My First Flip - Netting $30k with less than $5k in expenses
The Buy:
Offering $15k below asking price ($170k) on a wholesale deal would make some people a bit wary of ‘pissing off’ the person selling it. I figured I would go for it, worst case scenario the wholesaler hates me. This was not the case. I spoke to three realtors in the area and they told me that I, at best, will get $195k for the home. Interesting at $155k, discouraging at $170k.
After a week of saying my $155k offer was not enough, I got a text saying they were showing the property. Followed promptly by a call saying that they needed to assign it and that they were just not going to make money on this deal. Unfortunate for them, fortunate for me.
May 7th I closed at $155k and with me paying sellers closing costs it put me at $158k. I bought $190k-$195k worth of equity for $158k.
My original plan was to get transactional experience while making a little bit of money. I only thought I was going to make $10k-$15k. My original budget was: $158k (purchase) + $11k (rehab + holding) + $9k (selling closing costs) = $178k total spend. With $178k out with a conservative sale price of $190k, I was on track to make a quick $12k. I was wrong.
The Rehab:
My brain turned from “I’m an investor” to “I can totally paint an entire home to save two grand.” My original budget for insurance, utilities, rehab, holding all came out to $10,000. Very low budget to begin with. $3k for the bathroom, $2k to paint, $4k to repair the fencing and $1k for blinds, outlets and closet doors. Wrong, wrong, wrong and right.
Destroying a 1960’s bathroom in the most incredible condition I have ever seen seemed like a terrible idea to me. My uncle who works tile told me, unbeknownst to my genius, to “just reglaze it.” Well “just reglazing” it came to save me probably more than three grand. $550 dollars and six hours and my bathroom went from antique green to glossy white.
Painting is a lot easier than people think. If you have the time it might be worth doing on your own. I got a quote for $1,800 to do the entire home (950~ sq. ft.) Paint costs $20 a can (at most) and one could paint each room. So 6 rooms in the house: 6 (cans) x $20 (per can) = $180. If all 6 rooms took them 3 hours each and they wanted $1800 that would mean their labor is worth $100 an hour… Time is money but I can’t jive with that, I don’t have a $100/hr job. I had the house painted for $175 in materials + $200 for a friend to help. It took 3 part time days of work.
The fencing was a frustrating situation. My chainlink fence was good and to pull out my fence and put up board-on-board wood fencing was going to be around $4,000-$5,000. The neighbors directly behind and to the right had never repaired their fence from previous hurricanes. It wasn’t technically my problem, but who wants to buy a house with a backyard where you get to see your neighbor’s trash and neglected pool every day.
Beginners luck was evident in these following two scenarios. The neighbor behind me had worked for a fencing company for 18 years. He said he could not afford to replace the missing boards. So I bought nails, three 8′ board on board fences, and rented a home depot truck for $200. Hand-delivered the material, dug the post hole, and nailed the boards in with him. Took me about five hours round trip including installation.
I was prepared to take a nice beating in my asking price because of the house to the right. This home had no fencing whatsoever. The best part about it was the neglected pool that you could walk right into with no barrier. On May 31st I go to clean out the home and take photos for my listing. A pickup truck shows up with a bed filled with 2′ x 4’s and countless fence slats. The next day by 5 p.m I was a proud neighbor. This one hour old 30ft long 8ft tall beautiful light brown wooden fence cast a shadow on the windows of two of my three bedrooms. Privacy, sound barrier, and curb appeal all improved tenfold within those two days.
All said and done; $2,800 on rehab costs. $700 on insurance/utilities. Putting in the hours paid off with this project.
The Listing:
https://www.zillow.com/homes/1007-W-Jennings-St,-Lantana,-FL-33462_rb/13_zm/
I originally was planning on listing at $195k. The house did lack luxuries that other homes had that sold for $200k – $220k. After writing up the Zillow ad I figured I should go higher. I would rather get beaten down $10k on my asking than have that ‘what if’ feeling. So on June 2nd, I put it up at $204,999 for sale by owner.
After 4 calls from realtors spewing the same scripts, I was a bit skeptical of really selling the house. “Welp Max, its only got one bathroom and this area calls for two.” “Listen, you are a businessman, you need to be working on acquiring your next flip, not selling it!” “Statistics show that if it doesn’t sell in the first two weeks you will die a painful death.”
Alas, on June 5th at 9:30 am another realtor calls. “I have someone interested, I can do 2.5% commission and they want to see it at 5:15 pm today.” June 6th at 12:30 pm she calls again; “I’m going to email you a commission agreement I have an offer for $200k.” I quickly responded, “$202k is what I am looking for.” “I’ll check with them and see, they should be okay with that.” Four later she calls and says “Hey Max, check your inbox. I just sent a contract for the $202k you countered. They are approved for financing as well.”
The inspection is on June 12th. Having gotten my own inspection we solved all of the issues the next inspector will see (shoutout @Mindy Jensen for that tip.) I hope that it is smooth sailing from here.
Things I have learned:
- Don’t be afraid to reach out to neighbors
- Consider the cost per hour price you will pay someone to do something that you can do. Unless you are making $100 an hour, painting yourself might make sense.
- More than three-quarters of the calls you will get when listing on your own are realtors slightly discouraging you in hopes that you give them your listing. (google FSBO scripts)
- Better to go a bit high than a bit low on an asking price (at least in this case)
- Pull the trigger on something you know you won’t lose to get the experience