TLDR Version:
Morningside Neighborhood in Detroit, MI
4 Bedrooms, 2 bath (after rehab), 2000 sqft roughly
Purchase Price: 50k
Closing Cost at purchase: 2500
Rehab Cost: 75k
This was a full rehab. Originally the property was a 4 bedroom 1 bathroom. I converted it into a 4 bed 2 bath. Kept original flooring, but there was major damage so cost quite a bit to revive it.
Holding Cost: 1-2k
I paid cash, but there was insurance (a little pricey since it was vacant), utilities (winters can be pricey trying to keep it warm), etc.
Other maintenance stuff for selling: 5k:
Had to replace a large oversized window that got cracked somewhere between finishing rehab and going under contract. Staging was like 2k (not sure I would do that again, details below). Other small items.
Sold Price: 170k (cash offer. Prior to this offer, I was also under contract for 188k, details below).
Profit: roughly 20k after sales closing costs
Full Version:
In early 2024, I purchased a property in the Morningside neighborhood in Detroit for 50k. I already owned 6 other properties in the city, but those are long term holds. This was my first purchase with the intent to flip. I'm based out of the Seattle area and I never flew there to even look at the property. The property was run down and in terrible shape. At the time, I didn't realize brick would be in much higher demand for selling, lesson learned. This one was regular siding. The place was a 4 bed 1 bath and the whole thing needed to be redone. However, Ive been in investing in Detroit for a couple years at that time and knew Morningside was up and coming and comps in the area were 170k and higher.
Rehab ended up costing roughly 75k. This was the full works. Brand new kitchen (no applicances), nicer counter tops, new cabinets. For flooring, I attempted to keep the old hard wood, but it probably cost more to revive that, then to just put in new vinyl. The full bath was downstairs and that was fully remodeled. Upstairs, there was an oversized closet next to the master. I decided to turn that into another full bath with a standup shower and put a door connecting the master to it, as well as a hallway door. New bathroom from scratch was about 10k or so. On top of all the interior work, there was siding that needed to replaced, portions of the driveway needed to be repaved and I added a full fence. I started and nearly completed the rehab without ever setting my own eyes on it. Something I should have done was found an agent before I even started rehab and have them check on the property to make sure quality was at its highest from the beginning. I didn't get my agent involved until the last quarter of the rehab and that was a mistake. There wasn't any major issues, but I received comments that the work was on the sloppy side and could have been a little more refined. If I would have known this earlier, I would have addressed it. Overall the rehab took 5 months which was also longer than expected. Was expecting 3 months.
Once rehab was complete, October 2024, I got it listed for 185k. The first week it was on the market, it was a very hot property. Many tours and within that first week, I got my first offer. After a little back and forth, we landed at 200k with 12k in seller concessions to cover their closing costs (188k net). Buyer was also doing the Michigan first time home buyers program where their down payment would be covered by the state. At the time, I was feeling great, offer immediately, potential good profit on my first flip in Detroit. Then reality started to hit. First, I didn't get any other offers even though I never marked the property as pending. It was October and as a couple weeks passed, tours started to slowly die. Then the buyers started running into financing issues. For whatever reason they decided to switch lenders in the middle of the closing process (something about their agent wanted to use his friend). This delayed the closing by a couple of weeks. After a couple of weeks, there was some type of job loss for the buyers and they ended up not qualifying and the deal was canceled. Its my opinion that they tried to get out on purpose, but it doesn't matter. Now we are in early December and I haven't received any other offers. On top of that, it was very cold in Michigan and tours were nearly non existent. We decided to take the property off the market and wait till March when the weather warms up and people would be interested in buying again.
Fast forward to March, we put the house back on the market for 185k. The first few weeks had a lot of tours, but no offers. After a couple weeks I lower it to 180k. This seemed to spark more tours and interest, but some of the feedback were pointing out issues that were never brought up before, so I addressed those. Finally another came in at 167k cash. We negotiated and landed on 170k cash. As we all know, with a cash offer I don't have to deal with possible financing failure. Also, by this time, I had held the property for a year and so I was getting kind of antsy and wanted to get what I could. Once I took the offer, the closing was quick because it was cash. The inspection went well overall. They gave me a long list of things to address and I said I would address half of them (the cheapest ones) and had to shell out another $850 plus fixing a very large window that somehow got cracked after rehab ($1900). After those issues were addressed, we closed the deal and I ended up with 20k in profit after the sales closing costs for about a 15% roi in my 1 year of holding the property. I'm a little disappointed due to the fact that I had basically a 188k offer a few months back, but I need to remind myself that this isn't like the Seattle market and to be happy with a decent profit. Onto the the next.
Feel free to post any questions and dm if you want to discuss details. Happy to help however I can.
