First flip under contract

16 Replies

Hi BP,

I wanted share my first full flip results. After Pics here -- http://www.tourfactory.com/1439937/r_BP

Purchased on Auction.com - $147,000
Rehab - $35,000
Holding costs - $~1,500
Contract price - $239,000

Estimated net $40,000

The contract is contingent on buyers selling their home (relocating to area). They will rent home for $1,500/month up to year. They will close 30days after sale of their home, and if they can not close in one year they'll forfeit downpayment of $5,000. I realize this is risk accepting such a low downpayment. Buyers Household income was such, that I felt the reward (extra cash flow) was acceptable.

Things I learned--

It took MUCH longer to find my first flip than I anticipated. I was very cautious figuring for worst case.

Contractors over promise, and under deliver. I should have fire my first one MUCH sooner than I did.

Permits can be important, even in a 'cosmetic' flip. The city permitting dept, is no joke. :)

Timelines and budgets are tough to stick to starting out.

In the future I will hire even the things I enjoy/can do. I take too long, and too many trips to Lowes...cheaper in long run to hire!

Interesting twist--

Today while getting the mail at the 'flip house' I received a 'yellow letter' from another investor attempting to buy it. While he was 6+ months too late, I decided to call him. He is a wholesaler and is signing a contract tomorrow for a project that I am very interested in.

Thank you BP community, and I can't wait for the 2016 projects

Congratulations sir! It's interesting to me that even though you're an agent it took you a while to find a flip. I'll bet as you get better at analyzing rehab costs and risks you'll start finding more efficiently.

Great job. Very simple and elegant, not overdone. Only small thing I question is the multiple shifts in wood grain direction. It's probably personal preference more than anything, but I like to stick to one direction for the wood and not change it in each room.

The numbers look great as well. How long did it take you from the time you closed to getting it under contract? I'm also curious about your permitting issues. I permitted everything on my first. All new plumbing and electrical on that one. I'm doing only minor plumbing and electrical updates on the second and have not yet pulled a permit (I'm a week in).

@Mike Hibbs

Mike Congrats. House looks fantastic. I am doing a flip right now and we have the same color schemes (gray walls, white kitchen, hardwood floors, gray carpets, white baseboards....) 

What was your actual START date and FINISH date???

Looks stunning to say the least. I hope it all works out and your profit margin is well deserved. This is my first flip as well and I am hoping for a very similar outcome however my story comes with a twist which I'll post very soon, hopefully :-)

I am also looking for another flip and struggling to find the right one. My first one I feel I got lucky, now I need a strategy. 

QUESTION: Last part of my reno is granite..Love your choice, what is the name of the slab?

Happy New Year!

@Nik S.

@Bill Hinshaw

Thank you both for the kind words.

June 9th was purchase date - Oct 5th on the market date. (WAY TOO LONG FOR SOW)

We received an offer the day before it hit the market (agent friends brought a buyer), but we couldn't make the numbers work.  In retrospect we should have taken it to lessen the holding costs..My now end net will only be higher due to rent income.  Lesson learned, take a profit.

The home was on the market for 77 days before we received this accepted offer.

The wood grain direction, I agree with you @Bill Hinshaw it wouldn't have been my choice either.  I only refinished the floors, it is our guess originally the living room was carpet and at some point the put a hardwood down there.  Why they didn't lace in boards at that time we are unsure.  The color matches, but the hardwood thickness is not the same throughout.  (lesson learned via a sand through)

Permitting issues arose when the city put a stop work order.  Before staring I  spoke with several other investors in my area, none of which pull permits so I decided to go the same route.  I've learned Huntsville is going through a crackdown of unpermitted flips.  Since this was a flip I had to hire a licensed builder to be my project manager.  This cost me an extra $5,000 originally not in the plan.  This had me shut down for three weeks, because many of the builders didn't want the hassle of such a 'small' job and gave outrageous bids for the SOW. ($15,000+)

@Nik S. Granite color I believe was 'oriental light.'  Look forward to reading about your first flip. Congrats for taking the first step, and hopefully we have many more in 2016!

Awesome post! hiring a contractor can be a way better option, he brings in his subs that he can count on and keep the timeline that you're shooting for, they can see things that you don't and give you better ideas on things that you missed because that's what they do all the time.

@Mike Hibbs

Rehab looks good

Not sure on the deal though - I probably would have waited for a conventional buyer than the rent to own type arrangement.  Main reason is the opportunity cost on your money and you can't really bank on profit in what could be a year from now.   I hope your new tenants sell their house quick and complete the deal.

@John Weidner

I agree the numbers aren't exactly where I wanted them to be. First deal learning curve.

Question, our immediate exit is to cash out to have cash for another flip while waiting for the purchase. Approximate costs $1,000 plus 4% on what ever I draw out. With the cash flow of $1,500/month minus cash out costs...you would have still held out for conventional buyer?

I looked at that as a way to offset RE commissions.

@Mike Hibbs

Yes I would get my cash out if available to be ready for another project 

Just one other issue I have with this rent to own deal is if they do back out and you get their $5000 deposit your house is now not brand new.  You will not have the newness premium that goes along with a newly flipped house.