Welcome to San Diego Blog | June 9, 2013
Condo Flip Case Study
One of the many perks of being a real estate professional is that time to time we come across opportunities to purchase properties for a great price. At times, these offers are so good, we can’t help but purchase the properties ourselves to flip downtown San Diego Condo properties that need minor renovations. This is a case study of one of those such flips.
The real estate market has been no stranger to large investment groups that have made a practice of purchasing short sales, foreclosures and properties being auctioned at the courthouse steps. Real estate in downtown San Diego 92101 zip code has not been as attractive to many contractors, but there have been a significant number of property flips in the past 36 months.
Property Flips Downtown San Diego
The opportunities seem to be farther and few between, but with downtown San Diego condo prices having increased by 17.7% in 2012, the party couldn’t last forever. In late November of 2012, a short sale property at Crown Bay fell out of escrow. The buyer walked and I saw the property come back on the market immediately.
Residence 616 was a top floor residence including 939 sq/ft, 1 bed plus den and 2 baths. I purchased the property for a total of $303,000 (sale price & closing costs) and closed escrow on the Friday after Christmas 12/28/12.
I spent 2.5 weeks getting an architectural approval and we spent 1.5 weeks actually doing the renovations. Our renovations included:
- install new engineered wood floors and all new baseboards
- install new recessed lighting in the kitchen and we obtained permit for the electrical work
- install new quartz counter-tops in the kitchen and baths plus new under-mount sinks and fixtures
- install new stainless steel appliances in kitchen
- install new tile floors in bathrooms
- install new frameless glass door on master shower
- install new modern brushed nicket hardware on all cabinets
- install new shower head and valves in both bathrooms
- convert den into bedroom by installing closet with floor to ceiling mirrored doors
- repaint all walls, but not ceiling in the property
Once the renovations were finished, we listed the property for $439,900 and it took 12 days for us to market the property and get a full priced offer. We closed escrow on the 91’st day after owning the property and we spent $22,860 between the renovations, cost of insurance and the cost to carry the property for the 91 days.
When everything was completed we ended up making a net profit before taxes of $97,372 dollars. Not all property flips in downtown will pencil out this well, but when you know the downtown San Diego real estate market like we do, then you can hedge your bets.
We currently have 2 other projects we are working on and have been able to make similar profit for our investors. Somve of our clients chose to hold for 1 plus years to avoid short term capital gains or possibly do a 1031 exchange to avoid taxation, but regarless, if you’re making positive returns, having to figure out the best tax consequences is a good problem to have.
Real Estate Investment Downtown San Diego
I’ve included some before and after pictures of the property at Crown Bay in the Marina District of Downtown San Diego.
For more information, give us a call: 619-309-8011