Buy and Hold Rental That Turned Into a Profitable Flip

[Dante Pirouz]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $30,000
Cash invested: $7,500
Sale price: $65,000

A shabby foreclosed SFR purchased from HUD

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

We originally planned this purchase as a buy and hold rental but a new city ordinance banned rentals on that side of the street so we decided to flip it to reinvest the funds elsewhere. I had driven past this property for months...it was empty in a good neighborhood and I thought what a waste of a hidden gem-it was a nice simple ranch on a large lot. I told myself if it ever comes up for sale I'm going to buy it and 6 months later we did it.

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

I had been watching this listing on the HUD website for months (I'm kind of addicted to real estate listings) and watched the price drop. Most buyers in 2014 were not buying fixers at this time. They wanted move-in ready especially in this neighborhood because it was a very good family area with good schools within walking distance and near the lake beaches. We offered something around $50K and HUD is usually pretty tough to get to budge on price but eventually got to $60K.

How did you finance this deal?

Cash purchase

How did you add value to the deal?

We did lots of cosmetic fixups - painted, ripped up the groddy carpet and refinished the hardwood floors underneath. Put in new vanity and toilet in the bathroom. Fixed the broken window. Did some nice landscaping (it was an unsually large lot with a garage and an extra workshop/autoshop off the back driveway. Fixed the leak in the roof. Replaced lighting fixtures.

What was the outcome?

Put it on the market for $90K Sold it after about 3 months on the market for $65K. Not bad for overall investment of $38K-40K.

Lessons learned? Challenges?

Have a backup plan in mind. We wanted a rental but I knew from reading BP postings that a rental can always be sold if needed. I didn't plan explicitly to flip it but I did pad the numbers knowing that something could go sideways. I also listened to the BP Podcast the whole time I worked at the property which ensured no one bothered me (my family and workers run like the droves from my RE talk).

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

Yes we worked with @Paul Steward as our agent. We bought it for cash so no bank.