If you’re an aspiring real estate investor looking to flip properties for profit, you’re likely aware of the challenges that come with financing and finding the right deal; and you may be scared, not knowing how to get started. In this article I am going to give you a real world example of how partnering with a reputable wholesale home buying company like 2ndwind Properties and utilizing a hard money loan, can allow you to unlock the potential for lucrative real estate ventures.
Hi, my name is Chris, I wanted to share my experience working with 2nd Wind Properties and lift the veil on house flipping from a first hand perspective. Here is how it started.
Acquiring the Property
I received an email from 2ndWind from their email list with a property I was interested in. I immediately reached out to their property coordinator Pam. Pam was quick to respond and give me a run down on the facts of the property as well as give me a lockbox code to look around. I lived within several blocks of the property so I went and took a look. The property was perfect– predominately cosmetic fixes and priced at a point I couldn’t pass up. I immediately reached out to a hard money lender to work out details of how I would finance the flip if I were to take it on. I chose SurePoint Equity but there are a variety of other lenders with great options available in the louisville market- many can be found in the 2ndWind Partners Page. After looking over the terms with Surepoint and signing a few documents I reached back out to Pam to make an offer (all of this took place within a day… these guys move fast). Pam told me they would keep the property on the market for a few more days to get additional bids and I would hear back from them shortly. Within a few days Pam reached out to tell me I had the winning offer! From this point forward there were a few legal steps to be taken care of on my end- title search, insurance, and getting together various statements and documents. During this time 2ndWind was diligent in making sure they were doing everything possible to let things run as smooth as possible. Because of the quick work of 2ndWind and my lending partner we were able to close on the house within 9 days!
Flipping Begins
The next step to the flip is the most exciting: renovation. Each house you flip is going to need a different approach and require different work to be done, but one thing I found that is relatively universal in flips are floors, fixtures, and paint so I recommended getting a crew together who can tackle these items at the very least. I like to do as much of the labor as reasonably possible to increase my profitability and only contract out things that would either take me too much time or are completely out of my wheel house in skill or certifications. Here is where this article is going to really lift the veil on flipping, below is my actual list of repairs and expenses for this flip. I have dumbed down some of the numbers so this isn’t exhaustive or itemized but it should give you a relative idea of the cost of a cosmetic flip like this one.
Rehab Cost
- Floors: $5000
- Material: $2500
- Installation labor: $2500
- Doors: $500
- Light Fixtures: $1300
- Landscaping: $300
- Countertops: $4500
- Misc electrician $300
- Paint Materials: $600
- Fireplace: $400
- Misc/hardware: $600
- Cleaning: $500
- Vanities: $1000
Total Material/labor: $15,000
This is a pretty cheap cosmetic flip, the reason for this is I did everything but lay the flooring my self. There are a lot of general fixes and projects that when hired out will add up. But by being savvy there are several ways to save money. Example, I made my own vanities and custom cut and hung exterior door slabs, these two items alone saved roughly $4000.
Selling Your Property
The next step in any flip is selling your property. Many people turn to realtors for this step and they are truly a great asset. Generally a realtor will take 5-6% of the sell price of your property but if you do not have the skillset or the time to take on this task a realtor can help move you over the finish line. I have a background in marketing and a pretty good understanding of the local market, so getting the property in front of the right people isn’t as daunting for me as it may be for others and I have been able to sell my last 6 properties within days of listing without the use of an agent. The key to a quick sell is listing for the right price, taking good photos, and casting a wide net. The most important skill in real estate is utilizing your influence- make sure you are making connections and keeping a mental log of who is looking for properties, who is buying, who is selling etc. By keeping these principals in mind I was actually able to get a full price offer the first day I listed this property.
Closing Details and Final Numbers
The next step to any real estate transaction is closing. Again, a realtor will help guide you through this process but this is also something you can navigate yourself. You will need a closing attorney, and a title agency to handle the closing and transfer and a general understanding of the process to navigate through the sale. Depending on what you have negotiated with your buyer, there may be certain closing fees and items you are responsible for paying for- In my case, I negotiated that the buyer cover these cost. Below I breakdown the final numbers and profitability of this flip after closing.
Purchase Cost
Total Purchase Price $135,000
Down Payment Required $13,500
Initial Loan Amount $121,500
Funds for Future dispersement $6000
I won’t bore you with the terms of the loan- but I held the property for a year and ultimately paid $19520 in fees and interest (this amount could have been significantly less, the project only took 3 months but I had to hold onto it for a year due to other projects)
Taxes: $2000
Utilities: $500
Total expenses: $37,020 (loan fees + rehab)
Sell price $235,000
Net profit: $235,000- $135,000(purchase price)-$37,020(expenses)= $62,980
Conclusion and Before/After Photos
There are some projects that are a nightmare and others that are like they were sent from heaven. This project was the latter. Every step of the process went as smooth as possible and 2ndWind was truly a part of that. I held the property for a year, but only worked on it passively for about 2 months (I had other projects tying my hands during the rest of the year). If I were to have fully devoted my time to this I believe it could have been completed from start to finish in less than 3 months and I would have saved about $10,000 in fees/insurance/utilities. Ultimately it was a fantastic house that went to a happy buyer and you couldn’t ask for more than that. I hope that this article could shed a little more insight into the process and help you make the decision whether flipping properties is right for you. Enjoy before/after photos below.
View before Photos Here: https://2ndwindproperties.com/property-catalog/826-fulton-street-jeffersonville-in-47130/
After
