Our house flipping team turns over 50 properties a year on average. Here is a real house flipping story from one of our more unique properties.

Sourcing the Property

Yellowstone came to us through a wholesaler. We had purchased a difficult property from him previously, and he was looking to work with us again because we were flexible and understanding. We seldom buy properties from wholesalers, but Yellowstone offered a good price per square foot value in a very good school district. As we drove the neighborhood in the late afternoon, we noticed a lot of seniors in their yards- a sign that this area was in the early stages of turning over and may attract a young buyer couple looking to start or raise a family.

Initial Evaluation

Yellowstone was a three bedroom, three and a half bath home with 1,935 square feet and a two car attached garage on a quarter acre lot. The exterior of the home was in poor shape with peeling paint, limited dry rot on the trim boards and a neglected yard. There was a cement wheelchair ramp leading to the front porch that had settled and separated from the porch. Additionally, the concrete driveway was cracked and the garage floor had settled about six inches and was cracked beyond repair. Both the driveway and garage floor needed to be taken out and repoured. However, we were happy to see that the roof was newly replaced and would not need additional work.

The interior of the home was worn and dated but the floor plan worked well with a few minor modifications. The living room was closed off from the kitchen, but it would be easy to partially open the wall to allow an open feel in the home. The floors were a mix of laminate and carpet and would need to be completely replaced. The furnace, air conditioning unit and hot water heater were all in good shape and did not need to be replaced. The basement was large and unfinished but the walls had a ton of graffiti that was mostly bible verses and religious sayings. This was a first for us. The bathrooms and the kitchen were in poor shape and had to be completely replaced.

Here is our initial evaluation:

Purchase Price: $252,500
Remodel Budget: $77,930
After Repair Value: $385,000
Net Proceeds (4% Exit): $369,600
Net Profit: $39,170 or 11.85%

Our normal target return is 12.5% with a turn of 120 days to close. We felt that speed of the remodel, our conservative ARV estimate and the padding we had in the budget justified the slightly lower target return. We always try to be conservative on our remodel budget estimates and ARV’s.

Before Gallery

Final Results

As we remodeled the home and learned more about the area, we made a number of remodeling decisions that we knew would put us over budget. We decided to add concrete to the back patio, install hardwood floors on the main level and expand the size of the kitchen from its current footprint. We also had some fence repair expenses we did not anticipate as some of the fence posts were rotted and needed to be replaced.

For every home we purchase, we immediately put a sign in the front yard when the remodel starts. The sign looks just like a realtor “For Sale” sign but it is for our company (we are not realtors) and it has a brochure box. The brochures we create have the description of the future home (beds, baths, square footage and what will be new) as well as pictures of finished interiors from some of our other projects and an anticipated resale price range. On the back of the brochure, we include information about our company in the hope we find a buyer who is looking in the neighborhood and potentially a neighbor whose looking to sell their home. In this case, we were very fortunate that a young couple who wanted to move to the area had passed the home on their way to an Open House in the neighborhood. They called for a showing and absolutely loved the home. In fact, one of the buyers was named after a bible verse graffitied on the basement walls. For them, that felt like fate, and it sealed the deal. They were very educated about real estate and had not engaged a real estate agent, which helped them get a lower price and saved us the buy side commission– a win-win for both of us.

Here is our final evaluation:

Purchase Price: $252,638
Remodel Expense: $86,522
Total Investment: $339,160
Sales Price: $389,000
Net Proceeds from Sale: $381,969
Profit: $42,809 or 12.6%
Total Time Close to Close: 70 Days

After Gallery

Conclusion and Lessons Learned

We purchased Yellowstone anticipating a potentially below average return. We consciously exceeded our budget because we felt the area would support a higher resale price for a home with higher-end finishes. We were correct, but we were also fortunate to have a prequalified buyer who was able to close quickly. In the end, we had a 12.6% return in just 70 days (versus our target of 120 days) and a very happy couple who is starting their family in a great neighborhood!