Fix and Flip Case StudyPosted by Robert Watson on September 6th, 2022 The Expectation: How to create more than 100% Cash-on-Cash Refunds We began looking for a quick fix and Flip loans opportunity with a turn-around period of up to six months. We found a 1600sf 3 bedrooms, 2 bathrooms 1 carport owned by a bank property constructed in 1967 that appeared to be a good buy - asking price ,000.00.
Project Numbers:We completed our research at home and submitted our bid for ,000.00. We settled on an acquisition amount of ,000.00. After we put our bids accepted, our plans were as follows: Sale Price 0,000.00 Purchase Price ,000.00 Down Payment 20% ,600.00 Hard Money Loan 80% ,200.00 Cost of Hard Money Loan 3% ,340 Interest 6mo @ 18% ,616.00 Remodeling Costs ,000.00 Commissions 10% ,000.00 Closing Cost ,500.00 Miscellaneous Costs 5% ,500.00 Total Net Profit ,044.00Cash Needed ,556.00 Cash on Cash Return 65.46% Annualized Return 130.93% The scope of the workDemolition 0.00 Painting, exterior, interior doors, porch concrete ,170.00 Carpet ,510.00 Electrical 0.00 Plumbing ,110.00 HVAC Service and Repair ,095.00 Landscaping 0.00 Roof, repair leak 0.00 General repairs ,825.00 Cleaning Service 0.00 Termite Treatment 0.00 Total ,400.00Timeline Goal2-3 months to complete the sale. Weeks to repair, six weeks to make an offer, and 4 weeks to close the sale. Exit Strategy:Plan A is to sell it out at the highest price. Option B: Sell the property using a short-term lease (6 months). Plan C is to lease it for a long period until the market allows you to buy it at a price of big sums of money. Results:We closed the deal within 15 days. It took us 23 days to fix up. Then we put the house for sale for 0,000.00 to see if it would be a good fit for the market. It was amazing to find that 8 days later, we received an all-cash offer. The buyer asked us to pay 3% of the closing cost and to give them the buyer 45 days before closing the escrow. The buyer was receiving a VA loan. This seemed a bit long for us; however, the loan officer for the buyer told us that it couldn't be accomplished quicker (Wells Fargo Hmm). We signed the paperwork and then opened the escrow. The buyer's inspector tore our home apart, as every good inspector does, and we were able to deduct ,500.00 from the price of the sale for repairs. The Appraisal then came in with 8,000.00. Disappointing. We were forced to decide whether to proceed or not. Since a VA appraisal has been tattooed on the property for six months, we decided to alter the price and move on. After 91 days, we registered the sale. These are the actual numbers: Offer Price 0,000.00 Adjustment for Appraisal ,000.00 Adjustment instead of Repairs ,500.00 Sale Price 4,500.00 Purchase Price ,000.00 Down Payment 20% ,600.00 Hard Money Loan 80% ,200.00 Cost of Hard Money Loan 3% ,340 Interest 3mo @ 18% ,808.00 Remodeling Costs ,000.00 Commissions 10% ,450.00 The Closing cost (purchase as well as a sale) is ,200.00 Over Budget Cost ,400.00 Buyers Closing Cost 3% ,335.00 Total Net Profit ,967.00 Cash Used ,148.00 Cash on Cash Return 64.52% Annualized Return 258.07% Lessons Learned: Everything was as expected until we received a complete price quote, which was much better than we had expected. Then, the Appraisal was low. It blew our hopes that we were on a high in the world. ( It's true that we anticipated it, but been hoping for the highest quality. Overall, it was a fantastic project, and we're off for our next project. :) Like it? Share it! More by this author |