How To Make A Huge Profit On One House Flip
Have you ever gotten emails from real estate investing “experts” claiming they can help you make a huge profit on one house flip?
I made $56, 135 in one house flip.
I too couldn’t believe it but I can tell you for sure that it’s possible to make such a huge profit and even more from one house flip.
Sick And Tired Of Over-Hyped Headlines?
I’m tired of gurus who over-hype their messages and claim to know the secret to reaping huge profits from real estate. I won’t dwell so much on this topic but just to be clear, I don’t usually make $56, 135 on single house flips all the time.
Typically, I make around $20-30, 000 which is not a bad figure at all. 14 months before I made my $56, 135, I’d made a profit of
$14, 015. It was one of the worst deals I have ever made but that is a story for another day. Let me take you through how I ended up making a huge profit on one house flip.
Wholesalers Can Be Resourceful
Most real estate investors do not like wholesalers because they believe they are not resourceful but a wholesaler gave me this deal. I paid him a $5, 000 commission which was peanuts compared to the profit I made from the deal.
Don’t listen to people who tell you that you can’t make a huge profit flipping houses using wholesalers.
So let’s get to the details of my deal:
- Type OF House: 2 bath cape style, 3 bedroom
- Where: Wareham (Onset), MA
- Estimated Repairs: $90, 150
- ARV: $209, 000
- Projected Profit at 20%: $41, 800
- 70% Rule: = $146, 300
- Projected Expenses at 10%: $20, 900
- MAO: $56, 150
I Flipped The House With No Money
I have mentioned before that you can flip houses without money so this flip is evidence that it is possible.
Of course you cannot flip it for free and you need to have a reliable source of cash. If you are a beginner in real estate investing, it may not be possible for you to flip houses without investing some of your money especially if you plan on asking a private lender for financial help.
Lenders expect you to invest some of your money because it shows them you believe in the flip and you are willing to take a risk. Eventually, you will develop great relationships with your lenders as you gain more experience flipping houses.
For this deal I used a hard money lender who I formed a very good business relationship with. He knows that I give good returns and I have done several other flips. Because of this, he offered me preferred lending rates.
Building solid relationships, networking and a successful history of flipping houses can really boost your real estate investing career. So don’t rule out hard money lenders if you are a beginner. I have been flipping houses for a number of years and I still use them.
You can still make a profit if you use hard money lenders provided you follow all the rules and use accurate ARVs.
What Did I Do Right?
Apart from the market getting a little hotter between the purchase and the final sale, a number of things went right.
- My maximum allowed offer was more than I had anticipated
- My cost repairs were more than what I had planned for
- Other expenses increased by $1, 797
- The after repair value was expected to be $209, 000 but I ended up making a profit of $22, 500.
- Overall upside over projection $14, 335
- My projected profit increased by $14, 335
- I netted $56, 135 before taxes.
The only unexpected expenses I incurred were on the repairs and this was because we had to do some framing repairs.
I and my house flipping team always do responsible rehabbing and we don’t skimp on what needs to be done even if we know we can get away with it at the inspection.
What Made My House Flip A Home Run
I felt granite would look better than Formica countertops. The counter space was not as big and the kitchen was generally small. The granite definitely added a better look and feel to the house plus it cost us less than $500.
The Master Bedroom Cathedral Ceilings
We merged two bedrooms to make one master bedroom and I suggested to my builder to do the cathedral ceilings. It added very little to our costs and it made the upper floor very attractive.
Adding A Deck At The Back Of The House
A back deck was a great idea considering the backyard was rather small and not that usable. My builder, Billy Bachant is the one who came up with this idea and this just shows how important a good house flipping team is.
I think the house sold quickly because I staged it. I normally do not stage all house flips especially the low end ones. This one was definitely worth staging because it turned out so nice. I held an open house on Sunday and on Tuesday I accepted an offer.
We received a check for $78, 670.43 but this was not the real profit. I had to pay financing fees, broker fees, attorney fees and other expenses that diminished my profits. But even with those expenses, I made a huge profit on one house flip.
Although it doesn’t happen on every flip, there are many real estate investors out there who make six figure profits. If you are a beginner, sticking to the rules and having a solid plan can help you make such profits.
What was your best real estate investing deal? How did you do it and did you stick to the rules? I’d love to know all about it. Please leave a comment below.