Well, yesterday was the big day. We closed on our first investment property together. The closing was relatively painless and only took about 45 minutes. We spent the rest of the day getting supplies, going to the house, and getting bids. Today John started demo. I took pictures and video and will post them soon.
I read this article about how reality TV flipping shows don’t give viewers the real details about the costs involved in flipping. They simply give the purchase price, rehab costs, and the sale price and use those numbers alone to calculate profit. These profits are artificially inflated because they do not take into account the substantial other costs that go into it including holding costs (utilities, insurance, interest, etc.), closing costs, and realtor fees (5-6% of the sale price). In our case, these three buckets add up to more than $20K. So, in an effort to be transparent, here are the financial details of our project:
The profit is a lot less than what we discussed our threshold should be, but after going through so many rejected offers we realized we would have to adjust our expectations. This is still a healthy profit and it could potentially be more as a sale price of $235K is pretty conservative.
For now, though, the biggest task will be to stay within budget. I’m a reasonably good bargain hunter–I’ve got a pretty good system down to take advantage of as many discounts, rebates, and cash back offers as possible. I will be putting those skills to work on this project. In fact, today I managed to place an order for 6 appliances (washer, dryer, stainless steel side-by-side fridge with matching gas range, microwave, and dishwasher) all for $2,121 – over $1,000 under budget! Thank you, Black Friday!
So, we’re off to a good start. I will post photos and videos soon.