not have to do all that work. It was a nice surprise.
The house went under contract around the end of January, and we closed March 14th. The selling bank was slow to sign the contract, plus they take 6 weeks to close. Based on advice I read from others who purchased auction.com property, I opted to use my local closing company knowing I would have to pay some duplicate fees and buy my own title insurance. I could have used their closing company and saved some money, but I wanted someone working for me on closing to make sure everything went smooth.
March 14th – Closing day went smooth, this was my first all cash purchase, and it’s amazing how much less paperwork and time the closing takes. In and out in 5 minutes. My wife and I are frugal people who live on about half of what we make and invest the rest. So, we built up a good pile of cash over the years to make this happen. (Thank You Dave Ramsey)
Once I got in the house we quickly found out there was many things I overlooked that I would need to replace. The first blow was cut wiring in the crawl space and attic I did not notice. The previous owner wanted to be a jerk. It took 5 days and $600 to get that fixed and get power on in the house. One bathroom had a crappy tile job that went around all the walls, so we gutted the whole thing which we did not plan on. The kitchen cabinets, which I did not look close enough were junk as well, so all new kitchen. There were different types and colors of trim and doors inside the house as well, so we did all new trim and doors. It ended up being one of those houses that I said, “well if we’re updating all of that, we need to update these as well.”
Rehab took 7 weeks. New roof, kitchen, appliances, trim, doors, laminate flooring, carpet, tile bathrooms, entire house painted, ceiling retextured, vanities, and much more. Total rehab cost, nearly $36k! My estimates were far off. I kept justifying the extra expenses by increasing the ARV of the home since it would be brand new home inside. I was starting to get worried about appraisal. This home was built in 1969 and all the houses in that neighborhood (mostly all dated inside) sold for $70-$95 per sq ft, with the exception of 1 (updated) home in the past year that sold for $105 per sq ft. I was wanting to list for $135k, which was $110 per sq ft. Nervous about appraisal and wanting to make sure I was priced more competitively I priced at $132,500. My all in cost for the house, closing, and rehab was around $103k. I was worried that in a worst case scenario I would end up selling for $125k and buyers always want closing cost help these days. Take out realtor fees and seller closing costs and I could be looking at a profit around $10k for 7 weeks of late nights. After taxes, not super exciting, but I also give a lot of value to the experience gained.
May 4th – Officially on the market for $132,500, and boy did things happen fast. Within a couple hours we had 3 showing set up that night, plus a full price offer from an out of state person who was buying it based on the pictures before the other 3 showings happened. My agent notified the other potential buyers of the offer, and one of the buyers from the showings also offered full price but all cash. We asked for best and final. Out of state buyer didn’t change their offer, other than increasing the EM deposit (we told them $500 was too low since I was worried they would change their mind and only be out $500). All cash buyer came back with a $135k offer, which is what I wanted in the first place. Score! And I didn’t have to worry about appraisal. We closed on May 19th.
Final Summary:
Selling Price: $135,000
Purchase Price: $65,500
Purchase Closing Costs: $1,472
Rehab Cost: $35,882
Selling Closing Costs (including realtor): $8,632
TOTAL PROFIT $23,514
You can see more before, after, and during renovation pictures on the Facebook page link in my signature.
Before pictures:
