Flip #1 - The Plan

OK, so here is my plan for my first flip.  Renovations will start May 2, 2011 and I am hoping they take 2 weeks, max!  Here's what I'll be doing:

• Change all baseboards and window/door casings
• Sandblast old heater vents (they have such character - house was built in 1954) and re-paint
• All doors have been updated to colonial doors except for 2 - replace 2 doors
• Change all interior door hardware (x 12 doors)
• Install 3 shelves in main bathroom & perhaps change light fixture
• Remove wallpaper in front entrance, paint and install coat rack
• Replace patio door
• Gut the entire kitchen - replace cabinets, sink, counter top, floor, and tear tiles off the walls and re-drywall, move fridge to new location may need electrical outlet installed
• Add crown moulding to living room/dining room
• Carpet runner for basement stairs
• Carpet basement floor over existing ceramic tile
• Replace basement window
• Second bathroom - not sure yet what to do with it but let's say new bath wall tub surround and rip off some tiles from the wall and re-drywall, new mirror and new light fixture
• Paint entire interior of house
• Paint exterior front door and small metal roof at front step/porch
• Plant some flowers/plants in 2 front flower beds and clean up yard

My budget - $12,500.  I know that seems low but my brother and I are a team.  He owns a construction company, TL Construction, and his labour is almost free (maybe a case of beer and a few meals) and for his guys I pay his costs.  All of the supplies we source together and see what kind of deals we can get.  For example, I picked up some tiles off Kijiji last weekend for $325.  A couple had bought them for their house and then changed their minds.  The tile was custom ordered so they couldn't return it.  I got enough tile for 2 flips.  I will use it for the kitchen in this house and will have tons left over for another project in the future.  If I had bought that tile at the store it would have been 3x that.

This house is not a true flip because I have owned it for a year and a half.  I have been renting it out.  In order to show exactly how much profit is made on this flip I want to track every expense possible.  Since I have owned the house for a while I have some starting figures.

Purchase Price                            185,000	Painting of whole house                    2,075
GenWorth Mortgage Insurance         4,200	Repairs & Maintenance                       629
House Insurance to date                    600	House Inspection                              315
Mortgage Interest to date                5,250	Duct Cleaning                                    314
Utilities & Taxes to date                   4,401	Pest Control                                       282
Electrical work                                    325	Initial Renovation Supplies                  995
Used Washer/Dryer                            175	Legal fees + Land Transfer             3,152
Used Stove                                       400	TOTAL =         $211,265.00

That is the true cost of my house so far, almost to the penny.  I am extremely organized and keep all receipts. I think this is key to being a successful house flipper.  As you can see all of these small costs really add up.  Since I have been renting the house I have also recouped some money.  $19,550 to be exact.

THE PLAN

I plan to sell the house for $260,000.  I have another 12,000 to spend on renovations and 15,000 on realtor/legal fees totalling 27,000. 

DO THE MATH

Initial Costs         211,265

Selling Costs         27,000 (Renos, realty, legal)

Total                   238,265

I will have spent 238,265 but that was offset by the rental income I earned of almost $20,000.  That leaves me at $218,265.  So I will sell the house for $260,000 and walk with about $41,000 (+ the mortgage amount of $15,000 I already paid).

You might be thinking that it's hardly worth it.  Well, I don't think so at all.  You see I will have about $55,000 at the end of the day and that leaves me with a nice chunk of money to try another flip and make more money.  This is a small scale first flip.  Didn't cost me much; not a huge risk; won't bankrupt me if it doesn't work out as planned.....Wow, that doesn't sound like me.  I usually jump in both feet without calculating the risk.  Perhaps I am finally learning :)

Stay tuned for the before pictures coming soon.