How We Scored Over $100,000 in Profit with this Incredible Property Flip
Take a look at our latest property flip. Follow along and check out our strategies that yielded us $100k+ profit with this property flip! Want to learn more? Head to http://www.letsgetpaid.com
What’s up everybody? It’s your favorite real estate investor, Mike Anderson, with letsgetpaid.com. We are back at the finished property in McKinney, Texas now. I know you guys were here with us when we did the initial walkthrough, when we took occupancy of this house, so you’ve seen the condition it was in. I let you know that we’re going to do a full-scale rehab. Kind of did a walk through of what we were planning to do. Now you guys get to come in and see exactly what we did do and what this finished product is looking like as we host our open house to show everybody in our program the beautiful job that the team was able to do in this house. So let’s come take a look.
Why We Rehab
We don’t rehab a house to make it the most beautiful house in the neighborhood. We rehab a house to make the most profit at the least investment. It it is primarily driven by the comps in the area. Recent rehabs that have sold were the basis of our ARV (after repair value) that we think will be the estimated price that we sell the home for after repair. We will try to rehab it. I always say just a little bit more. She always says less than what that home that we used as our comps was rehabbed. When we do our initial analysis of profit and what we think our offer price is going to be, we pull both homes that have not been rehabbed and homes that have been rehabbed, and we kind of start developing what our offer strategy is going to be.
This house was a little bit different because of all the development that’s going around, right? We are right in the middle of the big downtown McKinney Arena development projects. I mean, this…you can see, I printed out the report. It’s a terrible report. It’s like a 200-page report on their vision and strategy for McKinney. Annette can probably talk about this better than I can because she lives in the area, but this street is like right in the middle of everything that’s going on related to their new city hall, and the development going on. We decided to go ahead and rehab this one.
Profit, not Perfection
So, you don’t make it to what you would like to live in, you make it for what’s going to make the most money, which is based upon the comps and the other houses in the market. So, number two, we don’t try to make the house absolutely perfect, right? What we do is make it visually appealing and livable. There are some standard things we do in the rehab, which Michael will talk about from house to house, standard things we always do, but we don’t try to make it perfect.
It’s All Negotiable
What we try to do is make it livable and then, through the negotiations process, find out what’s most important to the buyers that we want to work with. Because if you have 10 different people walk through this house and identify what they would like doing differently or what they would like to fix, 10 people are going to give you 10 different answers, right? So, what we want to do is not what Michael wants, not what Paige wants. What we want to do is ask who is the person that’s going to give us the most money for this house?
This home’s not as bad because this is a 2008 home. 2008, 2004, 2004 homes, not as many big problems, right? But when you start digging into a 1950s home or a 1960 something, it’s impossible to make it absolutely perfect like it was brand new. Rehab it to sell, you can’t make it perfect. Put it in the position that you can identify the things that are most important to your best buyer’s inspector is different, right?
So, your inspector might give you a list. Their inspector comes, and it’s going to give another list. Their job is to find every single little thing that is wrong with that house. So, it varies on inspector. That’s why we don’t do a whole inspection again. Now I do it for a higher-end home only. But for a lower-end home like this, this is a lower-end home, I’m not going to sit there and get an inspector for a higher-end home like in the 900s, you know?
Yes, I’m going to get an inspector to make sure, “Hey, if there’s a major issue, it’s easier for me to resolve it before I list it than to resolve it after I list it.” Because your clientele is a little bit different. For this one, we didn’t get an inspector. I don’t want to disclose it, um, and so we say, “Hey, it’s good enough.” There are things that I do know that’s wrong with that house. You know, just visually I notice it, but I will include that in disclosure.
Today we will include it in a disclosure, but then that gives them room to negotiate when we sell as-is. We give them zero option dates, so they don’t have the opportunity to do an inspection. And we tell them, “This is as-is. We’re not going to fix anything.” So, two different strategies for a retail home. We expect the inspection, and we budget for some amount that we know we’re going to have to invest in order to fix some of the problems, like insulation, right? I won’t do insulation. Of course, I know an inspector will come in, look at the attic, and say, “Hey, the insulation is not up to par.”
I use that as a negotiation tool. How much is it going to cost me to do that? Okay, well, I’ll give you five hundred dollars, right? Sure, no problem. So, it’s more on what the homeowner wants. Sometimes they just want a little bit of a discount, so that’s what I will do.
Rehab Drivers that made us $100k profit in this property flip
So, the rehab is driven by budget comps. The comps are driven by the after repair value, and we back into how much we can report. So, we use to do the profit analysis. We use the same basic equation that all investors use: 70% of ARV minus repairs. What that is based upon, will determine what we think we’re going to profit. We adjust the amount we’re going to profit to match the amount we’re going to put into the rehab, all based on the cost. Whatever the neighborhood dictates should be done is what we do.
Interior Rehab Choices that made us $100k profit in this property flip
So, it was carpeted all throughout the house, so we pulled the carpet in the living area and laid down some laminate. Of course, changed the sink fixtures, and we added this as well. The stove was already here. We just did a slide-in stove. And then the chandeliers and the fans. So, we put fans and replaced the fans in every room. Okay, and then in the bathroom, so the master, the tall bathroom, the toilet was falling into the floor, so of course, we had to get that replaced, changed the tile, and changed the vanity, the mirror, and kept the tub in there. We just refurbished the tub.
Now, in the master bathroom, if there was a tub in there, we went ahead and created a stand-up shower. So we replaced the vanity, single vanity, the mirror, the lighting, of course, the laminate flooring. Then we took the tub out and added a stand-up shower.
Exterior Rehab Choices that made us $100k profit in this property flip
Now, for the outside, if you can see the pictures, it was a pretty ugly yellow and green. So, you can see where we changed the gray shade of the exterior paint, the paint of the porch, and then the landscaping. As you’ve seen, the landscaping team just leave, put some bushes and stuff to make it a little bit more appealing, and then they’re knocking down that tree. We had a big tree that was in the way, that the power lines from the house were running through. The branches were all over the house, so we had to cut. Twice. First time, we had to cut, wasn’t up to par what we thought it should be, so we got to cut against where it was completely removed, and now it’s not a problem.
And then, for the carpeting in the bedrooms, we just pulled it up and replaced the carpet. Yeah, and we had two windows we had to replace. We had this front window, and then we had one window in the master bedroom that had to be replaced with the windows. But yeah, basic rehab. Like I said, this was the biggest…the biggest part of the rehab was knocking this wall down. So, our original owner, he built this house for his mom, so he wasn’t building it to have anything happening, okay? He just wanted something to live in. This was…and this was comfortable.