How to Turn an Abandoned House Into $50,000 in Profit through Flipping

Abandoned to $50k

B Y D A N K R U P A

I hear from investors all over the US and especially here in Kansas City that they want to flip to gain capital and experience, but they can’t find a deal or the numbers never work out. Here is how our company, Rev Homes, turned this neglected, abandoned house in Gladstone, MO into $50,000 in profit in eight weeks.

Acquisition: How can you find a great deal in a market this hot? The answer is easier than you think. Through networking, we have built our reputation, and people know we are always looking to buy distressed properties. We were called about this property through someone my wife, Michelle, had met and chatted with months ago. We tell everyone we meet that we buy properties, for cash, any condition, and close quickly. When the opportunity presented itself, we acted quickly, made a fair cash offer, and closed in under a week.

Should you buy a house in this condition?: A project of this scope and magnitude would scare most new investors. The water was not on. The sewer main couldn’t be inspected. Termites. The house was a mess. A family of raccoons had previously vacationed there. Where many investors see issues, we see opportunity. We have flipped over 60 properties, 11 BRRRs for out of state investors, six BRRRs for ourselves that our now our rentals, and 47 actual flips.

Through education, mentorship, and a ton of on-the-job training, we have learned how to address any and all issues on a rehab and acquired a large network of investor friendly contractors. A lack of know-how shouldn’t limit a new investor. Many seasoned investors would be happy to partner on a deal of this magnitude or provide fee-based consulting services. The key in this market is to procure the property at a great price.

Then move on to the next step.

Our process: Safety and quality are paramount to Rev Homes, these two factors aren’t negotiable for us, and they shouldn’t be for any investor. The first step was to gut this house down to the studs and replace the entire HVAC and ductwork in the crawl space while also removing all of the excess trees over the roof and in the front yard. Next, a new roof and gutters were installed to prevent water penetration. Once the new roof was installed, we started demolition, reframed damaged wood and subfloor, and installed new windows and doors.

We wanted to maximize the amount of liveable square footage and make the house as open as possible so we removed the partition wall in the kitchen and reconfigured the bathroom, moving the water heater out of the bathroom and into the garage creating more space.

Following the framing, we ran all new electrical and plumbing. After the rough-in was complete, we had the house inspected. Next, all new insulation and sheetrock were added.

The house is starting to take shape and transition to a cosmetic rehab. All new interior and exterior paint, flooring, tile, electric finish, and new cabinets were installed. Once countertops were installed, the kitchen is able to be completed with tile backsplash, faucet, and appliances. The bathroom had everything replaced; tub, tiled surround, vanity, and plumbing fixtures. Finally, the hardwood floors were refinished. Meanwhile, the final landscaping and repouring the sidewalk was completed since no one could be in the interior for five days while the hardwoods were refinished. This is your time to put the final touches on the exterior.

At this point, you will have to have your local municipality conduct final inspections and complete your final punch list. Final punch list items include minor touch up paint, house numbers, etc. Clean, stage, photos, high five, crack a beer

Make it stand out: Take a tip from full-time flippers and never rush to get your house on the market. I understand every day costs you money. However, rushing a house on the market three days early could cost you thousands of dollars. Do it right. For us that means thoroughly cleaning everything, great staging, ensuring every piece of trash is out of the yard, and finally having amazing photographs taken. Never skimp on photos or staging.

Risk: We bought this property without being able to inspect the sewer main. Normally, we would build the cost of replacing a portion of the line because the house sat vacant for years into the budget. In this case, we gave the seller the best price we could and didn’t include that cost. It did turn out we had two minor breaks which will cost a few thousand dollars to repair but that was an acceptable risk to us with the current market conditions.

Lessons learned: We have historic low mortgage rates and historic low inventory in Kansas City, creating the most favorable sellers market we have ever seen. We knew that prior to purchase and we used that to our advantage. We listed at the top of the price point and we knew we would not have to settle for anything below asking price, the house would be purchased “as is”, and we would get a quick close. Know where you are in a market cycle and factor that in on either the sale or procurement. Right now everything is selling and selling fast. The market won’t stay this way forever, so make your sales count.

About the author: Dan Krupa and his wife, Michelle, are full-time real estate investors who have renovated and sold over 60+ properties in the last 36 months. They have been investing for 15 years in buy and hold properties. Dan is also the managing broker and owner of Krupa Realty. Krupa Realty is a boutique investorfocused brokerage that specializes in helping investors purchase single and multi-family properties. Dan and Michelle also own and manage Fountain City Property Solutions, a property management company “for investors, run by investors.” For more information contact: dan@kruparealtykc.com