Two Flips Underway This year!

Two Flips Underway This year!

Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes

Just wanted to share the two flips that we have underway this year. My goal is to knock down 8 of them by the end of 2013. So far, I am on track. I have one short sale that will be ready to close in a few months and another one hopefully going under contract in a couple of days(fingers crossed).

Flip #1- Purchase price: $193,000
ARV: $279,999
Rehab Costs: $32,000
Hard Money: $12,000

I got this deal from another investor who did not have the funds to close on the deal. He originally had a partner that he was going to do the project with, but that fell through for some reason and did not have the funds to close. He posted an ad on a local forum for investment properties. We contacted him and looked at the property the next day(Saturday) and closed on it the following Monday(100% financing for purchase price). The rehab took about 8 weeks to complete(we ran into a few snags with our contractor). It should have taken about 6 weeks. We ended up listing the property $10,000 over our initial ARV due to a hot market and rising prices. Still waiting for an offer.

Flip #2- Purchase price: $330,000
ARV: $520,000
Rehab Costs: $78,000
Hard Money: $30,000

This flip is currently under way and is scheduled to be finished in about a week. We picked this one up off the MLS. We ended up getting 100% financing for the purchase price on this deal as well and came out of pocket for the rehab costs. Due to limited inventory and the location of the house, we are going to list it at $525,000. Other comps in the area are moving in about 14 days.

0Reply
54 views

Most Popular Reply

J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y

Hey Ty,

Have you factored in your fixed costs into the analysis? If you assume that your fixed costs (taxes, insurance, commissions, closing costs, other holding costs, fees, inspections, etc) are about 10% of the sale price (which is generally about right for our deals), your anticipated profits on these two deals are $15K (on a $280K sale) and $30K (on a $520K sale).

These margins are a bit thin, especially since those are best case numbers if you sell for your ARV. If the resale value ends up being less than your projected ARV, it could be even less.

Not trying to rain on your parade, but just want to make sure you're factoring these other costs in on future deals. Good luck!

See this reply in the discussion

34 Replies

Jump to latestLatest
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y

    Hey Ty,

    Have you factored in your fixed costs into the analysis? If you assume that your fixed costs (taxes, insurance, commissions, closing costs, other holding costs, fees, inspections, etc) are about 10% of the sale price (which is generally about right for our deals), your anticipated profits on these two deals are $15K (on a $280K sale) and $30K (on a $520K sale).

    These margins are a bit thin, especially since those are best case numbers if you sell for your ARV. If the resale value ends up being less than your projected ARV, it could be even less.

    Not trying to rain on your parade, but just want to make sure you're factoring these other costs in on future deals. Good luck!

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    J Scott- Yes, these costs have all been factored in, I just did not post those numbers. Thanks for the input though! We keep a very detailed spreadsheet of all accumulated and projected costs and fees of all our rehabs.

  • Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    13y

    are you saying then the holding/closing costs are included in your rehab costs then or are they separate?

  • Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
    13y

    Awesome work Ty. What's up with some addresses so we can see the work you guys did?

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Scott W.- The holding costs are my hard money costs. I did not post the detailed numbers such as closing costs and commissions, etc...

    Mehran Kamari- The address for flip #1 is 3091 S Imperial Street, SLC, UT 84106. The second one is not listed yet because the rehab is not complete. It should be listed in a week or so.

  • Investor · Parker, CO · Member since 2012 · 12 posts · 2 votes
    13y

    Ty, congrats! I'm interested in starting to lend on projects like these in the Denver area. If you don't mind me asking, how was the hard money structured in the way of points, fees and interest?

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Ryan Coburn- Thanks! On the first project, we paid 12% and 2 points, all on the back end. The second project was 12.5% and 3.5 points, all on the back end as well. Both lenders covered 100% of the purchase price. On the second deal, we had to have $50k in escrow by the closing date. This was part of the repair money that was distributed on a draw basis by the lender.

  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    13y

    Congrats, Ty! Let us know how they sell!

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Brandon Turner- Thanks! I appreciate it! The first one is on a busier street, so it is taking a little longer than projected to sell. The second one should sell pretty quickly. It is turning into a really nice remodel. I should have some videos online soon.

  • Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
    13y

    Looks great! Are you doing less that 6month HML loans? For the first one, I got $15,440 for the HML costs on a 6 month loan...

    Looks like we're at a similar point in our real estate investing careers. We're hoping to turn 10 homes this year. Gotta keep the pipeline full with leads.

    Let's connect sometime.

    Glenn

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Glenn Espinosa- Most projects are done in under 4 months, but I just factor in 6 months to be safe. I am glad to hear you have a goal of 10 homes this year. Thats awesome! I am looking for deals 24/7! I have been getting alot of leads lately from bird doggers. I do not do much direct mail or anything, but am going to start soon. How are you getting your deals?

  • Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
    13y

    Ah, I see how you're getting your HML #'s now. Four months is fast! I might need to pick your brain regarding rehab efficiencies.

    Anyway, we find most of our deals via networking and catering to the in the know realtors/agents in my area. They're starting to open up to my company and I'm getting first look access to escrow fallouts and other deals that aren't closing one way or another.

