Personal Rehab turned Flip

[Jeshua Patrick]

Hey BP, thought I'd share an accidental success story with you. About 5 years ago my wife and I decided to upsize our house while mortgage rates were still low. We were in a 950 s.f. 2 BR/2 BA house and all market signs pointed to rising interest rates that could kill our ability to upgrade affordably. We ended up settling on a HUD foreclosure that needed major work despite my pregnant wife declaring that she didn't want a rehab and I didn't want another HUD house but she loved it and it was the only house we could find that met our must haves so we went for it.

The house we settled on was a 1600 s.f. 3BR/2BA with a 2 car garage. It needed all new paint, flooring, kitchen cabinets, deck, and, little did we know at the time, moisture remediation in the crawl space. We bought the house for 93.5k on an FHA 203k streamline loan that included 13.5k in rehab money. Our mortgage lender agreed to help us bypass the FHA rule requiring a licensed contractor do the work and his contractor acted as a pass through on the draws for a small fee.

When we finally closed we were only 6 weeks from my wife being due and I was in panic mode. The kitchen included a surprise replacement of 300 s.f. but we got a big chunk done in the first 5 weeks. By the end of the 12 week rehab period we had a new kitchen and a large chunk of flooring installed but we were out of money and the rehab was far from finished. Over the course of the next 4 years I very slowly worked on the remaining repairs. We also added a solar system, which I would not do again in NC, and replaced the roof in 2015.

Fast forward to August of this year and all that was left was flooring in one room, the deck, and a vanity in one bathroom. A call to my realtor about investors I needed to network with resulted in a conversation about comps. He felt comps were higher about 10k than estimated by Zillow and Realtor.com and raised his valuation another 10k on visual walkthrough. By this point we had about 30k in upgrades and repairs. My wife decided that she wanted less maintenance, as I am currently finishing a degree that could lead me to jobs that require travel in the near future, and a pool so a townhome was in order. I wanted to reduce our mortgage payment.

We decided to buy first, finish the rehab, then sell. We found a workable townhome at 123k and then set to work finishing repairs. 17k in final repairs and three contracts later we finally sold at 175k. Final numbers were 175k gross minus 3k towards buyer closing costs and 11k in seller closing costs including realtors fees netting us 159k before repairs. 159k minus 47k in repairs and 80k purchase price landed us a nice 37k profit.