Analysis of a Flip

I recently started on an ambitious (for me) project.  I decided to reach out to some family friends and see if they wanted to partner on a house flip.  Essentially, we would buy a run down house, fix it up nicely and return it to market, making money by selling for more than we put into it.  The family friends put up the money (up to $50,000) and HBS will put in the head-scratching, project management stressing work.  I then decided to partner my share with my brother-in-law, who has much better carpentry skills than I do.  He’ll keep the project moving from a technical stand point.

My initial analysis is as follows:

Purchase Price: $23,000
Kitchen Cabinets: $1,725
Counter Tops: $6,480
Appliances: $1,350
Electrical Repairs: $1,000
1st Floor Refinish: $3,600
2nd Floor Carpeting: $1,500
Bathroom Update: $1,500
Painting: $750
Heating System: $1,000
Labor: $6,720
Contingency: $2,563

Total Investment: $53,188

Estimated sales price (conservative, ie. low): $72,590
Potential Profit: $19,403 before taxes, holding costs and closing costs
Holding Costs: -$2,150
Closing C0sts: -5,978
Net Profit: $11,275

With a 50/25/25 split, the investors stand to make $5,637.50 and my brother-in-law and I each stand to make $2,818.75.  While it’s not a HUGE payday, I think we will actually do better than that so long as I really drive hard to meet my improvement budget.

Before Pictures:

4 Thoughts.

  1. Great job!
    I think that on the outside when one does construction jobs like this, they don’t expect a huge profit, but if one does a GREAT job, they will do well in the long run.
    I wish you luck in your future construction jobs!
    Check out the show Flipping Vegas, it reminded me of this post.

    • Thanks. This is my first flip, and the numbers are only my initial go at the estimate. I’ll be updating the blog as I move forward with the whole project. We should be mostly completed within one month or so. The goal is to have the house back on the market by 4/1/14.

  2. My wife and I also like flipping homes. We’ve done about 4. We would live in them 2 years to avoid the capital gains and it worked out really well.

    With young kids, we’ve suspended our flipping, but look forward to picking it up again in a couple years.

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