How I saved $150,000 for $9.99

I have heard that the best house flip that you bought was the one that you didn't. I have an example of how I saved $150k with a ten dollar app. There is a beautiful neighborhood in Sacramento called Elmhurst. It is historic and expensive. The UC Davis Medical Center is on the edge of Elmhurst, so there are jobs and highly paid professionals in proximity.

My business partner and I are flipping a home on 12th Avenue which is within 1/2 mile of Elmhurst. Our home will be worth about $275 per foot; Elmhurst is $300-$400 per foot. I did some digging the night before heading to our flip and decided to go to a house that was 2 blocks from the medical center. They were asking $690k and it had been on the market for over a month. I knew it was over-priced since it was listed as a 2 bedroom, 3 bathroom. You can't get top dollar in Elmhurst unless the house is updated and the layout makes sense; a 2/3 makes no sense. There was a ton of square footage which makes it possible to turn this home into a 4 bedroom, 3 bath with a proper wine cellar and a rental/in-law unit. We saw an exit of up to $850k. Even our hard-money guy agreed to $800k (since they are always very conservative).

We decided to ask the listing agent to represent us. We offered $515k and got into contract at $540k. We had our agent schedule a pest and roof inspection. It was a sunny day in Sacramento when I met the pest guy at the house. Doctors and nurses were walking around the streets of Elmhurst. I glanced at the house next door that sold for $805k three years ago. The market has sky-rocketed since this sale. Even at 500 sq ft smaller, we were sure to make money. I glanced back at the home that we had in contract and something didn't seem right. The other house was a monster in size; ours seemed like a cottage in comparison.

I needed a floorplan of our 12th avenue flip for planning purposes and also for a permit. I bought a $10 app for creating floorplans. One of the features is that the app tells you square footage once you have made the layout. I grabbed my device and my tape measure. After I completed the layout of this house, the square footage read 1,806. The house was listed at over 2,250 and the description said it was probably actually 2,700. I valued the 450 square foot discrepency at more than $150k. We lowered the offer to $400k. That will put them into short sale territory, so I'm sure that we will not be buying this home. I was looking forward to building that wine cellar.

I am not an app representative, so PM me if you want to know the one I chose. I bet there are lots. I do recommend that you have some method to determine square footage of a property. It saved me a ton of money.