We just completed our first flip in Iowa

[Christopher Derr]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $51,500
Cash invested: $31,000
Sale price: $118,900

Turned a listed 2-1 with unfinished non-conforming basement into a 4-2 with a finished basement. Close to close was 4.5 months and was listed 20 days before we got an accepted offer. Sale price was 125,500 with a 6% closing commission which ended up around 118,900

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

It was going to be the first flip we attempted, it was a standard ranch that one of my agents actually showed me the day he got the listing from Fannie Mae and because you could see through the exterior wall in the basement walk out I knew that it was going to scare away a lot of potential buyers.

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

One of my realtors brought it to me as his listing for Fannie Mae. It started at 69,900 I immediately bid on it the day it opened to investors past the owner occupant stage. I bid 50,000 they did not counter offer. I waited 30 days they dropped it to $63,900 so I offered $50,000 again and they countered at $62,500. I countered at $51,000 they didn't respond to my counter offer. Waited another 30 days rinse and repeat, on the 4th drop to $53,900 we went back and forth until $51,500.

How did you finance this deal?

I got a commercial loan for for $59,000 based off a BPO of $73,000. I funded the rehab between my cash and a 0% store credit card. Upon completion it appraised for $125,000 I refinanced for $90,000 paid of everything I owed and took the additional $7,500 and put it down on another house. When it sold after all fees we walked away with another $17,900 or $25,400 total.

How did you add value to the deal?

We did the gut of the property ourselves and I worked it out with the contractor to do some of the work to keep him rolling on bigger items. This was the most we have used someone else to work on our properties and it was awesome to get to see how important it is to shift that workload to someone else to be able to scale. Building a good relationship with this contractor now. Working on a 2nd house now.

What was the outcome?

$25,300 profit, increased relationships with contractor, carpet installation, and realtor. Also a big win for financing and that relationship with the bank as more deals put some validation behind your proposals.

Lessons learned? Challenges?

That everything is scarier until you start to do it. Great things happen when you push your comfort zone. Making a little less money but having less of your personal time invested is the only try way to scale a business.