My first flip - ghetto house to best house within blocks

My first flip - ghetto house to best house within blocks

Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes

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:

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Most Popular Reply

Wholesaler · Ogden, UT · Member since 2016 · 12 posts · 4 votes
9y

@Caleb Rigby Looks great! 

A few questions:

  • What year was the home built?
  • How big was it?
  • 3 bed, 2 bath?
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61 Replies

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  • Ogden, UT · Member since 2016 · 17 posts · 16 votes
    9y

    Congrats on a successful first flip!

    I am just getting into investing in the Ogden area, maybe I will run into you sometime.

    Good luck on the next flip as well!

  • Investor · Layton, UT · Member since 2016 · 34 posts · 13 votes
    9y

    @Caleb Rigby That flip is awesome! Thanks for the insights and congrats!

  • Rental Property Investor · Alexandria, VA · Member since 2016 · 75 posts · 58 votes
    9y

    Good job man!

  • Investor · Las Vegas. Jacksonville, Bay Area Ca, Nv, Ca, Fl · Member since 2015 · 511 posts · 220 votes
    9y

    Good job!

  • Wholesaler · Ogden, UT · Member since 2016 · 12 posts · 4 votes
    9y

    @Caleb Rigby Looks great! 

    A few questions:

    • What year was the home built?
    • How big was it?
    • 3 bed, 2 bath?
  • Rental Property Investor · Lehi, UT · Member since 2015 · 195 posts · 133 votes
    9y

    Very good job and I agree with all of the tips.  What made you pick royal blue?  It looks nice, but it's a bit gutsy.

  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    @Rebecca Belnap, I had decided on navy blue but my wife talked me out of it. I agree it was gutsy, but we wanted something that popped.

    @Kyle Kapp, 1904, 2100 sq ft, 4 bed 1 bath. We were nervous that it wouldn't appraise/sell for $140k+ since it only had 1 bath, as there were basically zero comps in the surrounding neighborhoods that sold for as much with only 1 bath, but I think that just goes to show how good my contractor did.

  • Randolph, NJ · Member since 2017 · 5 posts · 2 votes
    9y

    congratulations @Caleb Rigby. Thanks for that break down and for sharing. 

  • Real Estate Agent · Westford, MA · Member since 2016 · 92 posts · 52 votes
    9y
    Have you calculated your profit after the tax impact of cashing out your IRA?
  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    @Samantha Magina, so I should have explained a littler better. I changed jobs in 2015 and at that time, I rolled my old traditional 401K into a Roth IRA, so I elected to pay the taxes for that distribution at that time. So, the complete distribution I made in 2016 will not be taxed since I had already paid the penalties.

  • San diego, CA · Member since 2016 · 6 posts · 5 votes
    9y

    great job! 

  • Salt Lake City, UT · Member since 2016 · 25 posts · 20 votes
    9y
    Caleb Rigby Looks great! I'd love to know how you found the deal.
  • Real Estate Agent · Ogden, UT · Member since 2016 · 20 posts · 7 votes
    9y

    Hi,

    I flip in Ogden for 6 years now.  Can you tell me who is the wholesaler?  I am looking for another property.  Nice job!

    r charles

  • Ogden, UT · Member since 2013 · 266 posts · 51 votes
    9y

    nice job, Ive done many in this area, and yours is first class. the tv shows make it look easy, but its a lot of work.

  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    Thanks @Mike Gallagher!

    @Ira Ashton, @Charles Doehler, I got this one from a wholesaler. I'll PM you his info.

  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    I posted a video of the initial walk-through but apparently it got removed :) Here are a few of the before pics:

    and wanted to show before/after of the bathroom too

  • Plainfield, IL · Member since 2016 · 139 posts · 53 votes
    9y

    Great job with the flip, the after pictures look amazing! Did you contract the work out, did you DIY, or both? I'm looking to do my first flip this year, but I'm trying to find a good GC since I'm going to have to contract most of the work away.

  • Mark S.Pro Member
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
    9y
    Caleb Rigby , good job on the flip. On the rollover/conversion/withdrawal situation, you may want to double check a few things. Even though you paid conversion taxes when you rolled it from pre-tax/traditional 401(k) to Roth IRA, if you're under 59.5, you still have to worry about the 5-year rule on the earnings portion, I believe. Normally, when you distribute funds from a Roth IRA, the order is contributions first, then conversions, then earnings. For example, let's say a 45 year old has a pre-tax 401(k), separates from his job, rolls/converts it to a Roth IRA (and pays the conversion taxes), and makes a withdrawal right away. Guess what? That person avoided the 10% IRS early withdrawal penalty by doing so and therefore I'm pretty sure they'll be subject to said penalty on the converted funds if the five-Year rule wasn't met. I would double check with a tax advisor, but you may be in for a surprise.
  • Port Orange, FL · Member since 2017 · 32 posts · 16 votes
    9y
    Great job! Thank you for the tips and much success in the future! I just spent New Year's Eve in West Jordan. Beautiful!!
  • Denver, CO · Member since 2017 · 8 posts · 2 votes
    9y

    Great work @Caleb Rigby! 

  • Philadelphia, PA · Member since 2016 · 7 posts · 3 votes
    9y
    I'm real proud of your hard work. I look forward to seeing the post in deal number two and the others down the road.
  • Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
    9y
    Awesome job! Regardless of the tax implication of using the IRA I'm sure plenty of newbies like myself would love to just make a profit on their first flip as it was obviously a big learning experience. Any estimates to what your numbers would have looked like had you evicted right away?
  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    @Dario Contreras, I'd rather be in FL this time of year. My little brother used to live in Bunnell so I know how awesome those beaches are.

    @Mark S., great advice, I will look into that. Thanks for sharing.

  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    Thanks @Bill Goodland. The actual hard costs of not evicting immediately weren't necessarily large ($500-1000), but it's the soft costs that hurt me - the eviction wasn't final until Sept 1, which means I didn't complete the rehab until the first week of November. Selling in the dead of winter (in UT) is not ideal. This probably cost me $5-$6k just by not having the house up for sale in the peak time of year (before school starts). 

    @Adam Juodis, thanks. I didn't do any of the work myself, besides removal of some of the tenant's leftover couches, mattresses, and chairs. I hired a GC that came highly recommended from another local investor. He's the type of guy that has done it for so long that he's 'got a guy' for everything in the house. I feel pretty lucky that I was able to build a good relationship with him from the start. I speak a little Spanish and he speaks OK English, so we get by :)

  • Flipper · Los Angeles, CA · Member since 2016 · 6 posts · 4 votes
    9y

    @Caleb Rigby Congrats on the flip! Sorry to hear about the tenant issue. I'm pretty new to the game but have financed a couple flips so far with my pops. We just put a house in AZ under contract today and one of the contingencies we put in the offer is the current tenant, who's currently month-to-month, must vacate the property before the deal can close. 

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