Fix and Flip Case Study
Expectation: To create more than 100% Cash-on-Cash Returns We started looking for a short term Fix and Flip opportunity with a turnaround time of maximum six months. We found a 1600sf, 3 bedroom...
Expectation: To create more than 100% Cash-on-Cash ReturnsWe started looking for a short term Fix and Flip opportunity with a turnaround time of maximum six months. We found a 1600sf, 3 bedrooms, 2 baths, 1 carport bank owned property built in 1967 that looked promising – ask price $89,000.00.
We did our home work, put in our offer at $70,000.00, and settled for a purchase price of $78,000.00. After we got our bids in, our projections looked like this;
Sale Price $150,000.00
Paining, interior, exterior, doors, porch concrete $4,170.00
HVAC Service and Repair $1,095.00
Roof, repair leak $300.00
General repairs $4,825.00
Cleaning Service $400.00
Termite Treatment $460.00
Time Line Goal:
2-3 weeks to close on the purchase, 2-3 weeks to fix, 6 weeks to get an offer, and 4 weeks to close on the sale.
Plan A – Sell it straight out for top dollar.
Plan B – Sell by way of a short term lease option (6 months).
Plan C – Lease it long term until the market allows you to sell for big bucks.Results:
On the purchase we closed in 15 days, it took 23 days to fix up. Next we put the property for sale at $160,000.00 to test the market. Believe it or not 8 days later we got a full price offer. The buyer was asking us to contribute 3% toward their closing cost, and 45 days to close escrow. The buyer was getting a VA loan – this seemed way to long for us but the buyer’s loan officer assured us it could not be done faster (Wells Fargo Hmm). We signed the papers and opened escrow.
The buyer’s inspector ripped our house apart as any good inspector always does and we ended up deducting $3,500.00 from the sale price in lieu of repairs. Next the appraisal came in at $148,000.00…. bummer. At this point we had to make the decision, whether to move forward or not. Given that a VA appraisal is tattooed to the property for six months we decided to adjust the price again and move forward. 91 days later we recorded the sale. Here are our actual figures;
Offer Price $160,000.00
Everything went as expected until we got a full price offer, this was better than expected. Next, the low appraisal shattered our feelings of being on top of the world :( The truth is we expected it but had hoped for the best.
Overall this was a great project and we are off to our next one :)
It is my passion to help anybody interested in real estate put together smart deals! Learn more at http://www.DiLarno.com
"Strive not to be a success but rather to be of value" Albert Einstein
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ABOUT THE AUTHOR
As an investor himself, as well as a licensed Realtor®, Dimitri has over a decade of real estate experience. Dimitri’s specialties include primary residences, second homes, investment properties, commercial properties and land. He has been recognized for being a Multi-million Dollar Producer, and is an accomplished Realtor® committed to superior results for his clients.