We listed the property on the MLS and received several showings. One showing on April 5th coincided with guests staying at the property. After obtaining their permission, I personally met with the agent and her buyer for the showing.

While the buyer inspected the rooms, I chatted with the agent, mentioning that I was primarily an investor and asked if she had any off-market or pocket listings. She mentioned she was handling an estate sale—property owned by a deceased person going through probate court. I expressed interest and asked for the address.

CRUNCHING THE NUMBERS (1 Hour)
The following day on April 6th I received a text with the address. The property was located in Irondale, AL. A nice suburban area East of downtown Birmingham about 8 miles. I stopped by the property to inspect.

Here’s a LINK to photos of the property

PROJECT OVERVIEW

• Asking price: $150,000
• Estimated value after repairs: $300,000
• Repair costs: $80,000
• Offer needed to be 75% of appraised value: $225,000
• Current estimate: $230,000

THE OFFER (1 hour)
After evaluating the property, I made an offer of $120,000 on April 7th, explaining my calculations, including renovation costs, potential risks, and holding costs. I noted it would take about three months to renovate and another two months to sell, highlighting the market risk in the area. The agent, familiar with investors, submitted the offer. After following up over the next few months, my offer was accepted on June 10th.

PROJECT COSTS FOR THIS FLIP

• Purchase price: $120,000
• Repair costs: $80,000
• 10% hard money loan for 6 months: $11,500
• 15% cushion for latent defects: $34,500
• Utilities: $1,000
• Buyer’s commission @ 2.5% for $300,000 sale price: $7,500 (I saved $7,500 by listing it myself as a broker)
• Estimated closing costs: $5,000
• Total Costs: $259,500
• Estimated Profit: $41,500

Remember, the key to determining your final offer price is determined based on the renovation costs. The higher the costs, the lower the price. The lower the costs, the higher the price. It’s very subjective. While my renovation costs may be $80,000, another investor may be able to do it for $60,000.

MULTIPLE EXIT STRATEGIES
While $41,500 seems significant, it’s a tight margin for a project of this size. Ideally, I aim for at least $50,000 net profit. However, if renovation costs were lower, there were no latent defects, and the property was ready in four months, this might be achievable. You have to measure your risk vs reward ratio and determine what the net profit of your flip is acceptable given the size, scope and time of the project.

Alternatively, I could flip the property to another investor for $145,000, netting about $23,000 after a double closing. Although a $25,000 assignment fee would be risky and might cause issues, double closing would mitigate this risk.

Now I have two exit strategies. I could fix and flip this property or I can wholesale it. On every deal we do, we need to have at least two exit strategies. Don’t get stuck with a property with only one exit. It’s very risky.

WHOLESALING THE PROPERTY (2 HOURS)
I had a 7-day inspection with the seller so if I was going to wholesale this property, I would need to move fast. On June 11, I sent out an email to my 2,347 investors with a price of $145,000. I received multiple inquiries and the next day I scheduled an open house. Seven investors showed up. Over the next few days, the offers came in. Offers came in as low as $125,000 so I knew I got it under contract at the right price. If I didn’t hit at least $140,000, we would simply buy, renovate and flip the property ourselves. The best offer we received was $150,000 through another agent on June 12. I told the agent if his buyer would do $152,000 with cash (no hard money) with $2,500 non-refundable deposit and close with my title company, the property was his. They agreed and on June 13, we closed escrow.

THE DOUBLE CLOSING
There is a $32,000 spread between the $120,000 buy price and the $152,000 sell price so I am definitely double closing this. Double closing a property has its own set of challenges. I have worked with the same title company for 12 years here in Birmingham and have completed several hundred closings with them. Separate emails to seller and buyer parties. Separate HUD’s. Coordinating deposits. Scheduling closings. All of this needs to be handled carefully to make sure neither selling or buying party can communicate directly. The tricky part of a double closing is making sure the buyer wires funds the day before closing or the morning of closing. Having a title company who has experience working with investors is key to a double closing.

THE CLOSING (1 HOUR)
I wire my funds for the A to B closing to the title company to hold in escrow. The buyer, out of town, completed a mail-away closing. On June 20th, the title company sent the closing documents and wire instructions. By 10 am on June 21st, the title company confirmed receipt of the signed documents and wired funds. I met with the seller at 12:30 pm to sign documents and after they left, I then signed documents completing the sale to the buyer.

• A to B Buyer Costs: $118,925.05
• B to C Seller Costs: $$146,585.05

I walk out of closing with a check for $27,659.99 and a separate check for the return of my A to B funds (more on why I wired funds in a future newsletter).

This deal involved many moving parts like failing to find a buyer within the inspection period or the buyer not wiring funds. Prepared for all scenarios, I was ready to wire close if necessary.

Most wholesalers do not have those kinds of funds available so most likely, the closing would not have happened.

As for the short-term rental we listed, it sold on May 31st, netting us $34,084.26 from a NYC investor. We now co-host and manage the property for her.