We added a second floor dormer roof addition to the existing house and a new two level carriage house in back. We built an additional bathroom, kitchen and dining room to the main house on the second floor to create a separate apartment. In the back yard we tore down a rickety old garage and added a 16' x 24' two story carriage house with one apartment on each level. The current owner lives in the main house with her elderly parents while she rents the two apartments in back on Air BNB.

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

Seattle is a very high dollar market which causes the cash flow potential on a rental to be very low and the spreads on a standard flip to be very thin. If you add enough usable square footage to a property in one of Seattle's "A" neighborhoods the returns on flips can easily be in the multi six figures and with people paying $1,300.00/month or more for a studio apartment that can go on Air BNB for $200/night with an 80% occupancy rate, adding units can really pay off.

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

The homeowner wanted to use her house as a live in rental with separated units as a way to supplement her income after retirement.

How did you finance this deal?

The homeowner already owned the property and used it as a primary residence. As far a future repeatable investment system, I think partnering with the homeowner on the flip rather than purchasing the property in cash upfront may make this an incredibly powerful flipping strategy.

How did you add value to the deal?

I acted as Designer / Project Manager. Starting by creating an initial concept with the homeowner, I worked with the Architect and General Contractor to nail down the final design. I routinely monitored the project from concept to completion to make sure the build was on track and safe for the homeowner who lived in the house throughout the build.

What was the outcome?

Crazy cash flow and forced equity.

Lessons learned? Challenges?

Next time I would retain creative control to ensure that we are using the property to it's highest and best use. Choosing a house on a slope in a view neighborhood and adding a roof deck would make this an even better deal. The challenge becomes finding properties in the $500k-600k price range in these neighborhoods. You can buy a house like this for $500k, put $200k into it and sell it for $1-1.5M.

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

The cooperation between a local Designer, Architect, General Contractor, and Landscape Architect were integral in making this project a success. Please feel to contact me for recommendations.