    We're going to start a big marketing push here soon once I get our systems in place to properly tract and analyze the different lead generators. Gotta do it right this time around!

  • Contractor · Brick, NJ · Member since 2011 · 86 posts · 12 votes
    13y

    That's great. Hope they sell fast for you. How big are these homes that you guys are taking 4-6 months to just do rehab? What do you think is making you guys take that long?

  • Property Manager · Brooklyn, NY · Member since 2013 · 66 posts · 7 votes
    13y

    I applaud you Ty Burns! you've took action congratulate yourself..you did more than a lot of people on that TALK about investing but never do it..Sadly none of my deals fell through but you give me motivation!

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Glenn Espinosa- Unfortunately, I have yet to have any agents bring me any pocket listings. That would be ideal. Those are some great connections to have. Hopefully you start pulling down a bunch more deals and things really start rolling!

    Steven Del Prete- The first one was a 1851 square foot home. It was a top to bottom remodel. It should have taken only about 4-6 weeks to complete, but we had some major issues with our contractor and ended up firing him. We fell a few weeks behind schedule. The second home is about 3200 square feet and is a complete remodel as well. Actual rehab work is 2 months. 1 month for escrow and we factor 1 month for listing. It will probably sell in a couple of weeks though.

    Michael Rivera- Thanks man! I appreciate it. Just be persistent and never give up. If you work hard enough, eventually things will fall into place. Network as much as you can!

  • Real Estate Professional · Salt Lake City, UT · Member since 2010 · 608 posts · 163 votes
    13y
    Originally posted by Steven Del Prete:
    How big are these homes that you guys are taking 4-6 months to just do rehab? What do you think is making you guys take that long?

    It is taking me an average of 3.5 months on a 2000 sf rehab that is top to bottom including cutting concrete for new plumbing and basement build out. This is an area I need to improve on as well. Time costs money in so many different ways.

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Gary Parker- That is not too bad of a turn around. You should come check out our other rehab in the harvard/yale area. It is pretty close to being finished.

  • Real Estate Professional · Salt Lake City, UT · Member since 2010 · 608 posts · 163 votes
    13y

    What a great area Harvard/Yale is. PM me and why dont we schedule a time we can both be there. I wouldnt mind looking now and when it is done.

    I am looking forward to reading J Scott book which I am assuming will address some of my rehab issues. There are a few books ahead of it though.

  • Real Estate Professional · Salt Lake City, UT · Member since 2010 · 608 posts · 163 votes
    13y

    Forgot to tag you. Ty Burns

  • Contractor · Brick, NJ · Member since 2011 · 86 posts · 12 votes
    13y

    @ty burns so you are adding in the selling time and such to the rehab which is where you come up with your 4-6 months?

    @gary parker that seems like it should be sped up some unless money slows you down.

    Cant seem to tag people on the ipad, anyway make your contractors know their timeline and schedule inspections in advance. Don't do it after the work is done or you are just wasting days/time.

  • Investor · Salt Lake City, UT · Member since 2013 · 138 posts · 21 votes
    13y

    Steven Del Prete- I am calculating the selling time separate from the rehab. My rehab costs are strictly that. I am saying that I normally budget 4-6 months holding costs when I am running my numbers.

  • Contractor · Brick, NJ · Member since 2011 · 86 posts · 12 votes
    13y

    On ok that makes sense.

    However I thought I read your taking 4-6 months to rehab projects and even at 3200 square feet you should be able to speed that up slightly which will make you more money which less holding cost on the rehab side.

  • Real Estate Professional · Salt Lake City, UT · Member since 2010 · 608 posts · 163 votes
    13y

    Steven Del Prete you are correct in the I should be able to speed up the process. I am working on that now. There are several issues but the two most pressing are: I have only been doing multiple rehabs at the same time for about a year so a learning curve and I manage the subs and dont use a contractor.

  • Contractor · Brick, NJ · Member since 2011 · 86 posts · 12 votes
    13y

    If you need tips on how to help speed the process up I can help some here and elsewhere. To touch base on doing multiple rehabs at once. As long as you didn't start each one at the exact time you should be able to have your contractors jumping from house to house. Now there may be some over lapping of trades and that's where having more then one electrician or plumber or carpenter ect come into play. Plus you should have more then one for every trade so that your not forced to have to wait for them and their schedule but instead you use the one that meets YOUR schedule.

    Now of course this will take time to grow a relationship to each one of the companies you use. Besides recommendations from friends or other investors you can always try to call a builder and see who they have used in the past and how it went for them.

    For when I build a new home, an addition, kitchen, smaller project ect. I have certain ones I know are better for certain projects but also 2-4 of each trade I will call to make the whole project work on MY timeline.

    This is something you and everyone should work towards to keeping their project on THEIR timeline and not someone else's.

  • Flipper · Irvine, CA · Member since 2013 · 349 posts · 45 votes
    13y

    Nice work Ty Burns, I hope you sell quickly. I just finished my first rehab in Orange County and will be listing soon too.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.