How to buy and flip a house

The document that follows in this report is data assembled for Triple O Corporation. The financial project in question is a home renovation for a purchased property in the Gwinnet County area. That area is just south and east of Alpharetta, Georgia in the Atlanta Metropolitan area. The data points that shall be covered in this report include the average home price in Gwinnett County, the renovation cost involved for the home that is being purchased, the contingency cost and other operating costs that exist, the sales price and the overall net profit from the sale.

According to real estate site Zillow, the median price of a home in Gwinnett County is about $186,300. Note that this is the median home price and not the average home price as they are not the same thing. Basically, median home price means that all of the prices in the county are ranked from top to bottom and the median price is the middle of the list. In other words, if there 99 homes in the county, the 50th highest would be the median. The average, on the other hand, is the sum of all the prices of homes in the area divided by the number of homes. This number will likely be similar to the median price but it will not be the same (Zillow, 2016). The average home price in Gwinnett County actually dropped a lot in light of the recession that happened in the late 2000's, that being the Great Recession that ran from 2007 to 2009 and that has really not been recovered from since in many ways. Indeed, the average home price in 2008 was a rather soaring $213,000. By 2012, that number had fallen by more than a fourth, all the way to $157,000. This number is even lower than where things were more than a decade ago in 2003, when they average was at $174,000. Prices are starting to edge back up but it will take some time for the area to recover (Young, 2014).

Strategy

As far as an overall strategy to do a home renovation and make a profit, the key is to find a property that is less than the prevailing "comps" and other homes in the area. The house can be bought at a discount and the idea is to renovate the house and sell it at a price that exceeds the sum of the purchase price and the renovations and other costs that are needed to get it into shape. Of course, the price has to be right or the numbers simply will not be there. Properties that are foreclosures, short sales, are "as is" or situations where a quick sale (even at a loss) are really the best ones. There does need to be an inspection of the home so that Triple O. surely knows what they are getting into and that will be insisted upon even if the house is "as is." With that being said, here are the statistics listed above, the costs for the selected property and the net profit that was garnered from the same.

Median Home Price: $186,300

Average Home Price: $157,000

Purchase Price of Home Chosen: $250,000, worked down from $260,000

Details of House: House address is 1824 Waterton Trail in Grayson, GA. In a neighborhood where houses that sell up to $400,000 abound despite being close to or the same size as those other houses. Just need to update the curb appeal, upgrade the major parts of the house (kitchen, bathrooms, etc.) and a profit should be easily made

Renovation Cost: $25,000

Contingency and other Costs (e.g. staging, real estate agent, mortgage payments, etc.): $3,000

Sale Price of Home: $350,000

Profit: $72,000

Conclusion

Of course, things that are not easy to see or inspect might come up when it comes to doing this renovation. That is something that can be dealt with so long as they are not too expensive. Things like air tests, inspections and required disclosures from the seller should be enough to deal with most situations. Even so, inspections and comps are vital to ensure that the margins are not cut too thin in case things come up.

References

Young, C. (2014). PROGRESS: Housing market on a turn-around. [online] Gwinnett Daily Post. Available at: http://www.gwinnettdailypost.com/archive/progress-housing-market-on-a-turn-around/article_9c963415-b455-5c3a-a40b-5830e4bfc8f0.html [Accessed 30 Sep. 2016].

Zillow. (2016). Gwinnett County GA Home Prices & Home Values - Zillow. [online] Zillow. Available at: http://www.zillow.com/gwinnett-county-ga/home-values/ [Accessed 30 Sep. 2016].