House #50: Final Analysis

December 19, 2013 · 8 comments

We closed on the sale of House #50 today…

This project was another Milwaukee house that needed a good cosmetic overhaul, along with some reconfiguration. We blew open the kitchen to the dining room and the living room, and took the huge master bedroom and created a master suite (added a full bath and a walk-in closet). Had we gotten this one on the market a month or two sooner, we likely would have earned an extra $10K in profit, but we’ve had a lot of projects going up there, and they all fell behind schedule.

We used a lender on this deal — we agreed to give him 50% of the profits or 12% annualized interest, whichever was greater. In the end, 50% of the profits would have resulted in about 10% return on his investment, so he got the 12% interest instead. Our profit here wasn’t great, but it made money, so I’m not complaining. Ultimately, I only had $60,000 or so invested (the other $200,000 came from our lender), so our ROI was actually pretty decent on this deal.

Here is how the financials break down:

House #51 Financials

8 responses to “House #50: Final Analysis”

  1. T Fortune says:

    Hey J –

    congrats on this one! If i’m reading this correctly, the 10k profit was AFTER you paid your lender? And it looks like the lender made about 15k on the deal?

  2. J Scott says:

    T Fortune –

    That’s exactly correct. Our lender made more than we did on this one, but in the end, he’s happy and we’re happy, so it’s a win/win!

  3. T Fortune says:

    Yep, nothing wrong with that. A profitable deal is a profitable deal!

  4. Jessica Sala-Bonin says:

    Congrats and Happy Holidays!

  5. Don R. says:

    If it is not a secret, how much time did you spend working on this deal?

  6. J Scott says:

    Hey Don,

    I don’t have any secrets! 🙂

    This was a Milwaukee deal, and I have a partner on it. He finds the deals and gets them sold; I handle the rehabs. I probably spent about 10 hours putting together a scope of work and getting bids, then my project manager handled the day-to-day aspects of the deal, and I probably spent another 10-15 hours through answering questions, dealing with high-priority issues, making decisions, etc. So, in total, I probably spent about 25 hours on this project.

  7. Sebastian says:

    Hey J,
    How much capital gain taxes are you paying at this moment?

  8. J Scott says:

    Hey Sebastian,

    You don’t pay capital gains on flip income — it’s taxed as ordinary income just like a regular W2 job. I only pay capital gains on my rental income and my other investment (non-real estate) income.

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