One of the quickest ways to earn wealth in the real estate investing sector is through house flipping. so The 6-Figure House Flipping Formula with Example is here. You could earn many times over a six-figure salary with just one deal. Ask Leka Devatha, who made an astounding $272,000 profit on her most recent fix and flip. But this enormous profit wasn’t achieved by chance or a novice; rather, it was achieved by a skilled, knowledgeable home flipper who was familiar with the ins and outs of the fix and flip analysis.
How then did you become so skilled at fixing and flipping? Though it could involve some trial and error, it’s not impossible. Leka is thankfully here to share some of the knowledge she has acquired via flipping hundreds of properties and making six-figure earnings. In any real estate analysis, having a solid understanding of your numbers is crucial. What are your costs for purchasing, maintaining, and renovating the property? What could the house sell for even if the market declines?
How to UnderWrite And Analyze a Flip?
I’m Shivam, and I started home flipping about ten years ago. Since then, I’ve done dozens and dozens of flips, and while my underwriting procedure hasn’t changed much, my returns expectations have. Today, I’m going to walk you through a case study of my most recent flip. Stay tuned to learn how I found the proper deals, bought them, flipped them, and made a six-figure profit. This is the major reason you should get skilled at underwriting deals. the good deals, the terrible deals, and the offers you should avoid.
3 number You Need to Know while House Flipping
The first three items to keep in mind are what the after repair value (ARV) is. There are a few various methods you can calm properties, so you’ll need to get pretty skilled at comping properties if you want to find this out. The key is to compare like-for-like properties, so a single family home with a single family and a multi-family home with a multi-family, so find a local real estate broker who has access to the multiple listing service as they have the best insights into how the market is doing as well as second there are presets like zillow redfin realtor.com and I used these sites to cop my properties well before I became a real estate broker and master the art of assessing your rehabilitation costs. I probably walked through 100 properties doing this repeatedly until I could walk into a property, look it over, and say, “Okay, this is the scope, so this is what it’s going to cost me to fix it up.” I hired a professional in my area to come walk the property with me, usually a contractor, and explain to me how he was coming up with his bid.
analyze your rehab charges, and get very skilled at it. I probably walked through 100 properties doing this repeatedly until I was able to walk into a property, look it over, and say, “Okay, this is the scope, so this is what it’s going to cost me to fix it up.” Get really good at rehabbing costs. I hired a professional in my area to come walk the property with me. He was usually a contractor. assessing your rehab charges is something you should become very skilled at.
I probably walked through 100 properties doing this repeatedly until I was able to walk into a property, look at it, and say, “Okay, this is the scope, so this is what it’s going to cost me to fix it up.” Get really good at rehabbing costs. I hired a professional in my area to come walk the property with me, who was typically a contractor, and explain to me how he was coming up with his bid.
Then, once I have that pricing, I can calculate all of my other expenditures from that price, with the exception of their transaction costs, which are your title and escrow fees. My estimated profit on that project is at least $100,000.
The Cost To account For
Your soft costs, such as utilities, property taxes, insurance, and finance costs, as well as your real estate commissions Now, for the important part: I usually utilize a hard money or private money lender to finance my renovations. You need to select a lender with whom you can develop a solid working relationship.
My Latest $272k fix and Flip
As soon as you incur all of these expenses, they become your holding costs. As a general guideline, I hold back six months’ worth of holding costs before beginning a fix and flip. Alright, let’s go over my most recent flip. when you do buy deals from wholesalers they sometimes already have a price in mind and that’s still okay as long as you know what all of your other costs come in at you can either tell the wholesaler that that purchase price either works for you or it doesn’t many times when a wholesaler gives me a property and says this is my purchase price and what the final result was was how I underwrote it and what the result was.
I received a call from one of my favorite wholesalers about a split entry property in a Seattle suburb. I got super excited because I had worked in that neighborhood before, so I went to look at it right away with my contractor. Now i’ts really good for you to know what those costs are up front so you can take an educated guess on what your offer price should be.
After receiving a call from one of my favorite wholesalers about a split entry property in a Seattle suburb, I immediately went to see it with my contractor because I had previously worked in that area. Although the property was in need of serious renovation, I jumped at the chance because it appeared to have a great floor plan.
The basement was extremely dingy and needed to be completely finished. The wholesaler’s price for this property was 680,000, which included a 20 000 assignment fee. We were going to open up the kitchen, opening up the floor plan, really modernizing it, and making it super versatile for today’s buyer. When I walked the property with my contractor, we came up with a scope and a budget to remodel this house, and our bid to renovate the house was 120k. Although he sent me his comps, I decided to pull my own and I came up with an arv of a million fifty.
I walked the property with my contractor, and we came up with a rehab budget of and twenty thousand to completely fix up this house. With an ARV of a million fifty, a rehab budget of one hundred and twenty thousand, and an acquisition price of six hundred and eighty thousand, my net profit would be one hundred and thirty seven thousand dollars after all expenses were paid off.
and those charges also included my transaction fees and my soft costs it was a really good deal, so I was ecstatic and decided to proceed now, here’s how the deal actually played out: We held it for four months and changed the original layout from three beds to a plan with four beds. We ultimately had to change it from the original plan of three beds and hold it for four months. Are you ready for a million two hundred ten thousand dollars? We listed the house for one million fifty, received three competing offers, and it ultimately sold. We went from two bedrooms and two baths to four bedrooms and three baths, completely renovated the kitchen and master suite, and turned that drab basement from boring to boujee. This trade generated a total profit of $272k, which is respectable considering the four-month hold period.
So, these are my complete expenditures: purchase charges of $680k, rehab costs of $120,000k, transaction costs of purchasing and selling for $92k, and holding costs of $4200k. Cost of my borrowing is $37,000. I made a total profit of $272 000 after totaling up all of my expenses and deducting them from my final selling price of $1.21 million. We underwrote it well, which is why this sale turned out to be so profitable. Before the deal even closed, we were already making a profit of $137,000. In a booming market, everything above that is just gravy and a bonus.
I prefer to have a much broader spread in my numbers and profit so that I’m set up for success and not failure going into the deal. If we made a mistake along the way and lost a lot of money, there was a lot of opportunity to fall and fail. I hope you learned the fundamentals of fixing and clip underwriting from this.