How I Made $104,000 on My First Flip Purchased for $31K
Overview of the numbers:
| Purchase Price (Cash Sale) | $31,500.00 |
| Closing Costs | $2,019.02 |
| Rehab | $29,800.00 |
| Mold Remediation | $1,950.00 |
| Furniture Cost | $1,200.00 |
| All-in Cost | $66,469.02 |
| Sales Price | $190,000.00 |
| Furniture Sale | $2,500.00 |
| Concessions | ($5,000.00) |
| Commission | ($9,400.00) |
| Closing Costs | ($7,355.24) |
| Gross Profit | $170,744.76 |
| Net Profit | $104,275.74 |
A few Before & Afters....
Master Bath Before/In-progress:
Master Bath After:
The Story:
This house was a monster. 4 bedrooms, 1 bath, 2,714 square feet, and a toilet that emptied into the kitchen below when flushed. The roof needed replaced, there were BB holes in the back windows, every inch of copper pipe was corroded, the fuse box was somewhat melted and the house had been sitting vacant for over a year. There was also a petrified bat carcass hanging onto one of the third floor window screens.
But...the original woodwork was in place, the boiler cranked like a champ, and there were endless possibilities for improvement. The house was part of an estate and had been up for auction but never sold. I was in the driveway of another home I was looking at when the MLS notification popped up on my phone. I called my realtor and told her I'd found my house, and I asked her to meet me there. As soon as I walked inside, I knew this was the house I would purchase. Where others saw a money pit, I saw a chance to restore the home to its former glory--and make an excellent profit in the process.
However, I'd never flipped a house before. I'd never taken on a large-scale renovation. I'd also never lived in the area. While I had some DIY experience gleaned from a few rental properties I own, I truly had no idea what I was doing with this house.
I was determined, I was committed to success with this project, and I was going to be homeless if I didn't get this off the ground because I'd rented my other homes and planned to live in this as I worked on it. It was time to get to work!
The Nitty Gritty
Essentially, my first flip was a live-in, major renovation in a new city. Had I been reading BP before purchasing this house, I'd definitely would have done some things differently. But with nothing more than my Home Depot how-to books, YouTube, and some advice from friends in various trades, I forged ahead.
While I hired out the new panel, roof, gutters, back porch, and radiator repairs, I did all of the other work myself. This was a slow, non-traditional flip that included installing new subfloors, tile, PEX, cabinets, sinks, faucets, windows, landscaping and wiring/outlets/switches/fixtures, studding new walls, refinishing the original hardwood floors and clawfoot tub I found at a salvage yard, building the master bath vanity from scrap wood, hanging drywall and beadboard, and turning an awkward landing/closet/powder room combo into a full bath.
When I was finished with the house 8 months later, it was a 4-bed, 2-bath, fully renovated gem that blew the ceiling off the local market's price range. In two days, the house was under contract with an offer that was $10,000 over asking.
What I Learned
- Flipping is no joke. Everything takes longer than anticipated and ends up costing more than you budgeted (imagine that!)
- Estates are a great way to find homes to flip if you don't mind more rehab due to deferred maintenance
- DIY is definitely the way to go but only when your skills are up to par and you pull appropriate permits to avoid hassles later in the transaction
- A live-in flip is a fantastic way to reduce/eliminate costs
- Get an insurance policy that's in effect on Day 1. I took the gamble of waiting until the house was renovated to insure, and I'd never do that again unless its unavoidable
- Make friends with the neighbors. They're an invaluable resource for referrals if you get in a jam, they'll help you haul that insanely heavy cast iron tub upstairs, and they won't mind the renovation noise as much if they know who you are and see you're committed to improving their neighborhood
- Unless I know without a shadow of a doubt that I'll yield at least a five-figure profit, I will never finance a flip
- There are ways to avoid capital gains taxes, which I certainly did for this project
- When staged properly, you can sell the house for more money (duh), but you can also make a profit by selling the things you use to stage. I amassed everything by shopping at thrift stores, estate/garage sales, and picking things up off of the curb and refinishing them. I made a $1,300 profit on the staging materials alone!
Final Thoughts
Completing this project has given me the courage to complete more projects, to better hone my skills, and to leverage this success ways that allow me to be a full-time investor. I currently have 2 flips on the market (one under contract and set to close in 2.5 weeks), and I stand to make a $32,000 and $47,000 profit respectively.
As luck would have it, after I sold this house, I submitted the master bath redo to This Old House Magazine and ended up being a finalist for their Reader Remodel Contest. My work has been the feature photo for all of their social media posts and website pages! See the link below. Additionally, I'm in contact with an HGTV producer to have my own episode of a vintage home restoration show.
Had I not taken my serious leap of faith on the beat up, worn out old home with beautiful bones that nobody else wanted, I'd never be in the position to further my real estate goals and live life exactly the way I'd like.
If you're considering your first flip or investment property purchase, read the information and network with the incredible people here at BiggerPockets then get out there! Be smart but be bold. If I can do this, anyone can.