Home A house flipping that doubled our investment in two years

November 2, 2023

A house flipping that doubled our investment in two years

We had a wonderful journey to buy our dream apartment at a 20% discount and how did we incresed its value.

I’m thrilled to share the captivating journey of how my wife and I, did a house flipping not being our first choice, but just pushing for a bit of luck.

In this journey we not only acquired our dream apartment at a remarkable 20% discount from the retail price but also exponentially increased its value through strategic upgrades. Our story is about how we remembered the key factors in the ideal moment.

The journey of buying a cheap property when everyone sells very expensive.

Searching for the Ideal Home

Our journey began in 2018 with a simple yet profound desire – to find an apartment that would cater to the comfort and happiness of our growing family. Back in those days me and my wife were renting a 100 sqm apartment, but we were tired of renting and paying rent to someone else and help them create patrimony, when that money could contribute to creating our own patrimony.

After dedicating several months to exhaustive searches and property viewings, we chanced upon an apartment that seemed tailor-made for us. Its spacious layout and well-distributed rooms perfectly aligned with our family’s needs, and also was half block away from a park that we all as a family could use on a daily basis.

Don’t get me wrong, we didn´t start this journey by thinking let’s do house flipping and make some money, it happened not by chance but it our case it happened by stages, mostly thanks to friends advices.

What is House Flipping?

I think that it is proper to start by defining what House Flipping is.

“House flipping” refers to a real estate investment strategy where a person or a group of investors purchase a property, most of the time a residential home, to renovate or improve with the aim to increase its value and then selling it for a profit. The idea is to do all of this in a relatively short period.

Here are the key steps involved in house flipping:

Property Acquisition: Flippers search for properties that are undervalued, distressed, or in need of repair. These properties are often obtained at a lower price compared to their potential market value.
Renovation and Improvement: Once the property is acquired, significant renovations and improvements are made to increase its appeal and value. This can include repairs, cosmetic upgrades, or even structural changes.
Market Analysis: Flippers conduct market research to understand the local real estate market and determine the ideal selling price. They aim to set a price that will yield a profit while remaining competitive.
Sale or “Flip”: After the renovations are complete, the property is listed for sale. Flippers aim to sell it as quickly as possible to maximize their returns and reduce holding costs.
Profit Realization: The profit in house flipping is the difference between the total acquisition and renovation costs and the selling price of the property. Successful flippers carefully manage their expenses to maximize their profit margin.

House flipping can be a lucrative venture when done correctly, but it also comes with risks. Market conditions, renovation costs, and the potential for unexpected issues can impact the overall profitability of a flip.

It’s essential for individuals considering house flipping to have a good understanding of real estate, construction, and financial management to be successful in this investment strategy.

We did a great post on what type of personality is best for House Flipping

The Financial Conundrum – The first apartment

My wife found this apartment while looking for a place close to a park, it was also close to some recreational sports facilities and a football pitch.

She was delighted because it was located in a street where her mother used to live in her early years.

The apartment has 208 sqm with a roof and 48 sqm of terrace space on two floors. it has a very good division between private and social areas of the apartment, and if we need one day we can use the TV room on the first floor and convert it into another dormitory and have 4 of them.

The Dilemma of the House Flipping

In the beginning, we didn’t give much thought to this apartment as it was a much bigger space (80 sqm more), and therefore, the asking price for the apartment was at least 20% beyond our allocated budget for this enterprise.

Faced with this dilemma, we were compelled to explore alternatives that would strike a balance between our aspirations and financial reality, and even though we were able to find other tinier apartments, we were always comparing them with the first apartment.

The weeks were passing and we were not able to find better options of apartments within the price we were seeking with the comfort that we were looking for.

Don’t get me wrong, we were not looking for a big size apartment, just for a place where all members of the family have their own space, where the space gets to be well-distributed and near the future schools of the kids.

As a result, the problem of not finding a place for the family made this well-distributed apartment start growing on us again, but still, the tantalizing vision of our ideal family home was overshadowed by financial constraints.

