Middleborough Part 3 | SOLD

Hey, guys it’s Mike with House Flipping School here, and welcome to this week's whiteboard lesson. You heard me talk about the Middleborough deal, and breaking that down. We are now at the stage where we have the property under contract.

We sold it in 2 days, and we sold it for full price. Therefore, that's why you see the happy face up there. The only time I'll get happier than that is when we close on the property and I leave the closing attorney's office holding the check. We'll be showing you that sometime, as well.

What I want to do is breakdown here the projected ARV and the projected price that we talked about. Early on this property was $200,000 to $210,000. We ran our numbers and used the 70% formula, like I showed you in the previous video; we used it on the $200,000. Remember, as real estate investors, we want to be conservative and we want to take the lower number so that we don't get burnt in the end.

Because we did that, our projected profit would have dropped from $40,000 to $35,000, so we put in that range of $35,000 to $40,000, depending on how the construction would go, because sometimes construction costs can go higher, sometimes they can go lower.

With this new sale price of $224,900, our new projected profit is $50,000+. I don't have the exact number, but we'll be sharing that with you when we officially close. Basically, it's pretty safe for me to say that we're going to nail our projections, because of selling the property for $15,000 to $25,000 more than what we originally projected.

What I want to do for you is breakdown the anticipated sale price, and how ARV would have been affected. I'm sorry; how this anticipated price, which would have been the new ARV, if we use our 70% formula, how that would have been affected.

Over here, we have the $224,900 x 70%. If we knew this was going to be the price at the time, but that was not the price. This is what I was talking about earlier about evolving markets or markets heating up.

This one happened to go in the right direction, which was really nice. That's why we were able to sell it for more money. If we use our 70% formula here, we end up now at $157,430 - $25,000 for our cost of repairs, which now puts our maximum allowed offer at $132,430, which as you remember, we paid $120,000. We would have been doing really well had we not known that this was the number, but we didn't.

This is why sometimes you can't always tell what's going to happen 3, 4, 5, or six months down the road. You got to go with live data.

That CMA that we talked about, comparative market analysis, at the time was coming in around $200,000 to $210,000. We took the conservative number of $200,000. Therefore, our maximum allowed offer was $115,000, if you remember in the previous whiteboard lesson. Because we took the conservative number, it gave us the ability to actually buy below the 70%.

If we had based it on the $210,000 number, and then decided to spend $5,000 more, then you got to just be really careful with that, because it's not always going to go in this direction. What happens if we did our ARV, and then this number went down $10,000 or $15,000?

Believe me, that can happen, because I've experienced that before. The idea is to try to recognize trends. When we recognize a trend going downward, we're more cautious to carry a lower ARV, maybe 6 months down the road. It's not always easy to see that, but it's just something you should consider. Talk to your real estate broker a little bit about how the market's doing, where it's trending, and that way sometimes, you can anticipate where things might be going-without too much speculation.

Hopefully that helps, and hopefully I can put a smiley face on your face pretty soon. That's this week's whiteboard lesson.

I’m Mike from House Flipping School and we'll see you soon.


Middleboro sold Numbers from rc on Vimeo.

Mike LaCava

I'm a full time real estate investor, proud Dad and husband. My team and I are working to restore communities - one house at a time. House Flipping School is my way of sharing this vision with other investors who want to do good for their community, and make money flipping houses.