Flipping Norfolk Ferry From Start To Finish
Do you want to see how we flipped our 2nd house? What the true costs are to flipping and how to flip for a profit? I will show you all the financials behind flipping this house in Glen Burnie Maryland! I will walk you through the entire flipping process from the acquisition and figuring out the numbers through the renovation and the sale.
I will do my best to keep this as short as possible without missing any key details. This flip took us longer to renovate due to permitting which will be reflected in our holding costs! But first, how did we find this house?
We buy houses in any condition, as is, from people that rather sell fast for cash than list with an agent. From this past blog post it’s clear how we get our leads, but this one we obtained differently.
We Purchased a House In Glen Burnie Maryland
Let’s start with the background. We were at a neighborhood cookout and one of the neighbors heard that we buy houses and said hey, “we have a house that we have been letting our daughter live in, but she is moving out and it needs a lot of work. It has foundation issues that we don’t feel like taking care of and we don’t want to be landlords anymore and really need the cash to pay off other debt. Would you be interested in buying it?” We said, “absolutely, we will go take a look at the house and let you know what we can do.”
After viewing the house and going over all the repairs that are needed we said hey, “we can give you a full price offer so that you can move on and not have to worry about this house any longer.” They said, “absolutely we will take it.” They wanted $175,000 for the house and that is what we were able to offer.
Norfolk is a 1,035 Sq ft rancher built in 1960 in Glen Burnie Maryland. It has 3 Bedrooms and 1 bathroom with an unfinished basement. Our plan is to fix the foundation issues in the basement and finish 800 sq ft of the basement with 2 additional bedrooms (with egress windows), 1 bathroom, and a kitchenette.
- Purchase Price; $175k
- Cost of Repairs: $98k
- ARV: $390k
- Project Duration: 240 Days! 🙁
We use the 70% rule: [ARV * .70] – [Cost of Repairs] = Offer Price. In this case we analyzed the ARV to be 390k. The general rule we use to estimate the cost of repairs is $50-60 per square foot. Therefore, [390k * .70] – [98k] = 175k! In this case we could offer exactly what the owners expected to receive.
We Do Our Due Diligence:
We use the two weeks prior to closing to receive a bid from our contractor and secure financing from our investors. Our bid from R&G Remodeling came in at $74k. However, this did not include the foundation repair or replacing the HVAC. The foundation repair quote from Budget Waterproofing came in at $10,000 and the quote from Comfort Systems Inc to replace the HVAC was $5,700.
We reached out to Pimlico Capital to obtain Hard Money Loan financing. Pimlico agreed to give us a loan for 80% of the purchase price and 100% of the renovation. After we confirmed our numbers we were able to move forward with the purchase after our due diligence period.
We then needed to obtain builders’ risk insurance. We use Esposito Insurance and put them in contact with Charter Title (Maryland is a title company state). The cash we needed to close was 57k which covered the 20% of the purchase price and all closing costs. We obtained private financing from a private money lender. We closed on this purchase and were ready to flip!
How We Flipped This House
The first thing we needed to do is make sure we had a plan. It is a terrible idea to start rehabbing without a plan. We met our contractor at the property to go over the demolition plan and future layout and any framing that needed to take place to adjust the layout.
We solidified the scope of work with Our Contractor, Budget Waterproofing, and Comfort Systems Inc.
Phase 1: Demo/ Interior Framing layout walls and rooms [14 Days]
- Demo kitchen cabinets completely
- Demo carpet throughout
- Demo vanity, toilet, vanity light and mirror in first floor bathroom
- Demo vanity, toilet, vanity light and mirror in unfinished basement bathroom
- Demo all doors throughout
- Demo paneling in dining room
- Install 7 I beams on the cement block basement wall
- Frame wall for basement to close off for possible 2nd apartment.
- Frame basement partition walls to create two bedrooms, family room, and HVAC utility room
- CONFIRM KITCHEN LAYOUT WITH CONTRACTOR
*Cost of this Phase: $20,500
Phase 2: Plumbing / electrical rough-in/ Insulation / HVAC Ductwork [90 Days]
- Install new plumbing for new basement kitchenette
- Extend ductwork in basement for new layout
- Install new outlets and switches in new basement walls per new layout
- Change existing light fixtures throughout the house
- Change locations and hardwire smoke detectors per code
- Install new insulation on basement exterior walls
*Cost of this Phase: $16,500
Phase 3: Drywall/ Doors/ Trim/ Tile/ Windows [21 Days]
- Install new drywall throughout entire basement walls and ceilings
- Plaster repairs throughout
- Mud sand, prep for paint
- Install new 3 ¼ base trim throughout the basement
- Install new 6 panel prehung doors on newly framed walls in basement
- Install new 6 panel door slabs on all remaining doors on first floor
- Install new bathroom tile floor and tile tub shower walls in upstairs bathroom
- Install new windows throughout the house including two egress windows in basement bedrooms
*Cost of this Phase: $34,244
Phase 4: Paint/ Flooring/ Kitchen/ Countertops/ Trim out/ Blue Tape/ HVAC [60 Days]
- Paint whole house 3 -tone: walls alabaster/flat; ceilings – white/flat; trim – white/semi gloss
- Install LVT flooring throughout first floor and basement
- Install new white shaker kitchen cabinets
- Install small kitchenette cabinets in basement
- Install new single vanity in both bathrooms
- Install new quartz countertops in kitchen and basement kitchenette
- Install new door hardware throughout
- Reglaze hall bathroom tub and install new mirror and toilet in both bathrooms
- Install new lighting fixtures, kitchen hardware
- Paint exterior of the home white
- Replace the heat pump
- Blue tape and get ready for staging!
*Cost of this Phase: $31,500
Change Orders! Ugh
- Replaced electric panel $2,000
- Draft stop protections per county inspection $900
- Move basement toilet due to plumbing issue $500
- Build a wall behind toilet due to I beam $650
- Install new sump pump $250
- Material overages $6,866
- Add recessed lights in living room $1,000
- Drywall repairs $750
Cost of Change Orders: $12,916
We had the property staged by Studio A Staging for $1,600
Total Renovation Cost (Including Staging): $115,260
Don’t forget your payment plan! Our payment plan with our contractor is reflective of these phases and agreed upon before the work starts and when the contract is signed.
Time to List this House!
We listed Norfolk for $399,900. We received a lot of interest and showings and after just 8 days on the market we received an offer for $400,000!
The Final Numbers:
- Purchase Price; $175k
- Purchase Closing Costs: 9k
- Cost of Repairs: $115k
- Holding/Financing Costs: 31k
- Sale Price: $400k
- Closing Costs on Sale: 25k
Net Profit: $45k
We were very happy with a 45k profit on this flip! However, if we were on HGTV they would have advertised this as a 110k profit! On TV they never go over the true hidden costs in flipping. This can also make it tough when negotiating with homeowners. Just taking the ARV and subtracting the cost of repairs and purchase price does not yield the true profit! As you can see there are many costs endured throughout the transaction on purchase and sale.
Our target profit on a flip is 15% of the ARV (400,000 *.15 = $60,000). Therefore, we did not hit our goal on this project.