Amazingly, it’s now been six months since we closed on our first property. In that time, we’ve learned more than we could ever have imagined, and despite some missteps and some mistakes along the way, I feel like the first six months were more successful than I had imagined.
While none of this is new info, I thought I’d take a couple minutes to recap the first six months, along with some highlights and some lowlights along the way…
- Over 6 months, we have placed offers on 24 properties, some multiple times.
- As of Monday, we will have purchased 7 properties — 6 single family homes and 1 duplex.
- Of those 7 properties, 3 were purchased with cash, 3 were purchased with rehab loans, and 1 was purchased with a conventional loan.
- Of those 7 properties, 4 have been rehabbed and put back on the market, 2 are currently under renovation, and 1 is being put back on the market next week untouched, looking for an astute investor to pay me a premium for it.
- Of the 4 properties that have been put back on the market, 2 have sold, and 2 are currently under contract.
- The average purchase price of our 7 properties is just under $48,500.
- To date, we have spent just over $90,000 on contractors and just over $33,000 on materials.
- The average rehab costs on the 4 houses we have put back on the market is just under $24,000.
- Assuming the 2 properties under contract sell as expected, the average sale price of our properties is $112,225.
- Of the 2 that have sold, our average profit has been just over $22,500. If the other 2 sell on schedule, our average profit for the 4 properties will be just over $18,300.
- 3 of the 4 properties that have been rehabbed and put back on the market I would call tremendous successes. The 4th property (actually the first we ever did) was somewhat less of a success. While we mostly hit our schedule and budget, we severely over-estimated the resale price, and will likely be making less than $5,000 profit on what was a very big effort.
- The average day on market (DOM) for the 2 properties that we have already sold was 8 days. Assuming the 2 properties under contract sell as expected, the average DOM for all our rehabbed properties will be 39 days.
- The average rehab time for our properties is 46.25 days.
- Between all our rehabbed properties, we are on-average about $50 over our alloted budget (not bad considering our average budget is $29,000).
- Between all our rehabbed properties, we miss our defined schedule by an average of 18 days. This is probably the biggest area of improvement for us.
From a less quantitative perspective, all three of us involved in the business (myself, my wife, and my brother) are very happy with our progress. While we’d love to have done 20 more houses in this time, I think it’s smart that we’ve taken it relatively slowly for the first several months. We’re all happy with our accomplishments, and we’ve all carved out our own niches and expertise in the business.
Personally, I find that I’m best at analyzing deals, putting together budgets and schedules and keeping things on track (I’m also controlling and bossy, from what I’m told :-). My wife is the creative and marketing genius. For someone who has no real estate experience prior to this little adventure, she has gotten her license, completed 5 transactions, built strong relationships with both buyer agents and REO listing agents, and all-around has become the “face of the company,” all in the past few months. My brother just flat-out gets things done day-to-day on the projects. He finds contractors, manages them, does grunt work when need be, and has no problem being the “bad cop” when we run into difficult contractors or situations.
From a financing perspective, we went from paying cash for our first property (over $100K between the purchase and rehab costs) to finding a lender who is basically extending us a line of credit that we can use to buy and rehab about 5-10 properties at a time.
Over the coming six months, our goals are to expand — both the business and the family! — and hopefully ramp up the number of houses that we can purchase, rehab, and sell simultaneously. For the most part, we have the bandwidth to buy and sell more houses at a given time; the bottleneck is in the management of the rehabs. With my brother starting to take the lead on all the project management, he can probably handle two simultaneous projects without a problem. But, once you throw in a third, it’s difficult to spend enough time at any of the rehabs.
What has been helpful is the fact that we are starting to build a strong network of contractors who we are using over and over on our projects. Between our GC/handyman, our painters, our landscapers, our cabinet people, our roofers, and our carpenters, we have a strong set of people who we trust to work without our micro-managing, and who understand what we look for in our rehabs and our required level of quality. So, hopefully we can figure out a way to make our team of contractors more efficient, which will allow us to do more rehabs at a time and without spreading my brother and myself too thin.
That’s our goal our the next several months…