Spokane River Flip...or Flop...
Hello Bigger Pockets Community,
I wanted to share my experience so far on a fix and flip that has gone WAY over our initial budget. In October of 2017 I closed on a 2 bedroom 1 bath house in Millwood (Spokane), Washington. The house was in need of some serious work but was on a gorgeous lot right on the Spokane River.
I had been looking for a deal and looked at several properties. I partnered with a local realtor that I had developed a,relationship with who has been serving as the project manager and will be responsible for selling the house when the time comes. He has no money in the deal and we will be splitting any profit. We picked the house up for 235k from a wholesaler and houses with similar square footage on the river have sold recently for $450k on up. There are larger homes in the $600 to $800k range that surround this house.
The initial estimates were that it would cost 80 to 100k to renovate the property. We decided to do a,small addition and enclose the breezeway to make a 3 bed 2 bath house and to add square footage. Now that we are almost 4 months into the project, costs will end up being closer to 160 or 170k. Yikes!
The project is financed through a local private lender and he has extended additional funds for the additional construction costs. He thinks the house will be worth at least 450k so he has a comfortable margin in case of default. There has been a ton of interest in the property and we plan on listing at $499k.
With projected holding, construction and selling costs, the current breakeven is around $450k. So what was originally projected to be a solid return is threatening to be a huge loss if the market tells us we are overpriced. I am mentally prepared to lose money as that is a risk of investment and it may all work out in the end but it has been a roller coaster of emotions!
At this point I am planning on doing as much of the finish work that I can to limit any additional capital into the project. I am trying to stay positive but wanted to share my experience to this point on how a renovation project can spiral out of control quickly especially when you are dealing with a seriously run down property.
I have been investing in real estate for over 12 years but this has been my first foray into flipping. Buy and hold might be more my style after this experience!
@Derek Tonn, very much like the TV show of the same name, you won't know - until you sell. Congrats on having a go, and for the cautionary warning to others.
Hint: Don't skimp on staging costs for this one. It'll need professional guidance. All the best...
@Derek Tonn, I agree with Brent; spring for any extra marketing touches. Pics need to be stellar. Staging is a must - I can give you an inexpensive contact. Focus on curb appeal, and finishes now. If the street is busy, plan for the fence now. Great news is that Valley houses are flying off the market in 24-48 hours since the sun came out last week! It's amazing how that happens.
Good luck Derek! Will be following....Keep us updated.
I hope you post how things turn out! Crossing my fingers for you, good luck!
I will keep you all posted! Thanks for the encouragement.
I'm excited to see how this goes for you! I just had a loss on a property that sat on market forever, overpriced, too much inventory in the area, etc. Sometimes, it can just be your luck that defines a project.
In that price range and area, I would definitely suggest good pictures, staging, and focus on curb appeal. Make sure the walk ways are nice and clear, no gross snow hanging out in piles at the street, etc. Every little detail will help! Valley stuff is flying off the market lately so I'm betting you'll be good to go!