Flip This House #4

Parent Cafe
3881

FINAL BUDGET UPDATE

Finally got the funds from the sale disbursed to my account and I have been busy all day trying to pay off credit cards and loans.

PURCHASE PRICE = $703,250
includes all transaction costs
RENOVATION COST = $147,017
SALES COSTS = $51,377
CARRYING COSTS = $26,400

TOTAL COST OF PROJECT = $928,044

PROFIT = $71,000

Obviously I am not giving Donald Trump a run for his money and I won’t be on TV anytime soon as a big real estate mogul/flipper who will be hawking Get Rich Quick Seminars. The profit would look great on TV… IF you were doing 6 to 10 transactions a year:)

You can now see why I was hesitating to even lower my price a bit and I was definitely dreading going into low ball negotiations. But, I am very happy and ready to go out and shop for another property !!

And my investors are very happy - I’m off to deliver their checks to their door!

3882

Congrats, CB!!!

3883

So happy for you! It’s a labor of love. Can’t wait until the next flip!

3884

SALES COSTS = $51,377
!!!
THAT ^^ is why you should take the time to get your Realtors license.

3885

Congratulations on another beautiful, successful flip, cb! Can’t wait for the next one.

3886

On the original purchase and the subsequent sale, what is the total amount of commissions your realtor received?

3887

I know that there is overhead buried in the realtor’s fees, but still…

When I was in the chocolate business, sometimes one of my retailers would order a lot of something for a customer who ordered it from them. They charged at least DOUBLE the wholesale price. So if I wholesaled a box of truffles at $11.20, they sold it for $22.95. If they ordered 10 for a customer, I was paid $112.00, out of which came my ingredients, packaging, and labor costs. They cleared the same amount. They made far more money on the deal than I did, I’m sure. If the customer had come straight to me, I would have grossed $224, and actually made some money.

3888

cb, the house is beautiful and you did a wonderful job. I would be happier if you had netted more of a profit (and I’m sure you would have been also). Is getting your real estate license the way to go?? I’m one of the ones who suggested letting your agent handle some of the buyer’s questions, so maybe not. Having that distance between you and the buyer can be very useful.

3889

My agent does not participate in the purchase. She helps me analyze everything, but I make my offers straight to the listing agent to try to get an advantage.

The other agent is the one who made a killing. He showed houses to these buyers for two days… maybe 6 hours total. He made $24,975. My agent had to hold five Open Houses (including the Broker Caravan), stage the house at her cost, advertising costs, etc.

I paid a total of $44,950 in commissions (less than the standard 5%). The other costs were the prorated property taxes paid out of escrow (a huge chunk), title insurance (although I pay hardly anything), escrow fees at $1,500 and on and on.

We have received two buyer questions since the close, routed through the agents. They were simple questions about how to lock the sliding doors and a light switch that they couldn’t figure out. I’m pretty sure I could have handled those without any liability - since I have to write up the whole explanation and then it gets copy/paste directly back to buyer.

3890

I would prefer to just sell the properties myself as a homeowner and pay someone a flat fee to list in the MLS. Nowadays, any listing in the MLS goes out to the websites and, for serious buyers, goes out in the instant email feeds. It’s very hard for an agent to tell his buyers “Oh, you don’t want that one” without a really good reason. They hate to let buyers go see For Sale By Owner because they want to be loyal to the other realtors. It was very hard to sell in the old days because real estate agents held the ‘list’ of properties for sale close to their chest. But now it is easy for interested buyers to see everything on the market.

Either way, I still have to pay 2.5% to an agent that brings the buyer in.

3891

I’m surprised that, at the prices for real estate in San Diego, the standard commission is still 5%. Especially with so few houses on the market. Around here, lots of deals are now 4%, 5% is becoming less common, and prices aren’t as high.

3892

Here, a typical commission will be 6% of the sales price (split between the two agents), plus the excise tax and etc. miisc. costs which amount to additional 2-3% to the seller.

3893

I keep fighting my agent trying to offer only 2% to the buying agent (which is fully shown in the MLS) and she says she cannot do it. There seems to be a lot of rules when you work for a large brokerage. I’m going to fight for it on the next one. I cannot imagine that an agent wouldn’t bring a buyer for a showing if a buyer saw property on Internet/email and wants to see it and/or it’s the best property for buyer.

She says she will not be a party to ‘depressing’ commission rates. Too bad, this one hurt. It’s bad when the agents make almost as much as the person who assumed all the risk for close to 6 months.

3894

I bet there are lots of agents who will lower themselves to list properties in great shape that sell quickly for a mere 4%.

