As of a couple hours ago, The Red Garage House is officially sold!
This was a long and sometimes frustrating project, mostly from the perspective of trying to sell it. In all, we had dozens of interested buyers, six formal offers, three contracts, and of the six months it was for sale, it was actually under contract about five of those months (just waiting for closings that never came). In the end, we did well with this one, and more than achieved our profit goals; but the fact that we held this property for nearly 8 months has detracted from our feeling of success.
Part of the problem is that, while the house is beautiful, the neighborhood is less so. It’s not a bad neighborhood, it’s just very “active.” Lots of people at all hours, lots of cars parked on the street (and on the curbs), etc. Because the roads and driveways are all narrow, the excessive number of people and cars makes the neighborhood feel very cramped and confined. This is part of the reason why we had so many more interested buyers than contracts; many of the buyers were wishy-washy on whether they wanted to live in the neighborhood.
We’ve already sold two properties in this subdivision — The Hat Trick House (Final Analysis) and The 16-Bid House (Final Analysis) — and we’re now completely out of properties in this neighborhood. Given our overall success with these three properties — we’ve earned over $60K in profit for very little work — we’ll definitely consider future purchases in this area, but for now, I’m glad to be done in there.
Anyway, here is the run-down of the project results, with the final set of statistics at the bottom…
Timelines
The total holding time on this house was 232 days. Again, most of that time the house was under contract, but still, it’s not fun having to go back to the same property day after day for 8 months waiting for a buyer who is able to close.
Here are the key timeline milestones:
- Purchase Offer Date: 1/12/2009
- Purchase Closing Date: 2/12/2009
- Rehab Completion Date: 4/1/2009
- Sale Listing Date: 3/31/2009
- First Sale Contract Date: 4/17/2009
- Final Sale Contract Date: 9/16/2009
- Sale Closing Date: 10/2/2009
Financials
We were able to sell this property for $104,900, just $5,000 less than our originally asking price. Our first offer was full-price, so we were disappointed to not ultimately sell for full price, but given the length of time we held it, I’m not complaining. Our total profit after all fees, commissions, rehab costs and other expenses was just under $29,000, which I’m thrilled with given the long selling period.
The rehab was pretty small, with total expenses at around $17K. We were hoping to keep it to $15K, but with multiple contracts and multiple requests from different buyers, we ended up spending a few dollars here and a few dollars there that were unexpected. Ultimately, the final buyer decided not to have an inspection (we gave her a copy of a previous one), so there were no requests for repairs or concessions after the final contract was submitted; that said, the final contract asked for about $1500 in furniture to stay, so that needs to be taken into account as well.
Here is the breakdown of financials for this project:
While these numbers don’t reflect the final holding costs — the final utility bills, a pro-rated loan-payoff credit and insurance refunds have not been received — the final results should be a few hundred dollars higher.
In terms of ROI, my total investment into this property (Purchase Costs, Rehab Costs, Holding Costs) was $23,542; this puts my ROI at over 120%, and adjusted for the time this project took, my annualized ROI is over 190%. This ROI is a bit lower than what we’ve gotten accustomed to, but again, I’m not complaining.
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: 31 Days
- Rehab Time: 44 Days
- Selling Days on Market: 17 Days
- Selling Close Time: 16 Days
- Total Hold Time (Close to Close): 232 Days
- Total Profit: $28,679.49
- Return on Investment (ROI): 121.82%
- Annualized ROI: 191.65%
can you explain how you’re calculating your ROI and annualized ROI?
Hey Rob –
ROI is the profit divided by my total investment into the property. As an example, if I earned $20,000 on a property where I invested $100,000, my ROI would be 20%.
In this particular case, I invested $23,542 between my purchase costs, my rehab costs and my holding costs; this was my total investment into the project. My profit was $28,679. Divide my profit by my investment, and the result is my ROI of about 121% (numbers are off by a couple percent because I hadn’t determined all costs when the post was written).
To get the annualized ROI, you divide the ROI by the % of a total year the house was held. In this case, I held the house for 232 days (or 63.5% of a year). So, 121 / 63.5 = 191%.
Does that make sense?
Yes it does. So the ROI is the same as saying your cash on cash return correct or am i wrong?
Is there a certain ROI look to get, or do I remember you saying you look for a minimum money amount.. of $20k maybe?
Hey Rob –
Yes, I use ROI to mean cash-on-cash return…I will use them interchangeably…
I don’t look for a minimum ROI, though I calculate it just to determine whether I’m making more in REI than I would elsewhere. Considering my returns are generally over 100%, I’m very happy and I don’t think I could easily be making the same returns doing anything else.
And yes, I do look for minimum profit amounts on each flip. Generally, I want to see at least $15K, and preferably over $20K. I’m willing to settle for less if it’s an extremely easy project…
Your data collection/organization time lines and accounting is impecable! What is your system for logging all of this information? Is most of it pulled from Huds?
Hey Jacob,
I keep lots of spreadsheets with all the project data. Over the years, I’ve honed the spreadsheets to focus on the data that I find most important, and I tend to update them on a daily/weekly basis as projects progress.
Hello Mr. Scott So how would I go about starting to flipping houses with no money I’ve heard people say investors but how would I find investors that are good and what information would I need
Hi Miguel,
That’s a tough question to answer in just a couple paragraphs. I would recommend you head over to BiggerPockets.com and start reading (as well as read everything here on this blog). I can promise you there is enough information to help you get started, regardless of your situation…
Hello. I am new to your website. So far, I am very intrigued by the amount of information that you are offering, and intend to put it all to productive use. I was wondering if you have any articles pertaining to doing Wholesale deals, that DO NOT involve doing rehabs? Personally I like to buy and flip property contracts as is, and then pass the savings onto a Rehabber, for the assignment fee. I’m “all thumbs” when it comes to manual labor. I just like the paperwork. Also any contracts and forms that you don’t mind sharing; will be greatly appreciated. Finally, once my website it complete; I’ll post a link to your page, if that’s okay with you. My way of saying Thank you, and sharing the knowledge with others who are interested. I look forward to your reply.
Hey Raymond,
I don’t talk a lot about wholesaling, as it’s not my area of expertise. But, if you’re interested in wholesaling, I highly recommend you check out http://www.biggerpockets.com. They have tons of great info!
I’m confused about your holding costs, looks like you had the home for about 8 months before selling it, but the mortgage payments only came out to $1,721.34. Were the mortgage payments really that low? Is there something I’m not understanding?
Hey Adolfo,
Yes, that’s correct. The total loan amount was $48,000, but only about $33,000 was paid at closing, and the other $15,000 was paid throughout the project as work was completed. The average outstanding monthly loan amount was about $40,000, and the interest rate was 6.75%. It was an interest only loan, so I paid about 6.75% of $40,000 for 2/3 of a year, which is:
$40,000 x .0675 x .66 = $1782
Hi J-
So, if I followed your numbers correctly, your out of pocket expenses on this buy-and-sell were about $6039?
Meaning, you rolled the rehab costs and insurance only into the loan?
Thanks,
Andy
Hey Andy,
Looks like for this one, my out of pockets costs were:
– $5000 Earnest Money
– About $15000 Required at Closing
– About $3000 in Rehab ($17,000 minus the $14,000 escrowed by the lender)
– About $3000 in Holding Costs
The selling costs and commissions would have come out of the sale proceeds.
So, about $26,000 in out of pocket expenses (this was from 10 years ago, so I’m just going off what I wrote).