House Flipping Success Story: Brookland (From $490K to ?)
Whether you are a newbie in the game or a veteran who has flipped dozens of houses in DC, house flipping success stories are always a great read. Why? Well, these stories offer various lessons and insight on property locations around the district. Asides from this, they also give an enormous morale boost!
This article will cover all the details concerning the $510,000 Brookland property I flipped recently and discuss the various steps used to ensure it was a flipping success.
The Benefits of Flipping Houses
Compared to your conventional real estate investment methods, house flipping offers a lot of benefits. One of these is the turnaround time. House flipping lets you purchase a house and sell it quickly for a profit.
The process of purchase, rehabilitation, and selling usually take no more than a year to complete. And if done the right way, you can turn in consistent profits all year round with multiple flips!
Why You Need an Investment Rental Property
Currently, there is a decline in homeownership as compared to rented properties. And right now, owning a rental property is probably the smartest move you can make. This is because home values have been on a steady upward trend.
Also, the market of renters is readily available- a lot of young people these days would rather rent properties than own one. Another primary reason why you need to own rental property is that they bring in reliable passive income.
Lastly, investment in rental properties comes with tax benefits. The expenses that come in categories of improvements of deprecations, insurance interests on the mortgage, and maintenance costs allow more deductible taxes.
The Successful House Flipper Story: Brookland
This section will show you how I successfully flipped a property worth well over $500,000. Below, I talk about the strategies and techniques that I applied to achieve this.
The skinny on the house: A duplex in Brookland DC, having two one-bedroom-one-bath units each.
Purchase Price:
The purchase price for this home was $510,000.
What does Purchase Price in Real Estate mean? A property's purchase price is an original amount that is paid for the property before any improvement on it. It is the price an investor pays for the property which becomes the investor's cost basis.
You can find a home's ideal purchase price in two basic ways. First, you can do an online survey of the property's information if you have basic knowledge of housing valuations. Or you can go the other route and ask for advice from a real estate agent who is experienced at valuation.
Brookland House Exit Strategy
The exit strategy for this flip was simple; turn each unit into a two-bedroom, having one bath section each, then renting them out. Essentially, I planned to buy and hold it as a rental unit.
Why I Bought the House
The main reason why I bought this property was because of its great section 8 rental. Additionally, The property is basically two units in one, and I figured that it could rent for about $5000/mo. This property also allows for good quality tenants, and I couldn't resist its potential resale value.
To spot a good home like this, you need to consider factors like the environment and neighborhood, proximity to landmarks, security, and access to basic amenities.
Financing for Purchase and Rehab
The financing used for this flip was a six-month hard money loan for $410,000.
Rehab Work
This property needed a new look. After researching what aspects of the property would yield the most ROI, I got new kitchen appliances, changed the paint, completely renovated the bathrooms, and changed the flooring.
Here are the steps I used to identify what aspects of the house needed renovating;
I checked out the property with the help of a professional inspector.
After this, I created a checklist to help remind me of important issues that needed to be fixed.
Then I developed a rehab budget that was in line with my checklist and the scope of work.
Finally, I found a contractor that was adequately suited to handle the rehab.
It is essential to hire a reliable contractor for your flip. Contractors can make or break your project. I have seen cases where contractors delay projects indefinitely, causing house flippers to barely break even on their projects.
Rehab Costs
Rehab costs basically mean the amount of money you will need to renovate or fix up your house. The renovation cost for this project was $50,000.
Turnaround Time
In house flipping, having a short TAT is essential. You have to keep in mind that you are losing money for every day your house isn't being rented. This loss can come in the form of interest from loans. However, make sure you don't cut corners because this will always lead to problems in the long run. The projected turnaround time for this project was only 90 days.
Rental Income
Rental income is described as the income received from rental properties. One of the main goals for any renovation project is to meet the rental income target or sell the house for its appraised value. The rental income for this project is $5000/mo - which is remarkably good for its area.
Appraised Value
The appraised value of a home is the value at a specific point in time as determined by a licensed appraiser.
After successfully renovating the house, it had an appraised value of $750,000. The renovations pumped the property's value up by almost 50%! Making it more suitable for renting activities or an outright sale.
Want To Learn How I Do It? Get Free Real Estate Investment Content
I have seen firsthand the challenges people face with real estate investments, especially with house flipping. And this is why I have made it my job to inform and educate budding investors about all they need to know about real estate in DC.
At Everyday Investors, we provide updated facts on real estate and discuss current real estate market trends. Lastly, our goal is to help investors get started and make the best return on their money from every development project they embark on. Get more FREE content on how to invest in real estate by joining our community list.
