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?
See this reply in the discussion

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

    @Claudia W., just money :) The fridge would have made it look even nicer, but I couldn't bring myself to spend $1,000+ on a stainless steel fridge. Maybe that would've helped us sell faster, but I was having a hard justifying any extra dollars as I was already so far over budget. Good luck!

  • Real Estate Agent · Henderson, NV · Member since 2016 · 59 posts · 22 votes
    9y
    Thanks for the tips. The complete rehab looks great!
  • Investor · Columbus, OH · Member since 2016 · 34 posts · 11 votes
    9y
    So what were the details on your HELOC? What were the rates and how much did it cost in the end?
  • Rental Property Investor · Green Bay, WI · Member since 2016 · 45 posts · 20 votes
    9y
    I just purchased my first flip last week at 20 years old and advice like this is very helpful. I appreciate you posting about experience and I'd like to do the same when I'm done. Congratulations.
  • Investor · Layton, UT · Member since 2016 · 162 posts · 237 votes
    9y

    @Martin Nowak, I got the HELOC from my local credit union, America First Credit Union. It was 80% LTV and came with a 3.49% interest rate. They did an appraisal and so I was able to borrow 80% of that less my payoff amount of my mortgage. The entire process took about 3 weeks between my application and actual signing of the docs, and the cool thing is it didn't cost me a thing (they paid for the appraisal). I would recommend anyone get a HELOC. I just checked and looks like I had about $750 in interest during the rehab, which also includes a small personal LOC that I drew on as well.

    @Joseph Ziolkowski, that's awesome! I wish I had begun earlier, so I'm jealous of you. Sounds like you already have some great experience over the past year as well. Can't wait to see your post.

  • Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    9y
    Originally posted by :

    Secondly, this area of Ogden is more of a “C” area, and I wouldn’t want to self-manage those types of properties, or get a property manager.

     I'm interested to hear why you don't want your properties professionally managed.  This is exactly how I deal with these. 

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Caleb Rigby:

    @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.

     Beautiful flip. I dig the blue exterior. Will the net profit you posted be taxed (I suspect so), if so at what rate?

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

    @William Hochstedler, that probably wasn't worded very well on my part, but if I did decide to ever become a landlord, I would have them managed professionally. You're also like the smartest man in Northern Utah, so I'm just going to hand over everything to you and have you make decisions for me from now on.

    @Andrey Y., thanks man. Not sure what the net profit will be yet, but it will get taxed as ordinary income, so whatever tax bracket I'm in at the end of 2017 then that will be the tax rate that gets used for this flip (and the others I complete this year).

  • Syracuse, UT · Member since 2016 · 21 posts · 27 votes
    9y

    Thanks for posting this Caleb- I'm in the middle of my first rehab deal in Ogden as well - I'll send you an invite, maybe we can get together to chat sometime.

  • Real Estate Agent · Salt Lake City, UT · Member since 2016 · 214 posts · 154 votes
    9y
    Awesome job Caleb Rigby !
  • Real Estate Broker · Charlotte, NC · Member since 2016 · 569 posts · 351 votes
    9y

    Great! Job Mr.Caleb Rigby what a wonderful flip and a nice pick of colors and style.

    Thanks for sharing your good flip experience and hope for your more success to come..

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