My First Live-In Flip

[Nick Noon]

I'm not sure if this is a "success story" or not, but I think I consider it my first successful move as a real estate investor.  It all started about 2 years ago when I decided I was going to buy a house.  For some reason, I had interest in buying a multi family, but knew nothing about real estate investment.  So I did what any millenial would do, I googled it.  Just so happens that the first thing that came up was BiggerPockets and a video by Brandon Turner on the 50% rule.  I was hooked from the start. 

Fast forward, I worked with my mortgage lender for 2 years building back my credit and working on getting approved for a house.  The middle of last year I was final in a position to buy a house.  I looked at a bunch of multi families and made offers on many of them.  I would look at a multi and put an offer in an hour later after looking at it, sometimes $40,000 over list price, and wouldn't even get a call back.  I'm glad I found BP when I did.  Using simple math, I knew exactly how much I could pay for a property, and I wasn't going to overpay like a lot of people were doing. 

So after a while of no offers getting accepted, and a baby on the way, my girlfriend and I decided to start looking at SFH. I told her the only way I would buy a SFH is if I could put sweat equity into it. I have been doing construction my whole life and I love fixing things and doing construction so I wasn't afraid of the work. So I called my real estate agent and told her to find me the smelliest, ugliest house you could find. We looked at a couple houses but most were asking too much for a house that needed too much work. Then we found this house...

It was originally listed for $307,000 and sat on the market for 90 days.  In that time there were a couple price drops.  It was now listed for $250,000.  We went and looked at it, and boy was it ugly.  Wallpaper EVERYWHERE, a lot of deferred maintenance, water damage, drop ceilings in living room, a toilet that obviously backed up recently telling by the walls below, a lot of ugly....It was love at first sight. 

My RE agent and I talked outside the house for a little bit and I did some simple math in my head and I came up with an offer:  $230,000.  We got a call back that night with a counteroffer of $240,000.  Boy were we excited that we finally got into the game! So I told my RE agent, "I guess this is the part where I say $235,000".  I offer was accepted. 

I did a 203(k) loan and rehabbed the property myself.  I did everything but the plumbing since you need a license for that.  A buddy of mind knew a plumber and he did a great job.  It sure took a lot out of me and the scope of work grew by the day.  I got into this pattern where I would say, "If I'm doing this, I might as well do that"  Grew and grew.  Mind you, I was going all this after work at nights and weekends.  I've been working 7 days a week 18 hour a day to get this house done all while having my son born 3 months prior.  Needless to say we had a lot going on. 

Work completed:

-Complete gut of living room dining room including removing dividing walls. 

-Removing 20' of bearing wall and heading off with LVL's to open up space

-Jacked up and leveled house and installed lally columns

-Poured new footing for lally columns

-New roof

-Complete gut and remodel of bathroom including removal of joists and reframing and a complete new layout including all new fixtures, tile, vanity, etc. 

-New electrical run through the house (the first guy was a hack.  There were junction boxes buried everywhere.  They even ran 220 up to the 2nd floor with a 3 wire then split it to run 2 different homeruns to the same circuit...scary stuff)

-New oak staircase

-New windows and trim, baseboard, crown moulding, etc. 

-New paint everywhere (obvisouly)

-New drywall in living room/dining room and one of the upstairs bedrooms

-New entryway tile after closet was removed and reframed to open up the siteline to the oak staircase

-Removed old oil fed radiator heat.  Put in new furnaces and central air system fed by gas.  

-Repainted kitchen and cabinets.

-And a whole lot of other stuff....

Now, the success story part:  

After 8 months of renovation work I am in the midst of refinancing to remove PMI. I have to show at least 20% equity in the house. We got the appraisal back last week and it is valued at $331,000! Very exciting! We are removing PMI and my payment is going down by $201/month!

The numbers:

Purchase price:  $235,000

Rehab:  $31,000

Downpayment 3.5% (Skin in the game):  $9,310

Total financed: $256,690

Appraised value:  $331,000

Total added value from purchase price:  $96,000

Total Equity:  $74,310 

I am very excited. I had a plan and executed it and it became better than I could have imagined. I believe this has set me up for success to become a RE investor. I now have equity to borrow against to purchase my next property. I looked at a local credit union that I belong to and they will do 95% LTV equity loans! So thats $50,000 I can borrow against my sweat equity to buy the next property. This is a very exciting time and I look forward to continuing my RE career. Below are some pictures of before, during, and some afters. I haven't taken any final pictures yet, the after ones are from the appraisal report.

Thank you BP community for helping me start out in this industry.

Existing Pictures:

Some Construction Photo's:

Finishes Product (Sorry haven't had time to take pictures, these are form the appraisal):