$115K Profit on my first deal!

[Mike Hasson]

Investment Info:

Single-family residence fix & flip investment in San Bernardino.

Purchase price: $175,000
Cash invested: $25,000
Sale price: $365,000

First project! Was renting this home while researching real estate, and basically just bought it from my landlord! It was kind of a dump, but i fixed it up gradually, mostly DIY, and made it a nice place to live. This was an incredibly rewarding learning experience.

What made you interested in investing in this type of deal?

Was renting it from the owner when I read Rich Dad Poor Dad, and started learning about real estate. About the same time that I got serious about making a purchase, the owner/landlord informed me that he needed to sell - so I bought it!

How did you find this deal and how did you negotiate it?

It took several months to actually make the purchase because the owner wanted more than it was worth. He priced it according to already fixed up homes, but did not have the funds/time to make the upgrades required to get it up to value. After he declined my $175K offer multiple times over about 4 months, and chose to put it on the market to try to get more, he did finally accept. Since I had a long term lease on the property, I had a bit of leverage in timing to wait it out.

How did you finance this deal?

Conventional mortgage with down payment assistance program = 100% financed with no money out of pocket!
In fact, I actually got a check at closing from the remainder of the first-time buyer program.

How did you add value to the deal?

New floor, new roof, new appliances, subfloor repair, removal of dangerously large trees, full yard landscaping and irrigation install.

What was the outcome?

Due to purchasing just before the pandemic, and then the skyrocketing of home prices resulted in a handsome profit, and a wealth of knowledge gained from the ups and downs over the 2 years of holding.

Lessons learned? Challenges?

I learned so much about negotiation with buyers/sellers, working with contractors (good and bad), costs of materials/labor/upgrades. Some of the biggest challenges were how to pay for the repairs needed, and while I would not recommend this approach, I put most of it on credit cards which I anxiously paid off immediately after closing. I also took a hit on the sale price due to taking mortgage forbearance which added a significant and unexpected sum to the payoff balance, and while disappointing, the end result was still better than any of the other plans that I had calculated for the property.