As of this morning, The Bulge House is officially sold!
It’s been both fun and educational going through my first complete cycle of flipping of a house, and I can honestly say that I’ve learned more in the past several months than I ever expected I could.
Now that The Bulge House is officially sold, it’s time to do a final review of the project to determine where we succeeded, where we failed, and ultimately how much money we made (or lost). Here is the run-down, with the final set of statistics at the bottom…
Timelines
Because I had originally planned to rent this house, my first stab at a schedule and budget really weren’t representative of the work we ended up doing, so it’s difficult to tell if this project was a success from a schedule standpoint. That said, the total time from purchase offer to closing was only three weeks, the total time from purchase to listing for sale was under a month, the house was put under contract in less than 8 hours, and the total time from contract to sale closing was just over a month; I’m tremendously happy with all those numbers.
Here are the key milestones from this project:
- Purchase Offer Date: 8/1/2008
- Purchase Closing Date: 8/21/2008
- Rehab Completion Date: 9/15/2008
- Sale Listing Date: 9/15/2008
- Sale Contract Date: 9/15/2008
- Sale Closing Date: 10/20/2008
Most amazing is that the total time from the closing of the purchase to the closing of the sale is less than 60 days. I may never accomplish this on a full rehab again…
Financials
Again, because I had originally planned to rent this house, I didn’t have a set budget for the rehab we ultimately did. So, while I can’t claim that I was either under- or over-budget on this one, I’ll let the final financial results speak for themselves.
Here is the breakdown of financials for this project:
While these numbers don’t reflect the final holding costs (last utility bills have not been received), nor do they reflect the refunds for things like insurance over-payment and escrowed funds, the final results should be within about $50 one way or the other.
Considering my overarching goal for each of my flips is to profit at least $15,000, I’m quite happy with my $23,668.86 profit. Especially considering this was earned for under four weeks of rehab effort! In terms of ROI, my total investment into this property (Purchase Costs, Rehab Costs, Holding Costs) was $28,247.03; this puts my ROI at just over 83%, and adjusted for the time this project took, my annualized ROI is nearly 510%.
Final Statistics
Here are just some of the final statistics that I’ll be tracking for all my projects, and that summarize the success/failure of each project pretty well:
- From Offer to Purchase Time: 21 Days
- Rehab Time: 25 Days
- Selling Days on Market: 0 Days
- Selling Close Time: 35 Days
- Total Hold Time (Close to Close): 60 Days
- Total Profit: $23,668.86
- Return on Investment (ROI): 83.76%
- Annualized ROI: 509.52%
you bought the place for 55K? Amazing.
Congratulations, Jason! Sounds like you “got it goin on” already! =)
Congrats! Your ROI will be in even better when your wife gets that RE license. You will save on both the purchase and sale.
Thanks for sharing Jason. I have learned a great deal in the last few months.
Again, great job!
Jason,
Looking over the numbers I noticed that the purchased loan – starting balance was $54,900 and loan payoff amount was $55,205.29. Is this the result of pre-payment penalty?
The starting balance on the loan was $54,900, and my monthly payment was about $500. Of that $500, much of it is interest (it was a 30 year loan, and that’s how they work). In fact, my interest accrual was about $12 per day.
So, by the time I made my first payment, almost $360 in interest had accrued, taking my total loan payoff to $54,900 + $360 = $55,260. When I made my first payment of $500, my loan payoff amount again dropped below $54,900, but not by much.
As the month of October moved on, my daily interest accrual again crept past the original loan value. Had I made my November 1 payment, my loan balance would again drop below $54,900, but I never made that second payment.
There was no pre-payment penalty, but I still ended up paying off more than the original loan due to the interest accrual. Does that make sense?
Btw, I had the same question when I first saw the loan payoff amount.
I think I get now.
Under Holding Cost – Mortgage you put $530.73 for the first month you paid. But, since you didn’t make the second payment before closing, the interest was added to the loan payoff balance which makes it higher than the original loan amount. This was unusal because of the quick turnaround.
Exactly!
Oh, and thanks for the kind words everyone…
Just curious about the tax and capital gains costs here, since you didn’t own the home for two years or more.
http://www.fool.com/school/taxes/1998/taxes980212.htm
Unfortunately, this income will be taxed as “ordinary income,” meaning I’ll likely lose up to 35% in Federal taxes plus State tax.
Not an optimal tax situation, but unfortunately there’s little way around it in this business. Now, once I start holding houses as rentals, those will likely be taxed more beneficially, but until then, I’ll be losing a chunk to the government on each sale.
Have you found out if they’re going to tax you at 35% + 15% for social security and medicare, or do you get to skip paying the self employment taxes? I haven’t done a short term deal yet, so I’m curious how that’s going to hit my pocketbook. It’s looking like the government gets about 50% of your profits when you go to sell, which sucks IMO…
– Hakrjak
I’m hoping my CPA is worth what I’m paying him, but I’m not sure if I’ll be subject to self-employment taxes or not. The bright side of only closing on one or two properties this year (from the selling side) is that I’ll have the opportunity to dig into the tax repercussions before next year without taking too much of a hit, and hopefully do things better next year when I have more money on the line.
I just visited your website for the first time. I was wondering if you share with us the way you obtain this property somewhere in your blog. It will be nice to know. MLS?
Hi Kim,
Most of our properties (including this one) have come right off the MLS.
Was it a distressed property or just a fixer upper? If you bought it for 54,900, what was the agents list price on MLS?
I am in West Texas and the market here is hot due to the oil boom. Any advice on where to look for a great deal and what a novice like me should know prior to pulling the trigger on their first property?
Thanks in advance
property #2 is deal and a half!
Hey Tim,
It was a foreclosure (REO) that needed a good bit of work. This was only the second property we ever purchased, and the post you’re commenting on is about 5 years old, so unfortunately I don’t remember the list price of the property… 🙂
There’s a lot to know before buying that first property. Keep reading the blog, and if you want to jump right into the meat of the discussion, feel free to grab a copy of my books: http://www.biggerpockets.com/flippingbook
Jason a novice looking to get into my first deal now. I am reading your book now on rehab cost. Had a question regarding the financials on your 2nd flip. You have a category titled commissions was this expense monies paid to the real estate agents?
Hi Mike,
Yes, Commissions are what are paid to both your real estate agent and the buyer’s real estate agent when you sell.