Townhouse, one day he disappeared

[Matthew Irvine]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $55,000
Cash invested: $33,000
Sale price: $80,000

Foreclosure deal that I did in partnership with my brother, the goal was to be a long term rental as the market rent for the property after a quick paint job was $1,000 a month. As time went on and goals were better defined between my brother and I we decided to dissolve the partnership.

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

My brother and I had worked together on my last project and talked about partnering on the next. The goal was to find a solid starter property that wouldn't require much in the form of remodel or maintenance, this property met both criteria.

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

Nothing special, listing I believe was close to 70k but the market was still very soft at the time. Properties of that type in that condition(fully functional but dated) were selling in the 40's, while fully remodeled version in the same area were trading at 90 to 100k. I believe we offered 48k, they countered low 60s and we settled at 56k(wanted to be at a 2% deal, we were close).

How did you finance this deal?

Cash. I brought half and my brother brought half.

How did you add value to the deal?

No real value add, just painted and repaired some small issues(minor drywall defects, a vanity, cleaned)

What was the outcome?

This was strange, we rented to a couple that we were certain would live there forever. Older couple that wanted to downsize, I save the details but essentially one day he left for work and never came home. He had emptied the account and ran off, weird series of events. We were able to help her move after breaking the lease, we re rented and then dissolved the partnership.

Lessons learned? Challenges?

At the time the lesson was getting solid base hits at a fair price will still lead to great upside, not sure that advice carries any weight here in 2022. Also, never assume anything about your tenants, people are strange.