A fix and flip & a seller finance deal in Valencia Spain

[Africa Estrada]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $485,000
Cash invested: $146,226
Sale price: $720,000

This was a very interesting deal in many ways. First because it was a seller finance fix and flip deal, which is not usual. The seller accepted 10k as a downpayment and agreed to 5 years to finish paying the rest, while also paying a monthly installment to them. This allowed me to proceed with renovations and my exit strategy (If the property would not have sold within the first 60 days after finishing renovations) was to rent rooms in the apartment as a mid term rental, to young profesionals, which is very popular here in Valencia Spain right now; we call those shared apartments, co-livings or HMO or simply a ¨alquiler por habitaciones¨. In this case I ended not having to go to my exit strategy because it was sold just a couple of weeks after being listed, after declining a couple of offers also. In this deal I found a private money partner, and he came up with 60% of the total investment needed in a exchange for equity. It worked out well, as the property was fully homestaged, which is not very common here in Valencia Spain, and the buyers even purchased the furniture. The property was located in one of the afluent neighborhoods in the city center, and it was large and very unique in comparison to the comps in the market and surrounding neighborhood at that time.
I went with a art deco inspired design, although toned down. We used bold colors in accent walls, along with wall paper in some areas, and it helped for the listing to be unique and I think it helped us received so many showings and interested buyers.We installed built-in closets in all bedrooms, which here in Valencia it is not common in most flips since investors leave them out to save money. We also curated the lightings, choosing interesting and unique pieces, which again is not normal but, in my opinion, help sell the property.

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

The possibility of seller finance and the highly demanded location

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

I found it in a popular real estate listings portal and I met the agent and explained to her that I´m a property redeveloper and that I would need seller finance in order to only need a smaller amount of capital in order to redevelop the property. I made an agreesive offer and asked for 5 years, which is a lot, since technically I was going to be donde with renovations in 5 or 6 months and did not need 5 years, however it was a back up so that I would recup the renovations investment tru rent

How did you finance this deal?

Part was the seller finance for the purchase and part was a private money lender or partner for the amount needed for the renovations and homestaging. All the monthly installments paid to the sellers were deducted from the principal amount owed, which was ideal and not common, usually they would only deduct anywhere between 60 and 80%

How did you add value to the deal?

I did a complete renovation and a homestaging and interior design that was bold

What was the outcome?

The property sold within the first couple of weeks of being listed and the agent that originally brought it to me has already brought e another deal, since she has now seen what I can do :)

Lessons learned? Challenges?

I did hesitate on selling right now, versus renting the properties for the remainder 4 years as I did have that option, but my private money partner did not want to wait. If I had fund the deal differently, I would have been able to do what I wanted. In a deal like this one in a future, I would first rent it for 4 years, and then on year 4 renovate and sell, that way, the renovations would be paid by the rental income and I would not have had to share the profits since I wouldn't have used a PML

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

Yes a local real estate agent for the purchase a another one for the sell. Anyone interested, let me know and I would be happy to introduce you to them.