3895

I’m now going back to see how the comparables did. Here is the list that Marilyn prepared when we were listed at $1,039,000 (we are purposely ignoring Newell and Byron that are still lingering on market with that horrible tile and kitchen designs). I put my update in all caps

4384 Saratoga, $1,099-1,199 sq ft. Attractive house with nice architectural features (although I hate the undoubtedly load bearing beam in the kitchen). I think buyers with younger kids might head for this. THIS PROPERTY HAD A TENANT AND WAS HARD TO SHOW. DROPPED PRICE TO $995K, ON MARKET 45 DAYS, WENT PENDING 11/10 AND ESCROW HAS NOT CLOSED. FINAL SALE PRICE UNKNOWN

658 Tarento - $984-1,020. Drawback is only two bedrooms. Nice area and lovely tile. Flat yard. ON MARKET 20 DAYS, STILL PENDING. FINAL SALE PRICE UNKNOWN

3028 Browning - $995-1,055. Actually, the first plane to take off over my head would send me screaming. Smaller house but otherwise nice. ON MARKET SINCE 8/26, STILL NOT SOLD. PRICE DROPPED TO $975K

1331 Willow - $1,150. The pictures are so terrible that it’s hard to get a feel for the house but as far as I can tell it has nice architectural features and a lovely yard. Great views and good location to walk places. ON MARKET FOR 150 DAYS!!! FINALLY WENT PENDING 11/10. FINAL SALE PRICE UNKNOWN

960 Harbor View Dr - $1,260. OK, getting out of the price range but what a stunning house. But small. STILL ON MARKET 82 DAYS. TRUSTEE HOLDING OUT FOR RIDICULOUS AMOUNT, THEY DON’T CARE HOW LONG THEY HAVE TO WAIT

3718 Narragansett - $1,084. I think this is very strong competition except I don’t like wood ceilings and it’s almost kitty-corner from the middle school. Nice views, nice yard, good walk-to places location. Another place families are likely to head. ON MARKET FOR ALMOST A WHOLE YEAR! JUST WENT PENDING 11/7. FINAL SALE PRICE UNKNOWN

4425 Point Loma Ave - $1,050 - 1,150. Another very strong competition. Attractive home with yard in a good location. ON MARKET 63 DAYS, WENT PENDING 11/24. FINAL SALE PRICE UNKNOWN.

So, I am happy to report that in the end, I sold before any of these on the list. Yeah!!!

3896

Next I’m reviewing the list of comparables when I dropped the price to $999,000. Here are the others that we analyzed together

3735 Pio Pico, in wooded area (very desireable) but already under contract, only 2 bd 1,500 sf. I believe it is in contract for under $899k PRICE DROP TO $895K, ON MARKET FOR 36 DAYS, WENT PENDING 11/20.

3444 Talbot St, ONLY ON MARKET 10 DAYS, STILL IN ESCROW

3296 Martinez hanging over cliff, needs work ON MARKET 27 DAYS, STILL ACTIVE

3897

And finally, the four flips in the neighborhood that I have been watching

3230 Newell - ON MARKET 80 DAYS AND STILL ACTIVE

3221 Byron - ON MARKET ONE YEAR AND STILL ACTIVE (same owner as Newell. How the heck can that guy hold a property for a year? That is really dumb, very bad business - too much ego involved trying to get his price. In this business, you need to keep dropping the price, accept the loss and move on as quickly as possible)

1076 Leroy - ON MARKET 120 DAYS. AGENT DID CRAZY PRICE DROP TO $999K TO CREATE ‘URGENCY’. SAT ON MARKET 20 DAYS, BUMPED PRICE BACK UP TO $1,199,000. FINALLY WENT PENDING 11/10, NOT SOLD YET

3238 Browning (same flipper as other Browning above) ON MARKET FOR 13 MONTHS, STILL ACTIVE. EVEN CRAZIER AGENT ANTICS. LISTED IN 10/2014 FOR $995K, THEN JUST TWO MONTHS AGO, EXPIRED AND BROUGHT BACK OUT AT $1,375,000??? WHAT THE HEY?

3898

CB…I know you said you were going to take a little break…but have you heard about any new flip prospects?

3899

There’s no such thing as a break in this business. I have to constantly monitor everything coming up for sale and anything coming up for auction, especially in December because I’m hoping some of my competition might be on vacation or sleeping or something (one can hope). So, no matter what I say, I am searching hard all the time.

Might miss the deal of the century if I don’t keep my eyes and ears open :slight_smile: It could come at any minute, you never know.

Right now I am working two deals where I know that an elderly person and/or heirs are going to sell, but property is not on market yet. Hoping I can make offers before it ever goes on market.

3900

It’s interesting to me that six out of the 14 comps you’ve been monitoring are “pending.” Is there some reason for that? Does something happen on 1/1/16 that the buyers are trying to avoid? It seems weird to me. Or maybe it’s just a function of how long they’ve been available and buyers finally deciding to bite the bullet.