Sold! $52,000 Profit Flip, despite challenges

30 Replies

Hey everyone!

I wanted to post our latest sale that closed about 2 weeks ago here in Seattle (SeaTac). Despite having a business partnership issue on this property that delayed us listing the house for almost 30 days, we still came out well on this one. Below are the pics and details on the deal:

Property Details: Property is a 4 bed/1.75 bath 1660 sqft home built in 1961.  We found the property via a wholesaler who tied it up.  The house was vandalized throughout, copper was stolen, furnace destroyed, water damage in lower level, roof was leaking near front door, etc.

This house all in all was a simple house for a rehab for the most part.

Major issue: The biggest problem we faced was the crawl space was full of water.  This is typical in seattle, but you have to deal with it somehow.  You can add a sub-pump (which can be expensive).  However we got creative and fixed it old school.  We found where the water was coming in, then graded the dirt with new fill dirt, making channels as we went until we reached an old clay drain pipe we found buried.  From there we led the water out of the crawler, then we put a nice thick vapor barrier throughout the entire crawler and sealed it. Instead of a $2500 fix, it became a $500 fix for labor and dirt.

Rehab Scope: Roof, ext/int paint, kitchen, new flooring throughout, update both baths, new plumbing to replace missing copper, furnace, rear deck, doors/trim, etc.

UNFORESEEN Delay: On many of our deals we tend to partner with others, and those usually go smoothly.  However on this one we had an issue with our own internal partnership in our company.  One of our partners broke their agreements and led us to attorneys and such which created more drama then needed.  Since this property was ready to list when this was happening, we decided to hold off on listing until we removed the partner and technically had to change title.  The property sat finished for 30 days before we could list.  I am not sure if this helped with prices, but it worked out in the end.  Nothing more frustrating then sitting on a beautiful house with staging in it though...

The Numbers:

Purchase: $195,000 (cash)

Rehab: $50,200

Holding: $1539

Closing/sales/excise: $28,000 (roughly)

Sold in 6 days: $330,000 conventional, no concessions

Profit: $52,074 give or take.

Bottom line, is make sure that you have VERY well defined contracts when you set up your partnerships, whether its for your company or a joint venture on a property.  You never know what some people might do once money is involved.  This comes from many lessons over my lifetime so far, CLEARLY define what peoples roles are and what happens with the money once its in the business PRIOR to making the money.  This helps eliminate a lot of drama and weirdness later in the game should it come up.

Hope this helps!

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Congrats!  Looks awesome!  There seems to always be something unexpected to overcome with a flip.

The house looks awesome and in one deal you've made what many people make in a year working their "J-O-B".  Congratulations! 

Hi Tarl, the house looks great and glad you came out in the end!!!  

My husband and I are looking into flipping, and it's helpful to hear about your journey through the entire process so that we have a sense of what we're signing up for.  

How long did it take to rehab the house?

Well done!  You not only improved the neighborhood, but also your pocketbook.  

Can you cover a little bit about how this short-term profit will affect your tax situation for those of us that are new?  Should we just count on giving 35% of our calculated risk, hard-earned labor and challenges overcome to the gov't?  Again, congrats!  

Thanks for the report including the partnership issue.  Great job and excellent profit. 

I didn't see any dates included that would be used to calculate ROR.  Those are always helpful in comparing opportunities.

@Tarl Yarber The house looks amazing.  How did you come up with design of the house?

One of my main fear is designing the home.

Originally posted by @Puttery Cher :

Hi Tarl, the house looks great and glad you came out in the end!!!  

My husband and I are looking into flipping, and it's helpful to hear about your journey through the entire process so that we have a sense of what we're signing up for.  

How long did it take to rehab the house?

Hi Puttery! The rehab on this house took about 50 days or so, would have been done sooner but we made some last minute changes and such towards the end.  Good luck on your future venture!  Just don't ever get caught up in the hype of a single house, this is a strictly numbers kind of business in the end.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

@Steve Vaughan

Yes, short term flips are generally going to be taxed at your tax bracket.

Originally posted by @Tom Cyr :

Thanks for the report including the partnership issue.  Great job and excellent profit. 

I didn't see any dates included that would be used to calculate ROR.  Those are always helpful in comparing opportunities.

Hi Tom. We calculate our ROI on a per project basis, and do a cash on cash analysis. So for this house we bought it early February and our disposition was late may, so close to four months. Our net ROI was roughly 20.4%

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Originally posted by @Tuan Le :

@Tarl Yarber The house looks amazing.  How did you come up with design of the house?

One of my main fear is designing the home.

Hi Tuan.  We have been doing this for a while, so we have a couple of basic models we use for our rehabs.  Typically if its a mid grade finish, we go with grey tones throughout.  White shaker cabinets, grey quartz counters, grey floor tile in baths, white subway tile with grey grout in shower/tub, grey house ext, even the int walls are a shade of grey from Sherwin Williams called revere pewter.  Best advice for designs when starting out, is look at houses in the neighborhood that other house flippers of done that look great and sell fast, then copy them :)  After a while, you start to come up with your own.  Big key: only do what the neighborhood demands. If the neighbor hood is low end, formica counters, then don't put quartz in, etc.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Originally posted by @Steve Vaughan :

Well done!  You not only improved the neighborhood, but also your pocketbook.  

Can you cover a little bit about how this short-term profit will affect your tax situation for those of us that are new?  Should we just count on giving 35% of our calculated risk, hard-earned labor and challenges overcome to the gov't?  Again, congrats!  

As Bryan stated, you get taxed at your tax bracket. In our case, we do everything inside of our LLC's, so make sure to expense what you can.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

@Tarl Yarber :

Hi Tom. We calculate our ROI on a per project basis, and do a cash on cash analysis. So for this house we bought it early February and our disposition was late may, so close to four months. Our net ROI was roughly 20.4%

Very good. So if you multiply your 4-month return by three, you will get your ROR, which is the real number to keep your eye on, since that allows you to normalize returns across other options. It's the timeframe that makes the ROI meaningful. 20% in 4 months is a whole different story than 20% in two years.

Now, can you find an asset to rehab three times a year to keep your capital fully invested?  Inventory is becoming scarce in many parts of the country.  Keep up the great work.

This post has been removed.

You are the Flipping Kang! I want to be like you when i grow up :)

Originally posted by @Esaul Viramontes :

You are the Flipping Kang! I want to be like you when i grow up :)

 Thanks Esaul, puberty is no fun though and can be very uncomfortable in this business.

Medium final file  jpg Tarl Yarber, Fixated Real Estate LLC | Podcast Guest on Show #189

Originally posted by @Tarl Yarber :
Originally posted by @Esaul Viramontes:

You are the Flipping Kang! I want to be like you when i grow up :)

 Thanks Esaul, puberty is no fun though and can be very uncomfortable in this business.

 Lol....copy that!

Congrats on the project! When you partner up with another investor, how do you go about finding/selecting that investor?

very inspiring. How did you come up with how much you're going to sell? Comps maybe?

This house looks great.  What did you use for the wood flooring?  Is it vinyl that looks like wood?  Engineered hard wood?  Well done and congratulations!!

248‑397‑4880 | http://www.lovettproperties.com

Excellent work, very inspiring. Keep it up!

@Tarl Yarber

Congratulations! 

That's a great turnaround, especially with the partnership issues. Glad it worked out. And your improvements look great!

And you've inspired me... I never posted the pics or deal details on my first flip. I'll do so tonight!

Looking forward to connecting with you and potentially doing deals. 

Thanks,

Tommy

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