Just sold my first flip, made a profit!
Hi Everyone,
Well, after all the research and reading, I finally proved that my action has paid off! Please know that I love to go into detail and answer questions, but I'll try to stick to an outline, and then people can ask if they want to know more.
Around September I drove around and wrote down the addresses of vacant houses. I looked them up on the tax website and sent them hand-written yellow letters. I probably sent about 40 letters and had about 6 people call me. One person called who was under the impression he didn't own the house any more, that the bank did (I found this a common misconception among distressed homeowners). He had abandoned the home, but still was paying insurance on it. He agreed to come down and show me the house. He owed the bank $37,000.
I didn't really realize it at the beginning but it turns out the house was actually a 10x40 mobile home from 1965 that had a number of additions on it. 1/3 acre of land.
I jumped through the hoops to get authorized to speak to the bank, and I offered them $10,000 in early October. They accepted it without countering and I rushed around to get the abstract done. I closed on about October 21 at 10 am, had my dumpster guy there at 2 pm, and got the ridiculously tall grass mowed, and most of the junk cleaned out by 11pm. It needed flooring in 2 rooms, some slight drywall repair, a window removed and replaced with a solid wall, and a fridge, painted and cleaned to get rid of the smoke smell, and some light fixtures. My roofer took a look and told me it needed a roof, so we got that done, too.
The rehab was done within 30 days and it was listed by Thanksgiving for $53,000. Due to the time of year, it took a little longer than I hoped to get a buyer, but we got a signed contract at the end of January for $45,500. Finally closed March 31.
Purchase Cost $10,000
Closing Costs $1300
Back Taxes $1200
Rehab $12,500
Holding Costs $1600
Selling Costs $4700
Sold for $45,500
Profit $14,200
I invested $10,000 in cash and financed the rest on 0% credit cards. People can hate on those all they want, but as long as you take enough out to make the minimum payments while you're holding the property and have an emergency fund, that is seriously cheap money.
My estimation of costs and repairs worked out really well. With the unexpected roof replacement, costs still came in right at my worst-case scenario. The dumbest thing I did was that the power was still on and I just let it run without calling them. It worked out ok, and they didn't shut it off until just before closing. Don't do that.
Also, I would have paid for a survey when I purchased it, because the buyer's bank is probably going to require it. I made an agreement with the buyer for him to pay for it, but not all will do that, and it held things up a little. If I had the survey in hand, it would have been smoother. Feel free to offer criticism, ask questions, or hit me up in private messaging. Thanks guys! Real estate is awesome :-)
Also, I was 26 when I purchased (I'm 27 now).