How I Flipped an Out-of-State Home for Over $100K Profit In Less Than 4 Months
Earning a lot of money doesn’t mean you have to have a high-paying 9-to-5 job; it can come from a side hustle like my out-of-state flipping business! In fact, because my flipping business can be so lucrative and take just a few hours a week, I often wonder why I should even keep my 9-to-5. Well, I’ll save the answer to that thought for another day. Today, I will share my experience buying an off-market property and how I ultimately sold it for a massive profit!
The Power of Networking
Because I started my out-of-state flipping business at the beginning of the year, I had already built relationships with a few trustworthy business contacts. In doing so, my primary realtor that I used for a few other purchases in the Dallas metro reached out to me in May with a potential flip opportunity! This property was located in the coveted city of Plano, Texas, specifically zoned for a highly desirable school district.
Since I had worked so well and so closely with my realtor on several other deals, they brought the opportunity to me first, despite having dozens of other investors who would’ve been just as eager to jump on this deal. This is why networking and treating your business contacts well is so important.
Feb 2020 to Feb 2021: About The Off-market Property
Back in February 2020, the owner of this Plano property listed the home for sale at $498K. Unfortunately, this was right when COVID-19 shook the nation. By June 2020, the seller still hadn’t sold the home and dropped the price by about $10K (too little too late, in my opinion).
That was not enough to bring in a buyer. So instead of continuing to wait, the owner decided to rent out the home and try to sell it again in 2021. But before they rented it, they decided to spruce up the place a bit by buying new kitchen appliances, thinking it would rent at a higher premium and would help with the sale the following year.
Unfortunately for the owner (who apparently needed a bottle of Felix Felicis), exactly 1 year after the initial sale attempt, in February 2021, Texas was hit by massive storms that took down their power grid and left many households without energy for weeks. It also froze many homes’ water pipes, including this one, which led to bursting pipes and extensive flood damage throughout the downstairs.
After dealing with their insurer for a few months, the owner decided the home was too much work to keep and wanted to get it off their hands as quickly as possible. Lucky for me, my realtor was recommended to the owner through a friend who worked with my realtor previously. From there, my realtor reached out to me and wanted to see if I was interested in flipping it.
May 24, 2021 - Buying The Home
In May 2021 the owner began negotiations with me on the sale of their home. Immediately, I had to work with my realtor to get the estimated ARV (after-repair value) of the home, as well as get my contractor to make a bid on the rehab project.
All-in-all, I came to an agreement with my contractor that it was a pretty straightforward, 1-month job and would cost a total of $65,000. My realtor estimated the ARV would be roughly $575K. With those costs in mind, I knew this deal would be very profitable if I could just purchase it for less than $450K.
Initially, I attempted to purchase it at $390K, but then another investor somehow learned about the opportunity and offered $420K! I thought I lost the deal at that point. Luckily, the owner was kind enough to agree to work with us because we came to him first and agreed to a $410K purchase price. No thanks to the other investor, we ended up paying $20K more than I wanted, but it was still going to be very profitable.
After about a week of negotiations, I finalized my loan terms with my hard money lender and signed the purchase agreement. My hard money loan was for 6 months at a 9.9% interest rate. Despite the high rate, I only expected to hold the loan for roughly 3 months since my contractor estimated a 1-month job, plus 1 and a half months to sell and close.
June 1, 2021 - Homeownership
In just 8 calendar days, I went from signing the purchase contract to becoming the homeowner. That is a super fast close time, if I do say so myself!
This was made possible because:
I was not buying the home with a conventional loan, nor would I have been able to, since the condition of the home would not qualify for a Fannie Mae loan.
My hard money lender can move very quickly, only needing a week’s notice.
I already had my contractor lined up with a signed bid.
We paid a premium to have HOA documents sent to the title company within a couple days. Sometimes it can take over a week for the title company to receive the HOA documents, which would’ve held up the close date.
August 5, 2021 - Listed For Sale
2 months passed instead of the 1-month job promised by my contractor. That was more than anticipated, but I have learned to double my contractor’s time estimates by now because there are always unexpected problems, shortages, etc.
Originally, my realtor projected the ARV would be around $575K. But after reviewing the latest comps in the area, we decided to list the home for sale at $599K! In fact, the comps were very good and we anticipated a final sale price well into the $600,000s.
We listed the home for sale on a Thursday so we could garner some preliminary interest, have a single weekend of open houses, and wait for offers to come in early the following week.
August 9, 2021 - In Contract
Just as we expected, 4 days after listing the home on the market, we got into contract the Monday after the open houses at a purchase price of $650,000!
Not only was the price amazing and tens of thousands of dollars above my expectations, the cherry on top was that the buyers fully waived their appraisal contingency! The appraisal contingency can be a big deal, especially in red hot housing markets, where appraisers aren’t able to keep up with skyrocketing home prices. And when appraisals come in below purchase prices, buyers are forced to fork over the difference in price with cash.
If you’re interested in understanding the importance of appraisal contingencies more, read how my very 1st out-of-state flip sold for $130,000 over appraised value!
September 9, 2021 - Final Numbers
While the owner walked away with tens of thousands of dollars in insurance claims (if not more) and didn’t have to deal with what they believed would be a giant headache, they could’ve reaped the profits for themselves if they had the knowledge, energy, time, patience, and connections to repair and sell their home. But they didn’t. And because of that, they missed out on a large profit that went into my pockets instead.
Here are the final numbers of the deal:
Purchase price: $410,000
Rehab: $65,000 + $3,699 = $68,699
Closing costs: $12,840
Monthly mortgage (<4 months): $3,437 x 4 = $13,748
Selling costs: $32,500 (5% commissions)
Sale price: $650,000
Profit: $109,906 | 95.08% ROI
I’m still shocked at how well this flip went, but I couldn’t be happier with the results! Over $100K profit with a 95% return on investment in under 4 months’ time is just mind-blowing!
For those of you who’ve been reading my blog since the beginning of this year, you’d know that I initially set out to flip 4 homes this year. However, I’ve ended up flipping 5!
Be sure to subscribe to my blog below to hear how I ended up flipping an extra home this year! And if you want to learn my flipping process, you can read all about it in my 1st flip.
