In the previous article titled “If I Can Make a Million Dollars Investing in Real Estate, So Can You” I mentioned that my second project was a Fix & Flip. What I failed to mention was that at the time of the article my wife and I were in the process of rehabbing a recently bought distressed property. The purchase price was $160,000. I currently have it under a cash deal contract for $261,000. In this article I will provide a brief summary case study on how to flip a house.
Estimating my profit based on repair cost and administrative expenses.
The first thing you have to do before making an offer is to estimate repair cost. I estimated the repairs on the home to be $40,000. Depending on the size of the project I always add a cushion for any unexpected expenses. My repair estimate always includes utilities and insurance on the property. You should only need insurance for 4 to 6 months. The repair estimate included items such as a new roof, interior and exterior paint, a few doors, and foundation repair, replace windows etc. Next I needed to determine how much I could sale the home for so I did a market analysis of recent sales of similar properties in the area. You should contact an experienced real estate agent to do this for you.
Did I come in over or under budget?
I was over budget. As with any project there is the unknown. The unknown in this project was the pool. The original owner had rigged the piping and the pool also had to be replastered. I also had to replace the breaker box to accommodate the new motor for the pool spa. On initial visual inspection you could not tell unless you drained the pool. This deal did not allow an inspection period.
Adjusting the sales price.
As a result of the unexpected expenses of this distressed property (Notice I say distressed property. When looking for a deal it could be a foreclosure, estate sale, divorce etc.) I had to reassess the asking price I wanted for the home. I listed it on October 21st for $259,900. I accepted a cash offer for $261,000 on October 22nd.
If you are ready to start making money in real estate contact me for a free consultation.
Sheldan Perry is highly skilled mortgage professional with more than 20 years’ experience in all aspects of real estate and finance. He specializes in consumer and investor financing. He can be reached at 713-524-4242. www.tmortgage.net