It’s officially been one year since my wife and I started flipping houses. After spending more than a year to research, write our business plan, get familiar with the local real estate market, and get settled back into the East Coast before we started investing, it certainly seems like we’ve been doing this forever. But, today marks our one-year anniversary since we purchased House #1.
I’m going to use this post to recap the first year…
First, let’s start with the question everyone has been asking me — what do the financials look like? Before I jump into the details of the financial results, here is one big disclaimer about how I did my calculations:
Because it can get difficult to try to analyze financial results with houses that are ready to be sold — but haven’t yet been — I’m going to assume that any house that is currently under contract to sell will actually sell under the contractual terms, and I will pretend that the income from those sales is already recognized. Specifically, The Corn House, The Sunglasses House, The Mini House and The Red Garage House are all is scheduled to close in the next 6 weeks; for the sake of this first financial analysis, I am assuming they all close under the current contractual terms.
That said, here is the quick summary is the following:
Income
Revenue: $1,075,800
COGS (All Rehab/Holding/Etc Costs): $852,354
Gross Profit: $223,446
Operating Expenses
Employee Pay/Bonuses: $49,696
General/Admin: $18,240
Total Operating Expenses: $67,936
Net Income Before Taxes: $155,510
My goal for the first year was to earn $250K pre-tax, and while we didn’t quite get there, I’m still very happy with what we achieved, both financially and in terms of our general progress. It’s a far-cry from what we were earning in the corporate world just a short-time ago, but on the flip side, we have no bosses to report to, we can sleep as late as we want, and our success (or failure!) is completely within our control…
In terms of financial success, it’s worth noting that we earned about $28K of our profit from the commissions my wife earned as a licensed real estate agent (the $28K is after all fees, dues, etc that agents have to pay). So, not only did getting her real estate license give us the ability to have a lot more control over our deals, but it also allowed us to earn about 20% more income.
In terms of volume, we purchased 11 houses this year (with one more under contract for 5 months now that we can’t seem to close on). Of those 11, we’ve wholesaled 2 of them, rehabbed and resold 5 of them, rehabbed and have under contract 3 of them (all closing in the next few weeks), and have 1 under contract as a lease purchase.
The average purchase price of our properties was $44,864, and the average sales price was 97,618. Our average profit per house was $20,339. This included the two houses that we wholesaled for only $5K each, and the house we sold to our project manager for just a $10K profit.
On average, we sold our properties for 96% of what we originally listed the house for, and it took an average of 27 days to get each property under contract from the day it was listed for sale.
We spent nearly a quarter of a million dollars on rehab of our houses, with about $180K of that going to contractors and nearly $70K going towards materials. The average rehab took 45 days, and the average total hold time (from purchase date to sale date) was about 125 days.
We paid just under $10K in interest payments on the money we borrowed, and just under $5K on utility costs during the rehabs.
Most importantly, we’ve built a strong internal team, with my wife taking charge of the real estate marketing/sales and the staging part of the business, my brother managing all aspects of our rehabs and contractor relationships and my focusing on the acquisitions, budgeting, and scheduling. In addition, we’ve built a tremendous team of contractors who work for reasonable prices, provide top-quality work, and consider our projects to be our top priority.
Ultimately, these are the things that will allow us to continue to grow, scale and improve the business in year two and beyond.
Btw, our goals for next year are $2M in gross sales, $500K in gross profit, and $300K in pre-tax income…
J Scott, it sure seems like we have a lot in common. I was going to write a similar post as our 1 yr anniversary from our first purchase is 8/25.
Good work, that is one productive year!!
Nice Job J!
I think you do a great job of keeping track of the numbers as that will be a great guideline for you to use going forward.
I’m pretty confident you will reach those goals. Congrats on a successful first year.
Congratulations!! Its very motivating to read about your successes in your blog and in this recap!
Nice Work. Seems like a very solid year.
Looking back would you do anything different?
Mike –
Honestly, I would have done twice as many deals… I was hesitant to buy too many properties before selling the ones I had, as I was never quite convinced that I could really keep doing it. Now I’m convinced… 🙂
Thanks for all the kind words, guys!
J Scott
Very nice job. Your detail to the numbers is second to none. Good luck in year 2!
Justin
J Scott,
Congratulations on the great 1st year! I am still interested in training, but I have been working long hours lately and I haven’t had time to get back to you.
James
Congratulation on your first year! Wishing you and your team continue success in year 2. Thank you for sharing your journey!
Marjorie
Thanks so much for sharing your story with us . I appreciate how u are transparent and breaking it down step by step .
Blessings and Success
Karmen
Congratulations! This is awesome, J Scott! Thanks for sharing so openly and considering how focused and disciplined you two are, I know you’re going to blow your goals out of the water for your second year. Nice work!
I’m new to this blog. What location are you doing this in? And how did you get financing for these houses?
Congrats on your success during the first year. It may be elsewhere on the blog, but how do you hold title and how do you finance your deals? Are the properties held by you personally or by the LLC? Are you getting bank financing on the properties you are buying or are you using other funds, like a second on your personal property?
Gary, Wyatt –
I’m doing this in Atlanta, GA. For the most part, financing for the flips is coming from small, local banks that provide investor loans.
As for how I hold title, I have a couple LLCs that I use for all business transactions, including holding title to all properties. This provides both liability protection and some tax benefits.
Wow, that’s really impressive, Jason. Congratulations to you guys!
The fact that you took an entire year to learn your market and strategize is something that you don’t see people do too often. Most people (myself included), just jump in and hope for the best.
Thanks for sharing your experiences with all of us, and I look forward to reading of your progress in year #2!
Steph
Oh wow, thas whas up! Congratulations!
Congratulations! This is an inspiration.
How many offers did you make last year? 🙂
Hey Josh –
We made 38 offers in the first year. Of those 38 offers:
– 16 were accepted (some took multiple offers and several months)
Of those 16 offers that were accepted:
– 12 we ultimately purchased
– 2 got serious mold issues before purchase so we backed out
– 2 we backed out during due diligence because of defects we found
It’s amazing that we were able to get contracts nearly 50% of the houses we offered on, but we were very picky about our offers, and tended to go after properties that had been on the market for a long time, so we were confident the bank was willing to negotiate and drop their prices.
[…] P.P.P.S Congrats on your first year in the flipping biz, Jason! […]
Hi your 1st year is very inspiring to my wife and I, what if any software are you using to track all the costs?
QuickBooks excel?
We hope to follow in your footsteps
Billy
Billy –
I use Quicken to track all my expenses and do my books. QuickBooks is probably a better choice, but I’m so comfortable with Quicken that I prefer to stick with it for now.
For more info on our book-keeping strategy: http://www.123flip.com/education/accounting-and-record-keeping