Diary of my latest flip

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Diary of my latest flip

Account Closed
Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes

I'm going to use this thread to track the progress of my current flip project. This house is in the Hickory NC area. The house was an REO listed in the MLS. It is a split level ranch with 3 bedrooms 1.5 baths and a full basement that is partially finished.

Purchase price: $41k 

Rehab/Holding cost estimate: $15k

ARV: ~$80k

I"m shooting for a profit of $15-20k. This is on the lower end of my desired profit margin on a flip, but it is actually the first one I've done where I am not doing any of the work. I'm willing to take a smaller return if I'm not swinging any hammers. We will see how it works out.

Before Pics:

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Karyn T.
Investor · Bellingham, WA · Member since 2013 · 210 posts · 138 votes
12y

@Jay Hinrichs 

"You would think all these folks renting would be buying but they just can't get there SH together and their credit issues."

I agree, for the most part...but I will say that part (a BIG part) of the problem is that credit chases you around for longer than the market stays stable.  People like myself, who took a huge hit, either financially (ours was financial...having to take out a large 5-figure "deficiency" loan to unload our east coast house that we couldn't even rent for a decent amount) or with credit, during the downturn are just now starting to dig out from the carnage.  A lot of good, stable, hardworking people got taken out or (in our case) knocked WAY back down the ladder through the actions of Wall Street and the housing crisis and because of the way credit works, with its decade-long penalties, even if you just had one big crisis,and got back to work/repayment, those people won't realistically be able to re-enter home ownership for another 3-5 years.  Add in the ridiculously tough credit requirements for new mortgages now....and the competition from investors like us...

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  • Jack North
    Carpenter/Other · Fallon, NV · Member since 2014 · 14 posts · 1 vote
    11y

    Besides kitchen cabinets, floors (linoleum, right?), paint, and a (non) 2nd bathroom - 

    What all are you planning/planned on renovating?

    Thanks for sharing your story, Austin!

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    @Jack North 

    The floors are actually wood laminate in the kitchen, ceramic tile in the bathroom and carpet in the rest of the living areas. The rehab was really just cosmetic. We replaced all lighting, kitchen counters, kitchen sink/faucet, appliances, bathroom vanity (double), and all flooring. The interior and exterior were also painted. The basement was just cleaned up by removing the old drop ceiling and painting everything. There are always a ton of little things that have to be done on a rehab like this that go unseen, but they always manage to eat at the budget and time.

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  • Shane Woods
    Real Estate Agent · Weatherford, TX · Member since 2011 · 726 posts · 284 votes
    11y

    I'm curious about the backsplash in the kitchen.  How much?  And if you're doing any "fancy" tile work in the bathroom, how much?  This is definitely a "budget" cosmetic rehab, which is appropriate for this price range.  Seems the backsplash in the kitchen would be a cost without a value add.  I know in my town where we have lots of houses that look like this one for similar prices, backsplash wouldn't raise resale.

    Maybe I'm over-analyzing, but I won't know until I know what you paid for it.  :)

    Also, I'm curious what your strategy was painting over the wood paneling.  Did you take it down & put up sheetrock, mud & smooth the grooves to make it look like regular sheetrock?  Or just paint & leave the grooves?

    I LOVE these sub $100K rehabs.....if you have more, please share!

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  • Account Closed
    Minneapolis, MN · Member since 2014 · 332 posts · 288 votes
    11y
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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    @Shane Woods 

    The tile in the kitchen is a stick on product from Lowe's, but it differs from many of the stick on type in that it is real glass mosaic. It was about $200, so not cheap. It probably will not raise the value of the house, but I believe it will make the home more desirable and hopefully make it easier to sell. 

    I am not going to do any additional tile work in the bathroom because it already had tile on the floor and the tub had a nice surround already in place. 

    As for the paneling, it was only in the kitchen, so we filled the grooves with mud and sanded them down to make it look like drywall. They turned out nice and will be ok for a home in this price range.

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y
    Originally posted by @Account Closed:

    I say that because they can easily crash and burn if they are caught holding inventory when the market turns down. I am living in a house that was supposed to be a flip because it was bought in 04 and by the time I was ready to sell in 07 (wanted to live in it for 3 years to avoid the capital gains tax) the value had dropped over $100k. I would have lost some serious money had it not been my primary residence. As such, I just continue to live there until the value up enough to sell.

    Jumping in AFTER the market has crashed makes things much easier. At that point, you are buying stuff dirt cheap and adding value.

    Don't get me wrong, I love flipping! I am just very cautious because I saw a lot of things go really bad for a lot of people during the crash.

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  • Shane Woods
    Real Estate Agent · Weatherford, TX · Member since 2011 · 726 posts · 284 votes
    11y

    $200 isn't a bad deal for the backsplash at all.  So with installation probably $400 or so?  That's worth it.  I'd do that.  :)  Good call.

    Glad you smoothed the paneling.  Many people don't here, and it hurts resale.  Brings the prices down, closer to "well kept" homes than the typical rehab should be.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    11y
    Originally posted by @Account Closed:
    Originally posted by @Account Closed:

    I say that because they can easily crash and burn if they are caught holding inventory when the market turns down. I am living in a house that was supposed to be a flip because it was bought in 04 and by the time I was ready to sell in 07 (wanted to live in it for 3 years to avoid the capital gains tax) the value had dropped over $100k. I would have lost some serious money had it not been my primary residence. As such, I just continue to live there until the value up enough to sell.

