House Flip Breakdown | Analyzing the Whitman Property
If you have watched the Whitman Round Table Discussion then you know that this particular house flip got off to a slow start. We actually owned the property for two weeks before we began any renovation work. Of course this is not ideal because I prefer to hit the ground running and start work immediately after closing on a property.
Yet the slow start was actually a good thing. My team and I are finding lots of profitable house flip deals right now, and my team of contractors simply cannot keep up. We are going through some "growing pains." Soon I hope to be working with additional contractors so that we can remain up to speed with our current deal flow, and not have another two week lag time like we did with the Whitman property.
In this post I want to take you through the Whitman deal, from how we found this property all the way to the final renovations. It's been quite the ride and I am really looking forward to the final sale.
How We Found This Deal
We discuss our strategies for consistently finding deals in-depth on the membership side of House Flipping School. If you need help finding your first house flip deal, or simply want to learn how to find profitable deals with greater consistency, then click here for an in-depth discussion about one of our most effective deal-finding strategies.
Working with Wholesalers
I found the Whitman property through a wholesaler I met at a REIA meeting. This particular wholesaler was sending out mailings, networking and doing everything he needed to do to source deals. However he was still new to the business and struggled when it came down to negotiating.
Because the wholesaler was new I explained to him that I was a cash buyer and that I would like to do business with him, however I thought that he needed a little training. My team and I actually spent some time and energy helping him, because we recognized that he could become a valuable source of deals for us. Eventually he found the Whitman property and with some help was able to get the deal under contract.
When to Break the 70% Rule
As mentioned above this wholesaler was still a bit inexperienced with regards to negotiation, and as a result we ended up paying a bit more than we would of liked for this property-$152,000. Based on the 70% Rule it would of been best if the wholesaler was able to get this deal under contract for under $142,000.
I never recommend breaking the 70% Rule but because I have a great deal of house flipping experience I can go outside the 70% Rule and still make a profit, granted the situation allows me to do so. When and when not to break the 70% Rule is a common question that I receive emails about all the time. You really need to be super careful if you decide to venture outside of the 70% Rule.
For detailed and specific information on how I was able to break the 70% Rule on the Whitman property and still turn a profit, check out the below House Flipping School members whiteboard video.
The Renovation Process
Aside from the initial two week lag, the renovation process for the Whitman property went very well. Here's a few before and after shots to give you a sense of the type of work we did on this house.
The family room before,
and the family room after renovations.
The kitchen before,
and the kitchen after.
The front of the house before,
and the front of the house after.
The Cost of Repairs Estimate Sheet
Now we had to be exact with regards to our repair estimates for this property because we were breaking the 70% Rule. Even if you remain within the bounds of the 70% Rule it is still possible to get yourself into heaps of financial trouble if you do not estimate your cost of repairs accurately.
I use a Cost of Repairs Estimate Sheet to help my team of contractors remain on track with repairs. This detailed sheet helps me develop an overall cost of repairs estimate that my contractors must adhere to. Remember that if you stray from your estimates the additional expenses will eat up your profit. You want to avoid this like the plague!
If you are a House Flipping School member simply click here to download a copy of the Cost of Repairs Estimate sheet that I use for all of my house flips.
How to Use the Cost of Repairs Estimate Sheet
Simply downloading the cost of repairs estimate sheet is not going to guarantee your success. You need to know how to use it effectively. Keeping contractors within budget and making sure they understand why this is important is a bit of an art. There is some psychology behind my techniques for happily keeping my contractors within the price points I set on my cost of repairs estimate sheet.
This step is absolutely critical to your success flipping houses, and I can't even begin to cover all the intricacies and details within this blog post. HFS members can get more information on how I strategically use the cost of repairs estimate sheet to stay within the budget by viewing the below roundtable video.
Fast forward to the 4 minute 22 second point for specific information on how to use the cost of repairs estimate sheet to keep your team of contractors within your set budget.
Last But Not Least | How We Purchased This Property
I saved this section for the end because everyone is always curious to how we purchase properties without using our own money. I wish I could say I have millions of dollars in the bank to invest, but the truth is that I don't. Instead I work creatively with banks, private money lenders, hard money lenders and other people in my community to raise the money necessary to purchase my house flips.
This property in Whitman was no different. By thinking outside of the box and working creatively with a few key individuals in my community, I was able to raise enough money to purchase this property without investing any of my own cash. Explaining how I exactly do this on a consistent basis would require a bit more than just another paragraph or two.
To learn how I was able to purchase the Whitman property without using any of my own money, simply fast forward to 5 minute 19 second point in the below video.
Join the Conversation about the Whitman Property
I truly believe that flipping a house like the Whitman property is within the realm of anyone who is serious about getting into this business. Right now there are many profitable deals available throughout the United States. You can get these deals as long as you approach the house flipping business from the right angle.
So lets talk more about the Whitman property. I want to hear your questions, comments and ideas about this deal.
We already have a nice thread going on within our forum about the Whitman property so lets keep that going. If you are a House Flipping School member, simply navigate to the forum page and chime in. I'll be looking forward to hearing what you think.
See you at the top,