We closed on the sale of The WI-1 House today…
My partner and I are in Milwaukee this week working on some other projects, but were excited about meeting the buyer and getting this one closed. Turned out the buyer ended up being a complete ass, and spent the last few days prior to closing giving his agent, my agent, my partner and myself a hard time. He made some ridiculous demands that he had no contractual right to ask for (like demanding to see the other offer we received on the property), made some ridiculous repair demands (asking us to fix the damage that HIS chimney contractors caused) and then threatening not to sign the closing papers if everyone didn’t bow to his demands.
Marty and I let our agent know that we were fine if she just told him to f*** off (I would have been happy to take his earnest money and not close the deal), but she’s the consummate professional and handled the situation well. This is probably the first time that if the buyer calls us with an issue, I will literally hang up on him. He treatment of my agent (and his) was completely uncalled for, and I almost wish he didn’t close on the purchase today.
Regardless, after the a long and difficult project, and given that it was the first one we’ve done out of state, I’m thrilled at our results. In other words, we made a profit!!! 🙂
The final numbers get a little complicated, as I partnered on this deal and there were some considerable travel costs associated with learning the new area and managing our first rehab up there. So, there are really three different profit numbers worth mentioning:
- The total combined profit made by my partner and myself on the house, not including the travel costs associated with visiting the project.
- The total combined profit made by my partner and myself on the project, if you include all the travel costs as part of the project expenses.
- My share of the profit after all costs, including all travel costs.
The actual numbers associated with each of these scenarios is as follows:
- $27,769.44
- $13,414.36
- $6,707.18
Basically, if you don’t count our travel costs, we made about $28K on this project. Subtracting out the $14K worth of travel costs we made to Milwaukee in 2012 (both before and during this rehab), we made about $13.5K. And if you divide that number by two to account for splitting the deal with a partner, I personally made $6700 or so. Not a great return given the large amount of cash invested (nearly $150K each) and the time frame of the project (almost 8 months). But, the fact that we were able to go into a new market, do our biggest rehab ever, and successfully sell the property for a 10% profit before travel costs, I’m actually pretty happy with the results.
The best part is that my partner and I learned so much from this project that we were able to basically complete our second rehab in Milwaukee without having to visit the property at all during the rehab.
To stay consistent with how my accountant will approach our profits on this one (and to make the results sound as successful as possible :)), I’m going to use scenario #1 above for my final analysis numbers. In other words, the analysis below doesn’t include travel costs and includes the profit shared by both my partner and myself:
Timelines
Here are the key timeline milestones:
- Purchase Offer Date: 5/4/2012
- Purchase Closing Date: 7/6/2012
- Rehab Completion Date: 12/5/12
- Sale Listing Date: 12/5/2012
- First Sale Contract Date: 1/21/2013
- Final Sale Contract Date: 1/21/2013
- Sale Closing Date:2/28/2013
Financials
Here is the breakdown of financials for this project:
Final Statistics
Here are just some of the final statistics that I’ve been tracking for all my projects, and that summarize the success/failure of each project pretty well:
- From Offer to Purchase Time: 63 Days
- Rehab Time: 118 Days
- Selling Days on Market: 47 Days
- Selling Close Time: 38 Days
- Total Hold Time (Close to Close): 237 Days
- Total Profit: 27,769.44$
- Return on Investment (ROI): 9.88%
- Annualized ROI: 15.21%
Congrats on success. Breaking into a new market, and getting paid for it – that’s a win-win-win. http://www.hark.com/clips/jslpnxpwjd-win-win-win. I love that quote.
Great job J Scott. This one might not be a slam dunk but you now have the infrastructure in a new area to do some great deals with relatively less work.
Have you thought about allocating only the travel costs associated with rehab to the project and using the other travel expenses as overhead (ie, research)?
Hey Justin,
From an accounting standpoint, all the research travel is just an expense. From an accounting standpoint, the project-related travel could be expensed or it could be allocated to a project (my accountant says either way is fine). So, from an accounting standpoint, that’s exactly what we do.
For the blog, I really wanted to lump in the non-project travel costs just so everyone knew that travel was a significant expense for us, even if it was “pre-project travel” to do research and learn the area. I’ll probably write a completely separate post at some point that breaks down all the travel (and other work) we had to do to come up to speed here in Milwaukee, as I know a lot of my readers want to (or do) invest in places far from home.
hi j
been reading for a few months now…nice website and really good returns
i was wondering why milwaukee? it seems kind of far from hotlanta and chicago is probably just as good for prospects as are many closer areas to you. not that i want your kind of competition in my area but it just seemed weird to go so far.
love the site and your success…all the best
danny
Hey Danny,
See this: http://www.123flip.com/why-milwaukee
Congratulations, J! It is absolutely remarkable that you handled a new market, new contractors, a large rehab with a scope that grew, major travel, and still made a profit. Way to go!
-Harry