Flip turned Rental - Great outcome!

[Dave Blackman]

Investment Info:

Single-family residence buy & hold investment in Indianapolis.

Purchase price: $95,000
Cash invested: $40,000

Home was originally purchased as a fix & flip, but decided to hold and try the rental market as the area of Indy is hyper-appreciating and higher-end rentals are starting to pop up around the neighborhood. We listed at $1200/mo, which is high for the area, and it rented in less than 24 hours! We were also able to refinance 100% of cash invested in the property and still retain 50k in equity that is growing at an expected 10-15%/year. Truly a win for our investment partners!

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

Wanted to get into Fix & Flips and Indy is a great market for it! This was my first flip as a remote investor handling the selection, BRRR management.

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

Found through local wholesaler - we overpaid a little but got great terms (he was getting cash offers and was really patient with our first time through the HML process).

How did you finance this deal?

Hard Money Lender @ 9.99% on a 12 month note. Covered 85% of the purchase price and 100% of the rehab cost.

How did you add value to the deal?

New electric and plumbing throughout, new kitchen, new insulation throughout (none in the walls originally), new furnace, new A/C, rehabbed the kitchen, full bath and half bath. New paint and trim throughout.

What was the outcome?

Your first flip is certainly a learning experience, and this was no exception. After about 2x the original quoted timeframe, we were late to market and missed the Spring/Early Summer rush and after several price reductions, we decided to pull the listing and rent for a year or two before testing the market again. As a hyper-appreciating area of Indy, I feel confident that in the end, it will be a win-win as we should be able to list at about 25-30% above the original price we listed.

Lessons learned? Challenges?

Vet your contractors -- one person's recommendation may not necessarily be a good fit for you. Ensure everyone is clear, not only on the plan for a flip but also the end-goal (selling as owner occupied vs. rental). This is important for a GC to know. A mentor of mine had good advice -- offer a % per day bonus (of the total contractor amount) for every day they finish early, and on the flip side, a % discount for every day they are late (barring any major unexpected contingencies or scope).

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

I love refinancing with Movement Mortgage. They can do 75% LTV and usually can close in 10 days or less. Who else does that??