Flipping Hammonds Ferry From Start To Finish
Do you want to see how we flipped a 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 Linthicum Heights 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. We learned a valuable lesson flipping this house and that will be reflected in the numbers as we outline them below. 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 more conventionally.
We Purchased a House In Linthicum Maryland
Let’s start with the background. This house was actually listed on the MLS for $165,000. It was a small house, barely $1,000 square feet, sitting on a half-acre of land. It was owned by two lawyers and was passed down to them from their parents who had passed away. The challenge with this property was it was built in the 1950’s and now required an easement from the property’s driveway in front of it to access the house from the main road.
- Purchase Price; $160k
- Cost of Repairs: $50k
- ARV: $280k-$290k
- Project Duration: 90 Days
How We Bought This House:
This deal didn’t come from our we buy houses for cash website, it came from the MLS. In addition to our off market marketing we still search the MLS for deals. The key is being quick and making offers as soon as houses hit the market. This house hit the market in mid-November for 160k. On the same day it was listed we contacted our agent and made a full price offer for 160k with 10 days of due diligence and it was accepted!
We use a quick analysis to make offers on the fly for homes on the MLS. We use the 70% rule: [ARV * .70] – [Cost of Repairs] = Offer Price. In this case we analyzed the ARV to be 300k. The general rule we use to estimate the cost of repairs is $50-60 per square foot. Therefore, [300k * .70] – [50k] = 160k! In this case the property was listed at a price that fit our buy box.
We Do Our Due Diligence:
We use these 10 days to get a bid from our contractor and secure financing from our investors. Our bid from R&G Remodeling came in at $50k. However, this did not include the roof or replacing the HVAC. These items didn’t NEED to be replaced but were over 15 years old. 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 40k which covered the 20% of the purchase price and all closing costs. We financed these costs with our own money but could have 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 R&G Remodeling and assigned solid deadlines for the renovation.
Phase 1: Demo/ Interior Framing layout walls and rooms [14 Days]
- Demo kitchen cabinets
- Demo full bath completely
- Demo all flooring and carpeting throughout
- Demo all light fixtures
- Demo faux pillars between Living Room and Dining Room
- Framer current full bath to be split into full bath & Laundry/hot water heater closet
- Frame wall in current kitchen to bring back 3rd bedroom with closet
- CONFIRM KITCHEN LAYOUT WITH CONTRACTOR
*Cost of this Phase: $10,000
Phase 2: Plumbing / electrical rough-in/ Exterior Inspections and Permits [14 Days]
- Rough in for new tub/shower diverter in full bath; new toilet
- Rough in for new bath faucet, kitchen faucet, garbage disposal
- Wire for new kitchen flush mount light, new bedroom flush mount lights, vanity light
- Install new outlets and switches throughout; hardwire smoke detectors per code
- Install new electric panel
- Install New siding, cap windows, new fascia board, new soffit & rakeboard
- Install new white gutters & downspouts
- Minor grading
- Schedule inspections with the county
*Cost of this Phase: $16,500
Phase 3: Drywall/ Doors/ Trim/ Tile [7 Days]
- Install new drywall as needed from demo and for newly framed walls
- Drywall/plaster repairs throughout to prep for paint
- Install new 6-panel prehung hollow core doors in newly framed areas (x3) with 2 ¼’’ colonial casing
- Install 3.25’’ matching base in newly framed walls (Bedroom, laundry, bathroom)
- Install new tiled flooring in full bathroom floor; tub tiled wall surround
*Cost of this Phase: $8,500
Phase 4: Paint/ Flooring/ Kitchen/ Countertops/ Trim out/ Blue Tape [14 Days]
- Mud, sand, paint whole house 3-tone; Walls – eggshell one color; Ceiling – Flat white; Trim – Semi Gloss white
- Install LVT flooring throughout, excluding bathroom with shoe molding
- Install new white shaker kitchen cabinets
- Install single vanity in full bathroom
- Install granite or quartz countertops with 4’’ countertop backsplash
- Install new lighting fixtures, kitchen hardware, and new door hardware throughout
- Blue tape and get ready for staging!
*Cost of this Phase: $15,000
We had the property staged by Studio A Staging
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 Hammonds for $289,900. We received a lot of interest and showings but there was one common theme that prevented us from getting any offers. We made two big mistakes! Can you guess what they were? Comment below! Hint… we should have spent the money on replacing these two items? Comment below!
If you commented about the Roof and HVAC, you are correct! While the roof was sound it wasn’t brand new and the HVAC worked fine but was 15 years old. After two weeks on the market we delisted the house.
We spent an additional $10,000 dollars to replace the HVAC and the roof. We relisted the property for $305,000 and received a full price offer within a few days! LESSON LEARNED. Always spend the money on the mechanicals and the roof. Buyers were willing to offer $15k more than our original list and all we had to do was spend an additional 10k!
The Final Numbers:
- Purchase Price; $160k
- Purchase Closing Costs: 9k
- Cost of Repairs: $63k
- Holding/Financing Costs: 6k
- Sale Price: $305k
- Closing Costs on Sale: 20k
Net Profit: $47k
We were very happy with a 47k profit on this flip! However, if we were on HGTV they would have advertised this as an 82k 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 (305,000 *.15 = $45,750). Therefore, we hit our goal on this project!