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Monday, November 12, 2012

House #10 Final Financial Analysis...it's a good one!

Like I had mentioned in my last post House #10 is now sold. Here is the financial analysis so you can see how the numbers on this house flipping deal came together. This is a breakdown of all my costs and the profit from the sale as well as some performance numbers so you can see my returns on this investment.

I divide my analysis into 5 sections, the first four are all my cost categories and the last one is performance. The column on the right labeled "% of ARV" means what percentage of the after repair value (ARV) is attributed to each category. 

For example, the most important of the ARV numbers is the first one. It tells me that I bought this house for 53% of what I ended selling it for. This is important because for future purchases I know I should be buying properties around 50% of what I expect to sell them for.

Here are the actual numbers:




First let's point out the obvious…the profit of $46,353!

Yes, this is a great profit for us and a great investment overall. That is the way investing in general is...you win some, you loose some and every now and then you get a home run.

Not only that but look at the hold time, 109 days. The fact that we made this profit in a bit over three months is pretty fantastic, at least for me.

I will be honest with you and tell you that [a bit of] luck had something to do with it because of timing.

There is a general decrease in the number of houses for sale in Atlanta right now. So the fact that we listed a good house, in excellent condition, at the end of the summer made for a quick sale. I also noticed other houses nearby selling pretty quickly…it's almost like a "sellers market" right now.

Let me point out the $2,143 in mortgage payments. These are higher than normal for us and that is because we used a private lender again for this house. This is just an individual that loaned us money to do this deal. Therefore the payments include higher than normal interest.

If you go further down you will see that my projected ARV was $195k. That was me being conservative when buying the house (as I should be). But right now the market was calling for more than that and actually I think the house could have sold for more if I would have been willing to be on the market a bit longer. But I did not want to be "greedy" and thought the deal was good enough with the offer we got.

So all of this makes for great returns as you can see in the ROI, IRR and Annualized ROI rows. I mean, 31.2% return on investment! Take that to the Stock Market…!

Finally the row that says "rehab price/sq. ft." is a number I like to track to compare one rehab to another in terms of risk and difficulty. At $16.76 per square foot, this house was a moderate rehab, not hard at all. Compared to the $26.61/sft. of House #9 this project needed less work overall.

FINAL THOUGHTS


Like I mentioned in my last post, this house was a milestone for me. Yes it’s the tenth house I have flipped but more importantly this business that we have created has helped us bring down many barriers.

If three years ago you would have told me that I could make $46k in a single real estate deal I would have thought you were trying to con me into something.

Like Henry Ford said, "whether you think you can or you can't, either way you are right"…

The last three years have really, deeply changed the way I see myself and what I am capable of. By taking action IN SPITE of my fears, we have been able to change our financial future. Not only because of the money we have made but more importantly because of the financially valuable skills we have acquired.

Think about that for a second…

The money can go away but the skill to make money this way stays with me forever…this is a very powerful thing.

This is what I am trying to communicate throughout this website. Whether it be about building wealth or whatever barrier you are struggling with…I am convinced that we are at risk of living a life at only a fraction of our potential if we don't take action, face our fears and dare to ask more from ourselves.

Question: What do you think about this deal? What do you want to take action on?





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