Turning a duplex into a SFH

[Kurtis Montgomery]

Hello BP Nation!

Newbie Kurtis Montgomery here from beautiful Chattanooga, Tennessee.  My last post I talked about a Buy & Hold in an up and coming gentrification area.  The deal wasn't under contract yet and another investor swooped in and got to it faster than I did.  Smart person; it was a great investment at an amazing discount price.  

After analyzing 3 properties a day, every day, I finally found another one with even better potential, but this one is a flip (I have put in 2 offers for this one, and just got a counter).  My business plan, which I am sticking to, is to flip houses to provide the down payment for my long term Buy & Holds.  This new property is a duplex in a historic neighborhood built in the 1920's like a lot of the homes in Chattanooga. With 6 out of the 14 houses on the block have been rehabbed and sold in the last 3 years, buying in the $80-100s and selling right around $220K.  This duplex is in pretty good shape for renters so that is a plus, but I believe it will still need around $60k to bring it back to it's glory and attract the buyers like the others have.  The rehabbed homes in the area have all sold in no more than 4 weeks, so that time frame is what I am gunning for.  The house has great bones, new sheetrock, new HVAC and Water heaters (2 of everything), the wiring and plumbing have been updated in the last 3 years, and within the last decade new windows.

Repairs wouldn't be major to polish this gem, minor modifications. On my first flip totally for myself, I'll take it easy and not do a Ferrari in a Cadillac neighborhood, but a few design touches to "wow" potential buyers and consistently do as branding. The house needs new siding, demo some walls for an open kitchen concept, new flooring throughout, and the "wow" kitchen and bathrooms. I wouldn't mind keeping the second bathroom original and updating the hardware or faucet, but bathroom needs to be relocated to a more functional spot. To get back to a SFH, the division of units need to be combined. I have been in the residential construction business (project manager for 8 years) and have made good friends with every trade, or just great contacts. My electrician said that it wound't be a huge deal converting back to a SFH and that he would even take some of the price down if he could reuse the old meter, amp, boxes.

I am offering around $100K for the house (they just countered to 110), my original was $85k and that offer was rejected. My realtor, and very close friend, told me it's likely the owner won't go for anything under $100, as the list price is $120k. With the 70% rule coming to a close shave, I would love feedback or questions. I have used the Investment Calculator and a couple other Excel Spreadsheets to run the numbers (Hard Money/Fix N Flip Calculator, Buy & Hold Cashflow and ROI Calculator, and the Hybrid Calculator), so feel free. I don't want my first to be emotional, bad, or overpriced. Thank you!