Flipping houses is incredibly profitable so they say on TV, every other infomercial or email you receive in your in-box. You can make $100,000 in just 30 minutes like they do on TV. The truth is that some can and most will not. We hope to bring some things to your attention so you do not wind having a home flip on top of you.
Flipping Houses should you do it?
We have a long time client of ours, who in 2014 was advised by a friend of a friend REALTOR(R) (not us) to purchase these homes 4 homes, 3 were in the same community and one outside the community. They laid it all for them to see and it all looked good, they stood to make over $350,000 with the sale of all these homes combined. So they started working on consolidating their crew to assist them in the rehabbing and got to work.
So with the homes finally purchased. Yes they purchased in cash, no hard money loans, no mortgages what so ever. They started out on the first project. Now they did things right. They replaced roofs, AC, gutted kitchens, replaced flooring, etc. Below are a few photos of two of the homes that they purchased after rehabbing.
So as you can see they did their homework on what was trending and honestly the homes were move in ready. So then the agent that assisted them in buying the homes listed them for sale. And they were listed way above any number that had sold in the community since 2005 time frame. And this was 2014. So naturally the homes sat on the market. One day Nick was at the gas station filling up his car when he ran into we will call him “Joe” (to protect their identity) and they start talking and Joe tells Nick what he did.
Nick was thinking to himself oh no! Nick explained that as long as the homes were on the market with another agent there was nothing that we could do. So two days later Joe calls us back and says the homes have been withdrawn. So we gathered all the information for all four homes and went to sit down with them. Now what you have to know is that two were completed, one home was less than a week away from completion and the fourth home was just like they purchased it.
When reviewing the past sales in the community they were nearly $100,000 over the highest sale on each home that they had listed. They had been on the market for nearly 120 days and had 1 or 2 showings each. So we agreed to try and push the numbers up slightly from where the sales were currently based on the condition and upgrades that these homes had. Three homes went on the market 2 in the same community and the 3rd was a town-home in a very sought after area.
Naturally the town home went under contract immediately, at list price. Inspection was completed with no issues, and then the buyer’s financing fell apart and the home did not sell. The two homes got showing after showing, but no offers because they were still above the highest sales in the community. (right at $20,000 above highest sale) Then we hit was typically our only slow time of the year September and October, so we did everything we could think of to get the homes in front of as many buyers and agents as possible. Nothing, so with the fourth home being a few weeks from completion. We sat down with them and discussed the possibility of renting the homes out.
This was not what they wanted to do, or ever thought about doing. So we listed the town home for rent and it rented in less than 24 hours for $250 above the highest rental comparable in the community. One of the homes rented in less than 1 week, again significantly higher than any other home in that community. We were left with the two larger homes, which naturally were listed at higher sales and rental amounts.
Now to show you Joe is no dummy, he and his wife ht listings back to them and they have managed those homes. The last home was completed and they have included the home in rental program and have done rather well for themselves. About 6 months after we rented the town home for them Joe calls and says do you know anyone interested in purchasing the town home with the rented in it? We just do not want to be monthly landlords.
This town home would net an investor right around 8.75% Return on their investment annually. So we presented it one of our investors who we work with and he purchased the home with tenant and we have been managing this home for the past two years. We would also like to mention that we have assisted their daughter in purchasing a home since then and Joe and his wife said that they will never sell or buy another home with using us again.
So in closing we guess we would like to say that Yes, you can make money flipping houses, you can lose money flipping houses, your plans can change on a drop of a hat. So if you are prepared for any or all of that happening, then may flipping houses is for you. When Nick & Cindy Davis look at a property for you as in investment we don’t just look at the sale. We look at everything, is it in a desirable area, what are the sales, what are average days on market. Is this a smart investment. What is the home does not sell, can it rented to produce positive income. We have two investment properties ourselves.
One we purchased in 2005 (ouch) but it has been rented continually since we purchased. The other we purchased in 2011, have it rented and it is yielding over 14% return annually, and we looked the numbers today of the sales and in less than 5 years we would make be able to sell the home for twice as much as paid for it in 2011. So if you are interested in investing in real estate, not being a fly by night flipper. We are available to assist. We are always available at 813-300-7116 or simply click here and we will be in touch.