Fliperati

I was going to continue telling the story of finding buyers for my flip and closing on the sale, but that chronology is getting a little boring so I thought I’d break it up with an overview of the project from an investment perspective.  Or, in short, an answer to the question: Did I make any money flipping this house?

If I benchmark everything against the budget and timeline I established at the outset of the flip, I would say I did very well.  I set three different budget levels for labor and materials at the start of the project (an aggressive low-ball number, an expected middle-of-the-road number and a worst-case scenario number) and my final renovation expenses came in just below the middle estimate.  I would say this is due to luck and conservative estimating more than any tremendous foresight on my part.  I say this because, although the total renovation costs were inline with my expectations, the distribution of the costs were nowhere near what I had planned for.  Some things ended up costing a lot less than planned (landscaping and garage repairs, for example) while other areas (like the floor and the plumbing) ended up way over-budget.  Fortunately the net result was still right in the middle of my total renovation budget for the flip, but it’s frightening to consider how only a few other unexpected problems could have totally destroyed this part of the profit equation.

I think the timeline could be considered my greatest success.  I started full-scale renovations on July 1, 2006 with an extremely aggressive eight-week renovation schedule and still managed to hold an open house on October 1, 2006 in spite of all the setbacks I faced at various stages of the project.  I know 12 weeks sounds a lot longer than eight weeks, but the original compressed timeframe was totally unrealistic and, even in retrospect, finishing all the renovations in three months was nothing short of astounding considering that almost every single surface in the entire house was ripped out and replaced.  With the exception of the exterior siding and the basement (and the garage, of course), you would be hard pressed to find anything on the renovated property that looks anything like it did when I first bought it.  This wouldn’t necessarily be anything to be too proud of if you were a seasoned flipper, but I think it’s a decent performance for a first-timer who started out with no good contractor leads and no practical renovation experience.

Of course, success with the budget and timeline is of little practical value if you don’t end up making any money on the deal and unfortunately that was the case here.  While I didn’t lose money, it looks like the actual profit is fairly negligible and I’m considering it pretty much a break-even deal.  While I did take a bit of a hit on the holding costs (I had budgeted for six months of carry and it ended up taking almost eight months), the biggest failure of this flip was clearly the resale value — which ended up coming in roughly 20% below the original target.  I’ll cover how I ended up taking an offer at this level and the reasons I think the resale fell short of expectations in another post.