In the end, we ended up paying a reservation for an apartment close to where we wanted (5 min drive), Although compared to the dreamy apartment it was 80 sqm less and not so well-distributed. As for better features, it was a block away from the kid’s school, with a 5-minute walk to a couple of parks and a couple of social spaces (an important feature back in pandemic times)

The Second Apartment - Our Insurance

We found the second apartment in a quiet zone, close to a couple of parks and in front of the future high-school of our daughter.

We were never really fond of this place, as it was in a location that was on a more public street, with parks close by but not as close as the first apartment.

The internal distribution of the apartment was good, but we needed an extra bedroom and the second floor was not looking optimum for this. (besides, we always thought there was lost space between the jacuzzi and the laundry room).

This apartment had 2 floors, developed in 167 sqm and constructed with 73 sqm extra terrace space. (a total of 240 sqm)

Comparing Apartments

Embracing the Unexpected Twist

The Second Chance

Amidst the deliberation, we decided to turn our attention to a smaller apartment that fit within our budgetary boundaries.

Though it meant compromising on space, we understood that practicality and long-term financial stability were paramount. With this choice firmly in mind, we chose to embrace our more economical option.

However, something happened that same day. Almost serendipitously, just as we had committed to our decision to pay $5,000 to reserve the less spacious apartment, we received a call from the real estate developer of the original bigger apartment.

They were willing to extend a 2% discount in an effort to win us back.

💡 This is when I remembered what a friend from a big storage renting company once told me. “We don’t do good business, we do great businesses; when we buy land to develop our business, we buy terrains that are from 20% to 40% below the market price. That way if anything goes wrong we still make a good profit”.

The Offer – Where the House Flipping begun

We talked about this with my wife and decided to make them the offer of what we are paying for the now reserved tiny apartment, because, What can we lose at this point? That way the next day we called the developers and told them our counteroffer – that we were interested, but only if we could secure a 20% reduction in the price.

After a few days of anticipation, we received a counteroffer from the sellers. They were prepared to offer a 19% discount on the original price. Recognizing the value of this compromise, we gratefully accepted.

I later spoke with a friend who was part of the investment company that was funding this apartment and he told me “You made a great business, but don’t think that they lost money, they just were having problems selling that apartment and you were the only serious offer they received”

This was a second learning opportunity for us, we discovered that the penthouse apartments was much more difficult for the developers to sell, so they are more open to negotiate the price on those apartments.

Elevating Value: A Transformational Journey

Realizing Vision through Upgrades

In Latin-American countries it is common that after the construction phase and the municipality gives the conformity of the building, the developers negotiate some “changes” to the apartments. So that is exactly what we did after the conformity.

With the deal sealed and the construction phase completed, our excitement only intensified. We envisioned the opportunity to augment the value of our new property through strategic upgrades. Our journey into property enhancement marked the intersection of aesthetics and functionality.

A Strategic Approach

Our upgrades were targeted at areas with the potential for maximum impact. By extending the terrace and kitchen spaces, we added an additional 20 square meters to the apartment’s footprint. This wasn’t just about aesthetics; it was a strategic move that not only amplified our living experience but also contributed significantly to the appreciation of the property’s value.

A Triumph in Real Estate Strategy

Transformative Results

Today, the apartment that was once a symbol of compromise stands as a testament to our financial wisdom and persistence. What began as a quest for comfortable living has metamorphosed into an investment that has yielded remarkable returns.

Our ability to secure a 20% discount, coupled with strategic upgrades, has positioned our apartment as a prized asset, exemplifying the importance of informed decision-making and seizing opportunities.

Conclusion

Money is King!!

If you have the money to invest in real estate then you have the power. There is always someone that needs the money and will be willing to accept your money.

In closing, our journey from initial compromise to having a success story highlights the power of perseverance, informed financial choices and good financial advice. The tale of how we acquired the apartment we wanted at a discounted price and subsequently escalated its value serves as inspiration for those navigating the dynamic realm of real estate. Although I have to say that even though we made a great investment and subsequent increments in the apartment price, we haven’t sold the apartment yet and there still could be some difficulties in the swlling process.

Some developer friends have told us that the apartment is not suitable for all the public ( elderly people or disabled for example have difficulties with the kitchen being on the second floor). Through flexibility, effective negotiation, and the audacity to embrace calculated risks, we’ve not only secured our dream home but transformed it into a thriving investment.

Feli

Updated November 01, 2024

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