Earlier I presented my numbers for the house flip that is currently under construction. Those were my original numbers. Here are some more up to date numbers as the project has progressed. Some very experienced flippers would probably tell me that my original scope of work (SOW) was no good to begin with. I’m actually operating under that notion anyway. However, just because the scope of work was bad doesn’t mean the numbers were wrong. Here are some updated numbers:
|Original Estimate:||Updated Projections|
|Property Purchase||$ 25,000||Property Purchase||$ 25,302|
|Kitchen Cabinets||$ 1,725||Credit for boiler||$ (5,050)|
|Counter Tops||$ 6,480||Insurance Pmt||$ 88|
|Appliances||$ 1,350||Clean and prep of house||$ 2,542|
|Electrical repairs||$ 1,000||Kitchen Cabinets||$ 696|
|1st Floor refinish||$ 3,600||2 Bathroom and kit. Install||$ 11,380|
|2nd floor carpeting||$ 1,500||Add Alt: Roof Repair||$ 2,800|
|Bathroom update||$ 1,500||Interior paint||$ 750|
|Painting||$ 750||1st floor flooring repair||$ 3,600|
|Heating system||$ 1,000||2nd floor carpeting||$ 1,500|
|labor||$ 6,720||Boiler replacement||$ 4,000||No fuel switch|
|Contingency||$ 2,563||Appliances||$ 1,350|
|Add Alt: Exterior Paint||$ 500|
|Total:||$ 53,188||Contingency:||$ 2,500|
You’ll notice that the categories don’t quite line up. For instance, the price for the two bathrooms does not really coincide with anything on my original estimate as we decided to add a 2nd bathroom into the project AFTER having closed on the house (not the best flipping strategy). However, I believe I was conservative enough in my original estimates that I was able to bury the 2nd bathroom costs in the rest of the job.
A few things to note:
1) There were no associated costs for demolition in the original estimate. I had assumed the clean out would take two days. I was wrong. Apparently, to make a bathroom disappear takes approximately two weeks.
2) The boiler cost looks like a loss ($1,000 in original, $4,000 in the new projection). However, if we factor in the credit for the boiler ($5,050) plus the original $1,000, I actually had $6,050 for a boiler and I am projecting $4,000, which is a $2,050 benefit to my budget. The only problem is this: with the intense cold we had here, the boiler tripped off, the system refroze and instead of one cracked radiator, I have six cracked radiators. Ouch.
3) I forgot to include counter top in my updated projections. I had originally spec’d out 16 running feet at a cost of $40/SF for a total of $6,400. I had assumed some high end solid counter material. After talking with some other house flippers, who told me I could make a counter top of gold leaf for $6,400, I decided to look around. I thought, “Hell, what’s granite cost?” Well, actually not as much as I originally thought. I can buy slabs of granite for $145/slab (72″ x 25.5″ x 1.25″) – the only catch is I have to buy four. So, purchasing four granite slabs including shipping is about $900, I only need two slabs, so for this flip, the cost is $450 (do you have a need for two granite slabs?). I then have to cut the slabs and round over the edges. I have a plan for how to cut the slabs so it looks good. Stay tuned for a future post.
4) As with any project, we’re beginning to experience project creep, meaning small items are beginning to pop up which add to the cost of the project. For example: Because of the disappearing bathroom, the existing waste line is now at a really bad height. So bad in fact that we have to cut the waste line in the BASEMENT and install an entirely new line up through the house. It’s so easy to think “Well, it’s only an additional $25, let’s go ahead and do it.” Well, if you do that six times over the course of 30 minutes (which is easy), you’ve blown $150 (I don’t make $300/hr, do you?).
5) I’ve taken the project creep mentality and applied it to materials. The fart fan*/light combo allowance: $150/light. I found a matching set on eBay for $20/ea. This would represent a savings of $260 over my contractor’s allowance.
The last, but most import observation between my original numbers and the updated numbers is this, as my business partner pointed out when we finish with this house, there will not be one thing the homeowners will have to do after they buy the house. Everything will have been addressed. Two brand new bathrooms; a brand new kitchen; a new master suite; new flooring; new roofs; freshly painted. What’s not to like? Based on my projections, we will have accomplished all of that with the same original budget, meaning my profit margins are still intact.