My first, and only, REO

[Matthew Irvine]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $51,000
Cash invested: $26,000
Sale price: $145,000

First REO that I purchased, used a HUD agent that was a real character. Needed a cosmetic rehab, first time I ever used hard money. Ended up being a moderate success.

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

I was open to any investment at the time I bought this. I was really just scouring the MLS for assets that I felt had immediate walk in equity, usually because of some mechanical issue(that wasn't really an issue) and some cosmetic items that were turn offs. This fit the mold for something that would have a strong rent to price ratio and would have that needed walk in equity

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

MLS, my agent told me to call his buddy a HUD agent as that would be the best way to get my offer seen. As I'm typing this idk if HUD real estate agents are even a real thing. But I ended up talking to Skip, and man is he a character. I was telling him what I wanted to offer and he said they use a formula and he knew it, he said the lowest I could offer and be accepted was 51,950. It was listed at 70k, I offered what he said, the offer was accepted.

How did you finance this deal?

Hard money lender: 12 month term, IO payments, 2 points, 10% interest.

How did you add value to the deal?

Replaced the HVAC, upgraded the kitchen cabinets, paint and new flooring through out. ARV upon completion was 145k

What was the outcome?

Renovation took about 45 days, tenant moved in from AZ and took it the day we completed for 1,400 a month. 18months later he bought the property for 145k.

Lessons learned? Challenges?

Don't ignore spaces! We knew there had been water intrusion in the basement in the past. The property was on a hill that was basically a rock shelf, when it rained water flowed right under the foundation. One storm the drainage system that was in place and working, had an issue. After a serious clean up and a few days of stress, we installed sump pump and more fully resolved the issue. That headache could have been avoided if we had more thoroughly assessed risk factors before completion.