​Flipping Childhood Home to Raise Cash for Future RE Investments

[Stefan Abel]

Brief Intro:

I have been on the Biggerpockets forums for some time now as I have begun my real estate investment journey. Currently, I own with my wife (1) SFH rental in NYC that was an inherited property and own/occupy another SFH in the same neighborhood. I'm currently in search of other markets as additional properties in NYC are cost prohibitive for us to move forward. Currently looking in the Huntsville, AL area and based on my extensive forum reading have moved on to Birmingham, AL as well since there seem to be more opportunities for MFH investments.

Current Opportunity:

My parents have moved out of my childhood semi-attached SFH to downsize and are currently holding (2) mortgages. In short, they need to sell and the numbers do not work as a rental. However, given my home reno skills and work in the architecture/construction industry (albeit not residential) I see this as a great opportunity for all of us to make some extra cash in the sale of this property as a ‘light' flip. The idea is to build capital for rental properties in the very near future.

The house is part of a fairly extensive residential development from the 1930's and has a prime location on the block with private driveway and full attic. All other houses share a driveway and no attic. Looking at similar properties (but not prime location) these houses are being sold from $610k to $780k based on level of repair. I would estimate current value near $630k and conservative ARV near $750k.

We have agreed to a 50/50 split in the additional value added to the property based on appraisal before repairs and actual sale price. They will foot the monthly mortgage payments and I will invest the repair costs ($27k budget) and do the actual work.

I want to approach this in the most transparent way possible to avoid any conflicts when this is all done. I plan to enlist an appraiser (not just my evaluation or RE Agent) to have a written document as the basis for the current value.

Any thoughts or issues I may have overlooked would be appreciated.