Accidental "Treehouse" in Durham NC

[Richard Mercado]

Investment Info:

Small multi-family (2-4 units) fix & flip investment in Durham.

Purchase price: $136,000
Cash invested: $35,195
Sale price: $274,335

This Duplex was purchased at the tail end of 2019 with one unit occupied and the other recently remodeled and vacant. Located in a flood zone, the property was ultimately destroyed by a large tree which crashed down onto the roof during a storm, practically dissecting both units. After paying Loss of Rents for a year, the insurance company finally settled considering it a total loss. Originally intended as a Buy & Hold this ended being a flip.

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

As an out of state investor, Durham was very interesting to me for its lower price entry point, great universities, and growing population. This duplex, less than a mile from city center and in the path of progress, seemed to be a good value.

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

Found this one on the MLS. Ended up paying full asking price as it seemed like a fair price for a duplex at the time.

How did you finance this deal?

Conventional Loan. 25% Down

How did you add value to the deal?

Rehabbed 2nd Unit ($20,000) Mainly the Bathroom, kitchen and addressed plumbing issues. The other unit had been rehabbed prior to us buying the property.

What was the outcome?

Located in a flood zone, the property was ultimately destroyed by a large 100' tall tree which crashed down onto the roof during a storm, essentially dissecting both units. After paying Loss of Rents for a year, the insurance company finally settled at full replacement value considering it a total loss. Between the insurance payout and the sale of the damaged property we were able to net $103,140 in the end.

Lessons learned? Challenges?

Lesson learned: Don't buy in a flood zone unless you have great insurance and are willing to deal with a lot of headaches! The main challenge was in dealing with the insurance company after the loss. It took over a year to settle but it all worked out in the end.

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

Philip Kennedy of Kennedy Contracting Services was hugely helpful in navigating the requests of the Insurance Adjuster.