Knocked out a real estate flip here in Cincinnati recently, and we closed today.
Return: 25% Fixed (Regardless of time)
Total Amount Returned: $37,500 ($7,500 Profit)
Projected Time Frame: 6 months
Actual Time Frame: 8 months
Annualized Rate of Return: 37.5%
Dow Jones Returns During the Same Period: 7.27%
I have always been more interested in the multiunit real estate side of things than I have for flipping homes. I love the cash flow, low risk (especially in affordable housing), and long term capital gain potential. As such, I never really considered doing a real estate flip, and in fact, if anything I’d be more inclined to buy, hold, and rent single family homes than renovate and sell. With that said, a good friend of mine, JJ, came to me with an opportunity to finance a flip for a fixed 25% return (regardless of time), and I gave it a shot.
JJ aspires to be a monster flipper, with a goal of doing 60 homes a year (if not more). The agreement we made was for a 25% flat return, with a projected project timeline of 6 months. Hard to turn away a 50% annualized return projection, despite the market risk (we are in an overheated market right now).
Things went smoothly, generally, though we had some contractor issues that delayed the project by about 8 weeks. As such, my annualized return shrank from the projected 50% to about 37.5%, which is still wonderful and I won’t complain about it.
We picked this home up for $70,000 and put $75,000 into it. It was sold 8 months later for $207,000. Not a bad deal for everyone involved.
Check out some photos of the project below.