Diary of my 4th flip

[Chris C.]

So I am going to jump on the diary band wagon and document my 4th flip.  This is my third of this year and 1 last year.

Just got word from my agent that the bank has accepted my offer.  Just waiting for the documents to sign right now.

Purchase Price: $120,000

Estimated Rehab:$20,509  This is my rough estimate based off  my previous flips I will do my final estimate and budget during the inspection period.

Estimated FARV: $179,900

2800 sqft

4 bed 3 bath

Two of the bedrooms are master suites

Expected to be a light rehab with just paint, floor coverings, countertops,etc.  My only concern right now is the previous contract with an owner occupant fell through due to the inspector saying " there are no ducts in the walls".  This caused the lender backed out.  This is a new one to me so I will just have to get in there and see what he was talking about.

[Chris C.]

Thought I would throw in a little detail about how I fund deals and specifically this one.

I try and fund my own deals but right now I am sitting on a 1000 sf 3/1 next to a busy road that I can't move. Very good lesson in the importance of location.

A co-worker has been investing with me since I begin picking up rental properties and flipping mobile homes. He has now jumped on board with the rehabbing also.

We structure our deals on a promissory note that is not recorded against the property. We do this for a couple of reasons.

• It saves a little money at closing when we do not have to file a lien/mortgage. It saves even more when we use the selling banks attorney so that they pay attorney and title insurance fees.
• Another benefit is that he does not have to attend any of the closings which is going to be necessary since he leaves in a few months for a long term contract in Germany.
• We do not have to pay him the full amount owed at the sell closing. We do a profit split but there are always some insurance andutility bills that come in after closing. We now pay him his principal right after closing. We then pay the remaining balance once all bills etc are accounted for.

It obviously takes a lot of trust for us to structure a deal in this way. He does have recourse but not as secure or clean cut as having a lien.

The profit split is 60/40. I get 60% and all capitol investors get the 40% based on their percentage of total funding. If a deal cost $100k and an investor puts in $80k and I put in $20k then the 40% of profit gets split 80/20. This is more expensive then borrowing from a bank but the flexibility is worth it.

On this particular deal I am also talking with a friend of his that is interested in investing with us. She has some reservations so we are working to make her comfortable which has required a few changes to the contract. Her father is an attorney so his input has actually been helpful.