We made $128,000 on an apartment building flip in three and a half years.
Location: Tampa, Florida
Type of Real Estate: Apartment Building
Scope of Project: Acquisition and Disposition
Length of Project: 2012 to 2015
Size of Real Estate: 6 Units
Purchase Price: Bought for $265,000
Selling Price: Sold for $340,000
Investment: $80,000 down
Average Rent of Building: From $550 per month to $650 per month.
Historic Vacancy Rate: 100 percent occupancy at acquisition and disposition
This was simply a good buy for us. In three and a half years, we made a 53 percent return on our investment! We placed $80,000 down to buy it and financed about 75 percent of it. Then, we made a total of $48,000 in cash flow during the time we owned it:
1st year cash flow: $12,000
2nd year cash flow: $16,000
3rd year cash flow: $20,000
This was due in part because we increased rent by $100 per month over the course of three years. A rent increase like this for six units adds up quickly! It generated a 15 percent return—not including sale price.
On top of cash flow, we made $75,000 profit at the sale!
Lessons Learned from the Project
This project taught us how vital it is for an investor to complete a thorough due-diligence before closing. In other words, the money is made when you BUY an asset because the purchase price is the one thing you can control. In most instances, if there’s an issue with the property, it becomes leverage in a negotiation for a price reduction prior to closing.
We reviewed every single lease, inspected inside the structure, outside the structure, utility connections and even saw each unit and met the tenants. Fortunately, there wasn’t anything wrong with the property, so we paid the full asking price. It was just a great deal in a great market.