So yesterday we sold our Rocky Point “House on the Hill” flip. Overall this was a very smooth process. Most of the times, there will be some type of major headache, but to be honest this was not the case here. All things considered, if every flip was like this, I could probably spend most of my time on a beach in the Caribbean, but I know that in this case I was just very lucky. Below is a recap of what transpired and why we settled on our eventual sale price.
What Was The Final Sale Price?
So ultimately we were able to fetch a sale price of $275,000 for the house. Our purchase price was $172,000 and our repairs were just over $40,000. Our profit after repairs, realtor fees, holding costs and paying back our private lender (who made almost $12,000 without having to do anything) was just over $35,000. The resale price was a tad lower than I expected. I originally thought the house would sell anywhere from $280,000 – $285,000. The one drawback to this home that had me a bit concerned was the fact that it was up on a hill (hence the nickname) with limited parking for vehicles. I wasn’t sure how much of a negative that would be. Additionally one of the other things that concerned me was the fact that you walked right into the kitchen with this house so the layout was strange.
When we put it on the market we had a very busy open house with great feedback on the finishes, plus we had a multitude of showings. Unfortunately once the dust settled about a week later, we still did not have an offer. The general concern was of course the fact that you had to walk up many stairs to get to the home (which is common in Rocky Point) but I think in this case you had just a few more stairs than people would have liked.
We finally encountered a buyer that loved the house as well as the low taxes which made the home very affordable and they were astute enough to know that it was cheaper than paying rent. Their financial qualifications however kept them from exceeding a $275,000 purchase price. Since my realtor was able to represent both sides of the transaction, he was able to cut 1% off of his commission which really brought the net amount to just under $278,000. Considering I would have taken $280,000 or higher, it didn’t make sense to try to squeeze an extra few thousand out of the deal and wait another month potentially. In fact, anything longer than just a few weeks would have been the same nets profits if I received a $280,000 offer later on. Anything beyond that would have been less of a profit since it is likely that my holding costs would have gone up since you are now spending money waiting for the higher price.
Especially when it comes to flipping, you have to realize two things. 1. Time is money. Each day you hold the property could easily be $100 a day for your average 200-300k flip especially if you have high taxes like we do in NY, and you are using some type of financing (which we almost always do). 2. A bird in the hand is worth a heck of a lot more than two in the bush. I’ve been burnt before where a buyer flakes out, and you wind up waiting a lot longer to find that next buyer. If you add up your costs and you see that your bottom line profit is a number you can be satisfied with. Take it. The greedy always pay twice.
What Challenges Did We Face with this Flip?
As I mentioned above, this was a pretty drama free project, but I would say the only real challenges we faced were the following:
- Turning a spare room into a bathroom. This was an unexpected decision, but as I mentioned in a previous article it made the most sense, but the time and effort with running plumbing and building the shower walls made the project take longer than we thought.
- The disappointment from the buyers who didn’t realize how high up the property was on the hill.
- The loan took longer to get cleared to close than I thought it would. The buyer was really spot on with getting everything he needed to qualify. He was even approved within a few weeks of going under contract which is quite fast in New York. However getting the official clear to close took almost 6 weeks from his initial approval which was quite frustrating since title was free and clear, so this was the only holdup. He was getting what is called a SONYMA loan which has a bunch of additional red tape and hurdles you have to jump through besides giving up your first born. All joking aside though, it is a more complicated loan but we got it done nonetheless.
To purchase a home with tenants, get delayed with starting the repairs for a few weeks after they vacated the premises, plus have a longer than expected wait time to have the loan cleared to close and still be out of the deal in just over 6 months is quite good. I typically budget 6 months, but on this project I was expecting 8 months because I wasn’t sure how difficult the tenants would be in moving out. I always like to count my blessings and in this case I’m not making an exception. Thanks to everyone involved for making this a (close to) stress free project. We don’t have many of them, so it is nice to get lucky once in a while. Stay tuned for more updates on our upcoming projects.