Real Life Case Study: Dallas, TX Wholesale Flip With a Lack of Solid Comps [Numbers Included!]

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Just wanted to share with you a quick wholesale flip case study from a couple months back.

Living Room

Generally, when I am walking a house, I bring a floor leveler with me — or at the very least walk the floor in a diagonal pattern that allows me to more easily feel any changes in elevation. However, this living room was packed from wall to wall in Nascar memorabilia. Lining the sides of the walls were cardboard life-size cutouts of different famous racers, from Dale Earnhardt to Danica Patrick.

This wasn’t just on the inside of the property but the outside as well. In the driveway, there was a black race car up on cinderblocks with a kid that must have been in high school working on it. Clearly, race cars and racing ran in the family. Apparently the son was driving this car in various tournaments.

The house wasn’t what I would really call messy, but this small living room was jam packed with so much racing memorabilia that it made it genuinely hard to see what work the house needed. There were no signs of stress fractures in the drywall from foundation settlement in the living room, but there was evidence throughout the rest of the house — especially in the master bedroom and above doorway frames where you could see cracks in the sheetrock.

Neighborhood Composition

To give you a feel for the neighborhood, most of the homes here were built in the 1990s and suffered pretty badly during the great recession. Now, however, the area appeared to be on the upswing. The neighborhood wasn’t unsafe or going downhill sharply, but it definitely wasn’t the pride and joy it once was. The lots were fairly small, and most homes were pretty close to their neighbors. In addition, many of the homes (such as the subject property) had land lines crossing through the backyards. Having big land line polls in the backyard is something I sometimes refer to as a “white elephant” issue. These are intangibles that can affect the price of the property but are hard to put a number on — such as the aforementioned land lines, being too close to a major road, or backing up to a commercial lot.

Related: Case Study: Why $30k Real Estate CAN Be Profitable [With Pictures & Numbers!]

Because of the limited space, the streets were fairly narrow, with lots of cars piled up on the sides on either side of the road. Many of the fences on the exteriors of neighboring houses were poorly maintained, with portions of them missing or broken.

cash-flowing-properties

Challenges With this Property

There were a few challenges with this property. One of the biggest was the lack of any solid comps in the area. Going back six months, there was absolutely no activity for sold comps. I had to go nine months back. Not only that, but I had to go across a major road to find anything comparable — a major no-no. But sometimes you don’t have the luxury of getting solid comps. When this is the case, I use my knowledge of the area in general and my gut to help round out a conservative number. In this case, I placed the ARV at $120k conservatively.

I felt the ARV was pretty sketchy, so I ended up giving one of my buddies a call, asking for his opinion on the property. We ended up walking it together at a later date after the initial appointment when the tenants were away and house was on lockbox. We did all the usual — got a big ladder, took a look on top of the roof checking for damage, did some estimates on the cosmetic rehab price, etc. 

When he asked me about my concerns, I told him it was chiefly ARV, and it was making me nervous to pull the trigger. He said he wasn’t worried at all and offered to buy the contract from me with a wholesale markup. At first I thought he was kidding, but he was serious. I ended up pulling out an assignment of contract form and got in his car and filled it out with him. Two weeks later, we closed. When he initially decided to do this, he was fairly confident in his projected ARV of $130k or so, but he too wasn’t completely sure given the lack of solid comps. But he told me worst case scenario, he would just keep it as a rental, so either way, he wasn’t worried and had an exit plan lined up.

Related: The Higher Earner vs. The Smart Investor: Who’s Better Off Financially? [A Case Study!]

After running the numbers, I determined for a retail flip, it would need roughly $23k in rehab to get it to a similar finish out level as some of the other “comps” in the area.

After he finished the rehab, he actually got a lot more than I thought he would. He ended up selling the house for around $135k, over our calculated ARV, and surprisingly had no problems with appraisals. Take a look at the offer projection sheet I used to make an offer on this property below:

Chris Feltus

Unfortunately for him, the tenants proved a bit troublesome, and he had to threaten eviction in order to get them out on time since they were giving him some trouble.

The other problem was that this was a tenant-occupied property. This can always make it matters quite a bit more complicated — especially when you show the house.

Investors: What did your latest deal look like? What obstacles did you have to overcome?

Leave your stories below!

About Author

Chris Feltus

Chris is an active real estate investor who buys and flips houses in the Dallas real estate market. He enjoys helping others along on their journey. In addition, Chris operates as a licensed Realtor in the Dallas-Fort Worth area.

6 Comments

  1. Brenda Whittaker

    Biggest obstacle for me is emotional attachment. I love my houses so much I go through excruciating pain when considering selling. I have one now I have to sell because I need the money. Its in a beautiful area that I absolutely love and I have another rental down the road, so I was always able to stay in the one I need to sell. I built a gorgeous deck on it and friendly deer come up to it to keep me company there. Its in another state and the agony of selling is so bad I have spent over a month trying to get to it only to find myself totally incapable of leaving home for the road trip. While it sits empty. I’m a mess.

  2. Diedrick Nagle

    Hm, interesting saituation. Wuold love to find someone willing to make the deal with me that he did with you! Nonetheless if you have any more real life wholesale experiences would you be able to share them? Case studies are SO much more insightful than inspiring blog posts…not that there is anything wrong with those kind either:)

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