My first flip - ghetto house to best house within blocks
I learned so many lessons on my first flip. I bought this house in July 2016 from a wholesaler in Ogden, Utah. I wanted to share some of the most valuable lessons in case they helped someone else out in their real estate journey. First, let me share the numbers and pictures with you. Then I’ll get into the nitty gritty:
Purchase Price: $60,000
Materials and Labor: $46,319
Holding Costs: 2,371.50
Final Sales Price: $141,000
Closing Costs and Commissions: $11,082
Total Profit: $21,228
My real estate journey started about 10 months ago when I began listening to the BP podcasts. I had always loved watching the flipping shows, but never thought I'd have the guts to actually do it myself. I listened to podcasts for a couple months, attended some local REIA meetings, and networked as much as possible to learn from those that were doing it. I then cashed in my IRA, got a HELOC on my house, and made the decision to just jump in and figure it all out.
I’ve told many people that I probably bit off more than I should have on my first property, but looking back now, I wouldn’t have it any other way. Here are my biggest take-aways:
Lesson #1:
If you have to evict tenants, then do it ASAP. When I closed on the property, I went up there and was genuinely nice to the tenants (had been there 6 years, but were on a month-to-month lease). The place was trashed, so I should have assumed they would be difficult to deal with. I believed them when they said they’d be out by a certain date, but: (a) that didn’t happen, (b) they didn’t pay me for the 1-month rent, and (c) they left ALL of their crap. Lesson learned: begin the eviction process ASAP and let the professionals do their job.
Lesson #2:
Learn how to estimate rehab costs. I went in to the remodel with a $35k budget, and blew that out of the water by spending an extra $11k! That could have killed another project, but thankfully there was a lot of room in the deal so I could make those mistakes on my first project and still make a profit. Things that cost more than I anticipated: Windows, interior doors, labor (in general), and cabinets/countertops and pretty much everything else. Lesson learned: spend more time at Home Depot/Lowes if you aren’t sure and make sure you have a better grasp on what materials will cost.
Lesson #3:
Stay up to date on current comps. This is one thing I knew was important and I’m really glad I was proactive. There was about 4 months between purchase date and listing date (took 1 ½ months to evict) so the market could have changed drastically during that time frame. I asked my Realtor for comps (sold/under contract 180 days back) each month during the process so that I could keep my finger on the pulse of the Ogden/Weber County market during the renovation. I initially listed it at $147k, but after 2 ½ weeks of zero offers we decided to reduce to $141k and that’s when things really picked up. Lesson learned: know your market really well when you’re purchasing a house but even better when you’re listing the house. Don’t get too greedy. The faster I can close on this property the faster I can move on to the next one and put my money to use.
Here are some before/after pictures of the rehab. My 2nd flip will be sold in two weeks and I’ll post about that once it’s final. My goal is to do 5 more flips this year.
After exterior:
After living room:
After kitchen: