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Flipping Houses for Profit—A Case Study

Flipping real estate involves buying a property, usually upgrading it, and then selling it (hopefully for a profit). Unlike investing in rental properties, flipping houses offers the potential for short-term gains and keeps your capital tied up for a relatively short period of time. Through this case study, Mike and I will be sharing with you in detail a foreclosure we just purchased and plan to flip.

As with all of our real estate investing, the investment property we purchased was a HUD foreclosure. HUD listed the property for $65,000, but we won the home with a gross bid of just $41,000. If you are wondering how we did that, check out our article on how to determine HUD’s minimum acceptable bid. In this case though, we just submitted a lowball offer and won. Sometimes it is better to be lucky, than good, not like Mike and I have much choice in the matter.

We expect to put about $23,000 in to rehabbing the property, but more about that later. Add a few thousand dollars in transaction fees, and our total investment will come in at around $65,000. The property appraised for $94,000 based on the improvements we intend to make, so there is a potential for a nice profit.

The property is a real “peach,” as Mike likes to say. It is a three bedroom, one bath home on a slab (no basement). It has a carport and a fenced 1/4 acre yard. Built in the 1950s, the home is in a good school district in a suburb of a large mid-western city. It won’t make the cover of Architectural Digest, but we do expect it to add nicely to our bank account. Here is a photo of the home taken a few years ago:

house-flipping-real-estate-investing

Flipping houses is not our primary real estate investing model, but it should provide additional capital as we continue to buy longer term rental properties. Stay tuned for more updates on our flip. The next article will walk through how we pick homes that we think make for a good investment in flipping homes.

{ 6 comments… add one }

  • InvestWithPassion.com September 4, 2008, 8:06 pm

    Congrats on the flip! Thanks for posting the details later. It always helps learning when the numbers are involved.

    Yes, you got a real deal if you were able to purchase and rehab for $65K and it appraises for $94.

    I assume that you sold it at a discount compared to the appraised value and used that as a selling point.

    My guess would be $82K with $13K left over to cover the buyers closing cost and some incidentials. Am I far off or did you go a different route?

    Nevertheless, great work and keep it up!

  • Joshua Dorkin @ BiggerPockets September 6, 2008, 8:59 pm

    Good luck with the flip. Let us know what happens when you actually get all of the work done. I’d be interested in seeing the actual numbers that you end up with once the deal is done.

  • Rob September 7, 2008, 7:22 am

    @investwithpassion, we are still in the rehab phase, so we haven’t sold it yet. As for the sale price, with incentives I’m sure it will be below 94k, but I sure hope it’s above 82k!

  • Rob September 7, 2008, 7:22 am

    @Joshua Dorkin, we will show all the numbers. If they turn out to be not so great, I’ll blame Mike.

  • Joshua Dorkin @ BiggerPockets.com September 11, 2008, 11:53 am

    @Rob, sounds good to me! I hope you guys do great with this project.

  • Calypso Bay March 2, 2011, 12:46 am

    What type of car is that in the driveway? Haven’t seen any like that in Australia!

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