    Jumping in AFTER the market has crashed makes things much easier. At that point, you are buying stuff dirt cheap and adding value.

    Don't get me wrong, I love flipping! I am just very cautious because I saw a lot of things go really bad for a lot of people during the crash.

    You have to look at flipping as a business, not a get-rich-quick scheme.  If the market were to turn today and drop 50% overnight, I'd lose a good bit of money in the properties I'm currently holding.  But, I'd still have 6 years of large gains flipping houses since 2008.  Overall, I'd be well ahead of the game, and my business financials across the entire 6 years would still look strong.

    Every business has cycles, and you need to make enough money in the up cycles to cover your stagnation or losses during the down cycles.  No different with real estate, in general, or flipping, specifically.

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    @J Scott 

    I totally agree that seasoned, savvy flippers can weather market cycles. What I was saying in my earlier post was I don't particularly like rentals, but I feel they are the best place to put the returns I earn on flips so I can weather the market cycles. You are right in that you have to make the money when things are good, but it is important to use that money to put systems in place that allow you to survive the bad times. 

    I am definitely not bad mouthing flipping. It is my favorite part of real estate investing, and I truly have a passion for it.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @J Scott 

      as well as look at when J started at the bottom of the trough scooping up all those incredible deals.. that helped most tremendously from 08 to now.. If you had no baggage to carry forward it was all Peach's and cream  especially the peach state of GA.

    Flipping is hot all over the country right now... were you have strong retail sales especially..

    Our next big rock for flippers is going to be interest rates.. and lack of product in certain markets..

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  • Vicki Gleitz
    bennett, CO · Member since 2014 · 225 posts · 122 votes
    11y

    I LOVE what you are doing!  Thank you so much!

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    Here is another small update. We are close to getting it done and listed. Hopefully within a week or so after a few paint touch ups and final touches. The weather has made finishing the outside more difficult than it should be, but such is life...

    1Reply
  • Barbara Long
    Martinsburg, PA · Member since 2014 · 67 posts · 4 votes
    11y

    I may have missed it ..but what's the formula for this property. purchase price, rehab costs, ARV. and comps? Exciting! Love this! :)

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    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    @Barbara Long 

    The purchase price was $41,000

    Estimated Rehab: $15,000

    Estimated ARV: $80-85,000

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    Well, at long last after months of delays, this flip is ready to be put on the market! We will probably list it for around $85k and see how it goes. We did stay pretty close to budget, but we cut a few things out (basement bathroom) to make that happen. I had to suck it up and bring in another contractor to get things finished, but it will be worth it just to get this one done and sold. I'll post the final numbers once it sells. Here are a few shots I snapped with my phone:

    1Reply
  • Devin Morgan
    Baltimore, MD · Member since 2014 · 91 posts · 49 votes
    11y

    It looks good! Glad to see the new contractor got things finished. What made you finally decide to bite the bullet and get a new contractor?

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y
    Originally posted by @Devin Morgan:

    It looks good! Glad to see the new contractor got things finished. What made you finally decide to bite the bullet and get a new contractor?

     Thanks Morgan! I finally brought someone else in because my original contractor had more issues come up that was going to make it even more difficult to finish. I realized these things were beyond his control and not his fault, but I simply couldn't let it continue to cost me money. 

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  • Pat S.Pro Member
    Real Estate Broker · Asheville, NC · Member since 2013 · 82 posts · 29 votes
    11y

    Looks great Austin!  Best of luck on the sale!

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    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    Thanks @Pat S.

    I hope your Realtor class is going well!

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  • Sawyer Lubke
    Real Estate Agent · Minneapolis, MN · Member since 2012 · 161 posts · 27 votes
    11y

    Congratulations on finishing the flip Austin! Good luck with the sale!

    Cheers, Sawyer 

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  • Account Closed
    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    Quick Update:

    We got the house under contract after being listed for only 6 days, but unfortunately the buyer's loan fell through. So, we are now relisted and hoping to get it sold soon. I am tossing around the idea of making it a "BRRRR" because its a good house in a good area. I'll leave it listed for another month or so and see what happens.

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    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    I forgot to update this thread. The house is SOLD! After the initial contract fell through, it quickly went under contact again, and this one was a success. The appraisal came in low at $78k, so I had to let it go for that. Here are the rough numbers:

    Purchase: $41,000

    Acquisition/holding costs: $3,000

    Rehab cost: ~$16,300

    Holding/closing costs/commissions: ~$7,900

    So, the profit was around $10,000. Not great, but not a loss either. I can live with it since I didn't have to do the labor, but I'd like to get a better return on my money. On to the next one!

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  • Pat S.Pro Member
    Real Estate Broker · Asheville, NC · Member since 2013 · 82 posts · 29 votes
    11y

    That's awesome news! I was wondering what the status was and planned to ask you about it at the CREIA meeting tonight... but now I know the answer. :)

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    OP
    Investor · Waynesville, NC · Member since 2014 · 408 posts · 121 votes
    11y

    Hey @Pat S. I hate I missed you, but I didn't make it to the CREIA meeting tonight. I hope things are going well for you. I hope your transition to NC has gone well!

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  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    11y

    Nicely done, great job!

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