I am new to the real estate investing and am getting ready to do my first flip purchase. As a friend of mine keeps telling me to get off the wire and fly. So I need a little motivation. Can some of you post before and after photos of homes you flipped and shot story about what you did, and the P/L statement. I don’t have a lot set aside but my friend is telling me what I found is a sweet deal and should only take 3 months to fix and sell and make the 30K I put in into 80K. It sounds too good to be true.
-What repairs need to be made = Garbage hald away (dumpster), Fresh coat of paint in and out, update look in Kitchen and bathrooms, yard work mostly manual labor.
-Estimated cost of repairs = $6,000 to do loan, $2,000 for dumpster, $8,000 in paint, $6,000 in kichen updates (refinsh cabs, appliances, refinish counter), $2,000 to up date bathrooms all 3 have white fixtures (more countertop work and new lights, fans, and flooring), the balance $6,000 mortgage payments and someone to buff the Hard wood floors that have been covered since the 70’s. We added about $500 to each room incase there was something my friend or I missed.
-Estimated price you can sell it for = Homes in the area are going from 295K - 325K. My friend likes to price a little lower for faster sale he said 290K that would but about 80k back in the bank ($50K in 90-120 days)
It all Pencils out but I like the wire I am on…
Oh ya if I don’t do this he is going to and he said he will take me to dinner after words…
Give it to him for a $500 finder’s fee and request that you get to tag along for the ride. Maybe you’ll learn something from him.
This may sound harsh, but you simply aren’t ready to do anything yet and might not ever be.
One of the key components to ANY self-run business, including REI, is that you are self motivating. If you’re looking for motivation from people you’ve never known to do something that you’re not sure of, then you definitely need to wait.
It sounds like it is worth doing using the figures you listed. You just have to get out there and do it. Nobody will be able to tell you something that will make you do it. If you’re questioning the numbers, I say do it. It makes sense. No deal is ever guaranteed the one deal you think is a slam dunk may end up costing you and the one you thought would only make a small profit will come in higher. It will happen, always does.
If you’re really unsure about it, just contract it and wholesale it to another investor. It sounds like you have enough of a profit there to find a buyer for the contract. Maybe wholesaling is a better fit if you’re not ready to commit to the rehab work and holding until the flip. Once you start wholesaling and seeing other investors profiting from your deals, and seeing how they are doing it will give you a bit more confidence to start holding and flipping yourself.
Best of luck. I know you can succeed. You just have to start telling yourself you can. Trust me I know a lot of morons that have some sort of success in this business. You’ll meet them eventually and ask yourself why you ever hesitated. ;D
From the figures you gave it does look like there’s good profit in there for a rehab. Are you prepared though if it costs more, or if it sits on the market for a few months? Are you prepared to pay $2,000 per month on mortgage payments? The fact that it’s discounted $120,000 makes me wonder if there is more work that needs to be done than what you think. If all the place needs is some paint, yard work, and updating in kitchen and bathroom I wouldn’t expect that it would be discounted so much. Are you sure you’re not going to have to replace the electrical in the basement, the furnace, the hot water heater, the roof, etc?
I think you have a lot of potential here, but rehabs are risky work. One unforseen problem can cancel out all your profit. I would lock it up under contract and wholesale it out to someone else for a $10,000 wholesale fee. If the numbers are as you say, a rehabber can still make $70k - 90k profit so they’ll be willing to pay 10k to you. And if they’re not willing, ask them why not? Maybe when they walk through the house, they’ll see something you don’t and explain what they believe the total cost of the job will be.
One thing I found out is that a lot of us have potential to lose without the right resources. Like you don’t want to pay retail for jobs to be completed. Kitchen cabinetry is always one of the most expensive asthetic costs. Paint is one of the least. Just make sure you get the best work for the right price. And, if you do the work yourself, make sure you are doing it exactly correct or that can cost you more aswell.
Well to get me off the fence my friend is going in with me on my first his 17th in 4 years. He told me that if I wasn’t going to move on it he would so I asked him for help on my first and he said “Yes”. So I am now the proud owner of a house to flip will let you know how it goes when we are done. I will also let you know if the #’s worked and I keep my shirt.
As promised I would let you all know how it went well……. I walked away with only 50K after all expenses, then had to split that in half due to my friend being a partner in the project.
This is how it really broke down:
-What repairs need to be made = Garbage haled away (dumpster), Fresh coat of paint in and out, update look in Kitchen and bathrooms, yard work mostly manual labor.
Items not seen till we got into it:
Dry and wet rout in the Bathroom behind the tub and the Kitchen under the dishwasher, live electrical wires in the walls that where not caped off or in boxes.
-Estimated cost of repairs = $6,000 to do loan that became $8,097, $2,000 for dumpster which turned into just under $2,500 (this I will say was our falt we did not move fast enough and had to have it a couple day more then we had scheduled it for, $8,000 in paint came in under that, $6,000 in kitchen updates (refinish cabs, appliances, refinish counter) turn into 9,900 but we replaced all appliances which we had not counted on doing but found a great deal on scratch and dent SS, $2,000 to up date bathrooms all 3 have white fixtures (more countertop work and new lights, fans, and flooring) this moved to an average of about 3,000 each once we found wet rout in one we told all down to studs, the balance $6,000 mortgage payments and someone to buff the Hard wood floors that have been covered since the 70’s make that 15,000 we held the house 3 months longer and we under estimated the floor work, it’s funny those things you can’t see cost so much. We added about $500 to each room incase there was something my friend or I missed this figure really needed to be bigger.
Total out lay was $211,997.00 including mortgage
-Estimated price you can sell it for = Homes in the area are going from 295K - 325K. My friend likes to price a little lower for faster sale he said 290K that would but about 80k back in the bank ($50K in 90-120 days) Forgot to budget RE Fees
Sold for $295,000
RE agent 7% $ 20,650
3% CC $ 8,850
Lay out $211,997
Profit $ 53,503
Split $ 26,751
This doesn’t include the $7,890 I spent on new tools to do this and some I may never us again but I own them now. All and all I will be doing it again but with a lot more detail looking before jumping in. I went over budget and took longer then anticipated to sell when finished.