The house across the way - yard sale house!

[Joe Stout]

Investment Info:

Townhouse buy & hold investment.

Purchase price: $155,000
Cash invested: $40,675

Bought this house off market from a yard sale. Noticed the seller was having yard sales often, offered to buy the house with everything in it. Seller was told by an agent that his house would not meet FHA standards and that the majority of people looking to buy at this price in this market are FHA users. Wrote number on napkin and gave it to the seller. Went on Facebook and white pages to find sellers number and close the deal. Used paperwork from a consultant which charged the seller $3500 for his mediation. Asked for $3,000 seller concessions. Negotiated from $165,000 to $155,000- house had been vacant for 5+ years. Planned to split into a duplex at first but didn't want to ruin the beautiful layout for when it is decided to sell. Came into it with a 5% down primary residence loan and will rent after 6 months of living there to stay compliant. Partner brought closing costs, down payment, and rehab costs initially and plan to buy him out using a HELOC from another property and paying back the HELOC with the cash flow from this property. Ran the rehab to finish the basement, add bathroom in the basement, paint entire house, add smoke alarms, hand rails, new doors, new roof, new windows, etc. Property was rehabbed for 2 months after finding contractors that would work on the project and do it quickly. Negotiated contractor price from $24,000 for finishing entire basement and adding bathroom to $18,000. With tips and other things that needed to be done, the cost was $20,400. Paid $2375 for Painting cabinets in kitchen, Paid $600 for fridge, paid $1300 for hardwired smoke & carbon alarms, handrailings, paint on exterior of windows that were not changed in basement. $24,675 was total rehab, $16,000 was total to acquire house.

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

It was right across the street from where I was living at the time. An awesome appreciating neighborhood with lots of neighbors that have pride of ownership.

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

Yard Sale, negotiated it by saying I can move quickly and I am pre approved.

How did you finance this deal?

5% conventional Primary home loan.

How did you add value to the deal?

Added bathroom in basement, finished basement, Added fridge in kitchen, painted cabinets a bright white, painted entire house agreeable gray with bright white as trim.

What was the outcome?

Cash flowing rental ready to be set up.

Lessons learned? Challenges?

Definitely need more rigor in vetting contractors, keep hiring contractors that are looking to take advantage. Need to establish a template contract for all service people- contractors, painters, photographers. This way everyone is held accountable.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My painter is Bastian Campos, he is the founder of BM Painting. His Instagram is @bm.painting2016 He does incredible work. He knows people in the field and helps anyway he can with your project, but his specialty is painting.