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.

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I of course have to open this post with a very sincere apology for leaving everyone hanging in suspense for so long.  It’s been over

three months since I’ve posted my last update and I realize it wasn’t fair to simply drop off the face of the earth like that, but there are a number of reasons why I quit writing in the blog so suddenly (although I doubt anyone will be fully placated by my ideas of good reasons).  The holidays were the first major catalyst in my blogging hiatus, primarily because my family is in a rural part of the Midwest without any high-speed internet access and I simply can’t stomach using dial-up for any purpose beyond bare-necessity e-mail checking.  I spent quite a bit of time at home around Thanksgiving and Christmas because my prior Wall Street job limited my holiday visits to rushed three-day affairs and I wanted to actually spend some quality time with my family this year.  All that home cooking and the slower pace of day-to-day life back home really sapped my enthusiasm for blogging and distracted me from the flip that was languishing back in New Jersey.  I know die-hard real estate investors would never get so detached from their businesses, but I hadn’t been able to spend that much time with my family in nearly a decade so I was okay with tarnishing my work record over a long break.

The second factor in my blogging absence was plain old superstition.  I hate to admit it, but I have always had a strong superstitious side that is particularly pronounced when it comes to major life events that are influenced by luck, competition or forces beyond my control.  For example, I always refused to speculate on my performance on important exams in school until I had the final grade in my hand.  This behavior was driven by the completely irrational fear that discussing the test would somehow “jinx” my results.  Even though everyone else was busily comparing notes about how ridiculous the essay section was and how Question #3 on the first page was straight out of the textbook, I was like a guilty politician dodging pre-trial interview requests from the media: No Comment.  The same goes for job interviews, first dates and poker tournaments: I’ve always thought that speculation brought bad luck and generally avoided talking about anything until the final result was written in stone.

The fact that the full-price offer on my first flip fell through right around the time I began telling my friends about the sale only reinforced this long-standing policy of not discussing anything until it was a done deal.  After that it was tough to sit down and write blog posts on any new developments when I still had the fear of “jinxing” the deal.  Crazy, I know, but I’ve never been able to shake that kind of superstition.

The fact that I’m writing now indicates that I’ve closed on the sale of my very first investment property, but I’ll save the details of that story for another post because I’m short on time at the moment.  I promise it won’t take three months this time.

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I of course have to open this post with a very sincere apology for leaving everyone hanging in suspense for so long.  It’s been over three months since I’ve posted my last update and I realize it wasn’t fair to simply drop off the face of the earth like that, but there are a number of reasons why I quit writing in the blog so suddenly (although

I doubt anyone will be fully placated by my ideas of good reasons).  The holidays were the first major catalyst in my blogging hiatus, primarily because my family is in a rural part of the Midwest without any high-speed internet access and I simply can’t stomach using dial-up for any purpose beyond bare-necessity e-mail checking.  I spent quite a bit of time at home around Thanksgiving and Christmas because my prior Wall Street job limited my holiday visits to rushed three-day affairs and I wanted to actually spend some quality time with my family this year.  All that home cooking and the slower pace of day-to-day life back home really sapped my enthusiasm for blogging and distracted me from the flip that was languishing back in New Jersey.  I know die-hard real estate investors would never get so detached from their businesses, but I hadn’t been able to spend that much time with my family in nearly a decade so I was okay with tarnishing my work record over a long break.

The second factor in my blogging absence was plain old superstition.  I hate to admit it, but I have always had a strong superstitious side that is particularly pronounced when it comes to major life events that are influenced by luck, competition or forces beyond my control.  For example, I always refused to speculate on my performance on important exams in school until I had the final grade in my hand.  This behavior was driven by the completely irrational fear that discussing the test would somehow “jinx” my results.  Even though everyone else was busily comparing notes about how ridiculous the essay section was and how Question #3 on the first page was straight out of the textbook, I was like a guilty politician dodging pre-trial interview requests from the media: No Comment.  The same goes for job interviews, first dates and poker tournaments: I’ve always thought that speculation brought bad luck and generally avoided talking about anything until the final result was written in stone.

The fact that the full-price offer on my first flip fell through right around the time I began telling my friends about the sale only reinforced this long-standing policy of not discussing anything until it was a done deal.  After that it was tough to sit down and write blog posts on any new developments when I still had the fear of “jinxing” the deal.  Crazy, I know, but I’ve never been able to shake that kind of superstition.

The fact that I’m writing now indicates that I’ve closed on the sale of my very first investment property, but I’ll save the details of that story for another post because I’m short on time at the moment.  I promise it won’t take three months this time.

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