Flip Walk-Through: Small Ranch to Luxury Home ($179K Expected Profit!)

Flip Walk-Through: Small Ranch to Luxury Home ($179K Expected Profit!)

2 min read
Matt Faircloth

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, N.J., is a developer and owner of commercial and residential property with a mission to “transform lives through real estate.” DeRosa creates partnerships to finance select real estate investments and has a proven track record of providing safe, profitable investment opportunities to their clients.

Experience
Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to hundreds of units in residential and commercial assets throughout the East Coast. Under Matt’s leadership, DeRosa has completed tens of millions in real estate transactions involving private capital, including fix and flips, single family home rentals, mixed-use buildings, apartment buildings, and office buildings.

Matt is an active contributor to the BiggerPockets Blog and has been featured on the BiggerPockets Podcast three times (show #88, #203, and #289). He also regularly contributes to BiggerPockets’ Facebook Live sessions and teaches free educational webinars for the BiggerPockets Community.

Matt authored the Amazon Best Seller Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money. The book is a comprehensive roadmap for investors looking to inject more private capital into their real estate investing business and is a must-read for anyone looking to grow their business by using private lenders and equity investors. Kirkus, the No. 1 trade review publication for books, had this to say about Raising Private Capital: “In this impressively accessible introduction to a complex subject, Faircloth covers every aspect of private funding, presuming little knowledge on the part of the reader.”

Matt and his wife Liz live in New Hope, Penn., with their two children.

Education
Matt earned a B.S. in Industrial and Systems Engineering with a minor in Business from Virginia Tech. (Go, Hokies!)

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I’m super excited to share with you guys a project we’re in the middle of in New Jersey. This is an ENORMOUS house—it’s going to be a luxury home. We’re about three-quarters of the way done with the fix and flip.

I’m going to walk you through this property, while explaining three essential tips to bear in mind when flipping a higher-end property. I’ll also go over all the numbers involved in this deal.

Related: Flipping Houses: The Ultimate Step by Step Guide

You need to watch the video above if you have any desire to get involved in fixing and flipping luxury properties. We bought this one for $235,000—and it was a third of the size it is now. We’ve added a level—and lots of square footage—and I can’t wait for you to see this video tour.

But first, here are the things you HAVE to consider when taking on a project like this.

3 Tips for Successfully Flipping Luxury Homes

  1. Go higher on your finishes. With this type of property, you can’t go builder’s-grade, standard grade, el cheapo, anything. It has to be perceived as something that’s really nice. They have to look like finishes that fit in a luxury home. For instance, the front door we installed on this home is not a standard door. You’re not going to see it on a shelf at a big box home remodeling store. This one probably cost $700 to $800. If you’re wondering why we’d spend that much on a door, think about it! It’s the first thing you see when approaching the property. Light fixtures, sinks, appliances, floors, buyers looking at luxury properties are going to be considering all of these things. So, your choices need to be a bump up from what you might pick for standard properties.
  2. Create a “sizzle” factor. For these types of properties, there needs to be something that when you walk in the door, you go, “Wow! I wasn’t expecting that!” In other words, make it sizzle. And have a few of those throughout the home. In this instance, an open, double-high ceiling throughout the entire foyer of the house is one of those wow factors. This house also has two master bedrooms (one on the first floor) and an enormous master bedroom (on the back). These should knock people’s socks off and make the property unique.
  3. Add bonus spaces. This house has areas that could be used as a playroom, reading nook, or sitting room. Plus, it has a finished basement. Any other little square footage nooks and crannies are important to people who are considering luxury properties. You want them to feel the prosperity, to think, “This house has so much extra room! What are we going to do with all this space?!”

Property Specs

  • 3,500 square feet
  • 5 bedrooms/4.5 bathrooms
  • 2 master bedrooms
  • 1/2 bath on first floor, several upstairs
  • Finished basement

The Numbers

  • Projected Sale Price: $795,000
  • Purchase Price: $235,000
  • Construction Costs: $250,000
  • Sales Commission: $39,000
  • Selling Expenses: $15,000 (aka 2%)
  • Carrying Costs: $75,000
  • Projected Profit: $179,000

A profit of $179,000 for one year’s work?! It’s pretty amazing.

Before taking on a property like this though, make sure there are other homes in the area that are selling for similar prices. You want your final product to have been remodeled to be on par with the other homes in the neighborhood.

One other thing, I did this whole deal using other people’s money. You can do the same thing!

Watch the video above for more details about this luxury fix and flip and to find out how to raise capital to fund such a project. A great place to start is by reading my book Raising Private Capital, which is available on the BiggerPockets Bookstore. Get a 20% discount code to purchase it at the tail end of the video.

Do you have questions about this project? Or questions about how I funded it?

Ask me in a comment below.