I just completed my first flip in Queens New York. It took me 16 months from the minute i close as a buyer to the minute i had close as a seller. Here are the numbers.
Purchase Price- $330K
Closing Cost as buyer-$1K
Renovation Cost- $105K
Holding Cost- $18K
Misc Cost- $3k
Closing Cost as seller-$8K
Sales Price $475K
Net Profit- $10K
The experience I am about to share only applies to the New York Queens Market. Before I took on this property I want to disclose that I am a contractor and all the renovation work was done by me and my crew.
1. I had purchase the property at a city auction and I knew from the start it was going to be a full gut renovation from inside and outside. My budget to purchase this property was $300K but when your at the moment of bidding at an auction, as a rookie investor, I let my emotions get the best of me and went into a bidding war and won at $330K.
2. Being a contractor I estimated $80K renovation, the first 3 months starting I was 70% done with the inside and outside work. But then my electrician decided to take his third payment and disappear so I had to get another one and then to find out that the new meter i wanted outside and upgraded was going to take another 6-9 months for the electrical company and the city to complete and inspect. I estimated to finish this project in 3-4 months and now with another 6-9 months that would make it a year. This is how the NYC market operates and all because i wanted to upgrade the meter and relocated it outside with higher amp wires. The old meter was located inside and the wires were so thin that it would not support the electrical output of today's generation.
3. Finally after 12 months holding and winter came and gone, i was in the finishing stage of renovation, so to save some labor cost i decided to do the rest myself. That took another 2 months because I had to get it done part time so that i could fix some other personal family matters that i had no control of. I could had subcontracted to get it all done fast, but $450K already spend and I didnt have enough to keep spending if i wanted to profit something and lucky holding cost wasn't much.
4. I did a for sale by owner and sold it to another buyer. We both didnt have any agents so that saved me 4-6% of the sale price but it didnt come easy. Doing a FSBO was very time consuming and it took 2 months to find the right buyer.
Conclusion: I cant wait to start my next flip, i was over confidence thinking that being a contractor I have some advantage but i didnt and in this NYC market it didnt matter because some things you just cant control.
Thanks for sharing that cautionary tale. My main take-away was: look what can happen if I bid above my budget! You probably had a lucky escape because values rose during that time anyway.
Thus, if your Buyer were to list it through an Agent, they'll likely make more than you did, overnight!
yes value did rose 9% after holding for 1 year, I was almost prepare to break even.
@Account Closed Congrats on your first flip and for being profitable, even after some challenges.
@Account Closed That's great that you not only gained experience, but also a profit! Now you can take what you learned and repeat the process, eliminating mistakes you've already made. Best of luck on your next one!
Account Closed thank you for sharing your experience and for having the wherewithal to learn and continue to move forward.
thank you everyone, the profit margin was not what I expected but the expierence level was a much greater reward.
That's a tough deal. Your ROI on your time was very heavily diminished. You still have to pay taxes on top of your profit.
Let's say you put in 5 hours per week average so 20 a month times 16 months = 320 hours
320 hours / 10,000 = 32 an hour
I have a friend who does multi million dollar rehabs in CA. The risk is bigger and the market can change so the spread has to be bigger or you do not do it at all. Next time assigning the paper for that small of a margin could make more sense than rehabbing.
A property I am taking on is off market and has 900k upside potential on a commercial property. Probably take 1 year to turn around . The deal is off market from one of my mailings. The auction buyers are starving for properties. You have to find off market where you can get a seller one on one and be there at the right time they need a solution to the problem in an expedient manner. That is where you can usually unlock value and big gains for your time.
You were very lucky as any market across the country can drastically change in a span of 16 months. You could have had huge losses and be stuck right now. Glad it worked out okay for you. Next time calculate worst case scenario and if expected yield is below a certain level walk away. One investor friend that has been doing this for 40 years told me there will always be another property tomorrow to look at and consider purchasing. You need the great deals to accelerate the results. The okay to marginal deals you will spin your wheels and possibly lose money.
At least you broke even. Education isn't free. I know a guy that undertook a flip. It took him about the same time as yours..roughly 18 months. He lost 50K!
@Joel Owens this was actually supposed to be a lost, I over bid, holding cost accumulated, my electrician stole $5000 from me, by not having a buyers agent 2 months was wasted, the city and electrical company put work on hold for 9 months. I probably made every rookie mistake on running the numbers by being over confidence as a contractor thinking I was going to save money. Yea your right Uncle Sam wants his cut once income tax comes around, but what I learn doing my first flip in this crazy NYC market was all worth it, and will try direct marketing mail this time.
@John Thedford that was actually my goal to get out of this at breaking even, that extra $10K was luck and enough to pay Uncle Sam if I don't use the 1031 exchange. $50K lost would had taken my motivation away.
Sounds like you still win!
how was it bidding with the city for realestate Can you go into some more detail?
@Rick Wang the Auction here in Queens NY was great. There were 15 properties and about 200 people at the court house wanting to grab a deal. The property I purchase was 3rd on the list so I though I was going to get a deal but then I realize I was bidding against a person who actually wanted the property as a resident. It's tough to win against someone who is not an investor because they don't have limits. I do recommend auctions as resort of buying deals for a small profit margin, there's no home run deals as I saw many properties being over bid. Closing cost was very cheap at $1K, I had used Heloc from another home so it was all cash.
Do you have a link or something to the auction? I was just about all done in nyc, everytime I try and give up, it seems like prices just keep going and going and going...
@Rick Wang yes I do, I will send you a message with all the info, NYC is a big money market and competitive, we just need some edge to beat out the rest, mines was being a contractor and sometimes that doesn't matter.
Thank you very much. I went to 6 open houses, I should post some pictures. Lets just say the bathroom in horror movies are in better shape than these. They still wanted top dollar.
Congrats on your first flip. You learn a lot and will be ready for the next one. You even made a profit on this!
Account Closed Congrats on your first deal. Things kinda got close there but I'm glad you were able to get out of there in time. Moving forward, you now have the experience and knowledge necessary to make sure you put yourself in a better position next time.
To get a bit off topic, can you tell me a little more about your contracting business? What kind of work do you guys do and where do you usually conduct business?
Feel free to PM me or email me if you prefer not to get into specifics on here.
Look forward to hearing from you,
@Rich N. thank you
@Abel Curiel thank you and yes it Was a close one. My business is part time now as I want to dedicate more time to RE flipping. The work I do is everything from inside to outside to building a new construction anywhere in queens NY area only.
Account Closed I don't know if I'd call this a success, but congrats! I think of successes as something other people would want to imitate, but I would not recommend that anyone try to do this.
How did you finance this? And did your reno costs include paying yourself since you did a lot of the work?
@Larry T. as a first flip to not lose On top of all the rookie mistakes I was making was a success, I call this boot camp lol. I have a rental property that I took a HELOC and bunch of promotional credit card to finance this project. Has for materials, Home Depot and lowes helped a lot with no interested for 2 years on 60K credit limit and 10% off for military veteran like myself. The Reno cost was another rookie mistake, I did a high end $105k renovation in a middle class neighborhood thinking my house value would sky rocket but once the appraisal came in, it wasn't what I expected. I could had put in $70k of middle end work and still had the same appraisal results due to the market value in the area, I am speaking of NYC queens area and I don't know how other areas work but here it's pretty challenging. But on positive note, with that high end renovation I had no shortage of offers.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you