We closed on the sale of The Haggle House yesterday… (see all the financial results below)
This house was a great experiment. For about 6 months, it was our first real rental property, but once the initial tenant chose to leave (before the lease was up), we decided that we’d rather just sell this one and move on. It’s not that I don’t like the idea of rentals — it’s more that we just didn’t have a good plan in place for holding properties, and until we have a solid plan, I’d rather just keep reselling them like we’ve been doing.
Ultimately, the six months that we held the property allowed us to get the sale price up to market value — something that would have been very difficult from an appraisal and buyer-financing standpoint had we tried to do it immediately after we purchased and rehabbed it. So, ultimately, it was a good thing that we held it for a few months. We probably made an $15,000 doing this.
Here is the full final analysis for this one…
Timelines
Here are the key timeline milestones:
- Purchase Offer Date: 8/12/2010
- Purchase Closing Date: 9/10/2010
- Rehab Completion Date: 9/17/2010
- Sale Listing Date: 5/20/2011 (Rented for 6 Months)
- First Sale Contract Date: 6/25/2011
- Final Sale Contract Date: 6/25/2011
- Sale Closing Date: 8/4/2011
Financials
Here is the breakdown of financials for this project:
Our profit on this one was a little over $31K, pretty much a homerun in my book, especially considering the low purchase price. Not to mention that this was one of the easiest rehabs we’ve ever done, and were still able to sell it for more than twice what we purchased it for.
We purchased this one for cash and did a refinance to pull much of our money out, so the ROI on this one is better than expected for a property we held for nearly a year — about 169%..
Final Statistics
Here are just some of the final statistics that I’ve been tracking for all my projects, and that summarize the success/failure of each project pretty well:
- From Offer to Purchase Time: 29 Days
- Rehab Time: 10 Days
- Selling Days on Market: 26 Days
- Selling Close Time: 40 Days
- Total Hold Time (Close to Close): 328 Days
- Total Profit: $31,476.49
- Return on Investment (ROI): 168.57%
- Annualized ROI: 187.58%
Nice. I love reading about these homerun house flips.
I’m curious though, why did you mention feeling that you would have had a hard time getting market value without waiting the 6 months? Do the appraisers there really take the fact that you are flipping it into that much consideration?
This is awesome. It sure is a home run to me. Considering the market, the final statistics are impressive. Great job.
Hey Danny (Johnson),
The issue on this one would have been the FHA underwriters. They don’t like to see properties with just a little bit of rehab sold for so much above the purchase price in such a short amount of time. Specifically, on this one, I bought for about $43K, put about $7K in during the initial rehab, and wanted to sell for $95K (my ultimate sale price). This would have been a $45K mark-up (from $50K to $95K) from the underwriter’s perspective, which is more than I bought the property for. While I *might* have gotten away with it, more likely the underwriter would have flagged it and it may or may not have worked.
Instead, by waiting 6 months, I thought I alleviated any extra FHA scrutiny on the resale…though if you take a look at my last post on this property, the system still through up a red flag that required the property appraisal to go through a full desk review. So, even with the six month seasoning, there were little issues.
That’s understandable. It’s just how you talk about it like “I *might* have gotten away with it” like you’ve experienced something in the past. I know it is all how FHA looks at it, but I have never had a deal not go through no matter how much I made. Sure, we’ve had to jump through more hoops for FHA, but they’ve always worked out.
I’m only asking because I didn’t know if you’d run into situations where they wouldn’t do it, other than not fitting in with the 90 day rule or exemption rules.
What I am understanding is that you just wanted to try and avoid the hassles with the extra scrutiny and having to jump through more hoops.
Thanks for the response.