Single Family Flip - Arlington Heights, IL

[Justin Pease]

Investment Info:

Single-family residence in downtown Arlington Heights, IL (Chicago suburb)

4 bed, 2 bath, 1,700sf

Purchase price: $305k

Rehab Costs: $42k

Holding Costs: $16k

Closing Costs: $15k

Sold Price: $430k

Gross Profit: $52k

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

Off market deal, I own the home next door as a rental and the owner contacted me to see if I was in the market for another rental.  Walked the home and made what I thought was a low but reasonable offer based on the condition.  

How did you finance this deal?

$300k from private investors at 10%

Rehab budget funded from HELOC on primary residence at 5.5%

Zero of my own cash in the deal

How did you add value to the deal?

Full but mostly cosmetic rehab.  Painted the interior and exterior of the home.  New appliances, backsplash, painted cabinets, and hardware in the kitchen.  New vanities and toilets in the bathrooms.  New light fixtures throughout. Refinished floors throughout. Cleaned up the landscaping.  

What was the outcome?

Listed at $475k on the MLS myself (own a small brokerage). Lots of tours, no offers after 45 days. Reduced to $450k and went under contract a week later at $440k. Reduced to $430k after inspection.

Lessons learned? Challenges?

This was our 3rd full blown rehab so we had learned some big lessons on the first 2.  Had this deal under contract for 5 months prior to closing, so we used that time to get plenty of bids for the rehab work and had our contractors lined up to start the day we closed.  Managed the schedule and stayed on top of the contractors and completed the rehab in 30 days.  

Initially tried to offer .5% commission to buyer agents.  Had been wanting to test what impact that would have on tour volume and offers.  Increased that to 2.5% at the same time we dropped the price $25k, wish I had left the commission low to fully test my theory that buyers would still be there even if their agents weren't getting the typical market rate.

No major issues with the rehab, didn't run in to any big surprises.  We did end up doing more work than we had planned, but ultimately I think the decisions we made added the appropriate value to get the returns we had hoped for.  Still think the house was worth $475k though!

Only major regret was not trying harder to put long term financing on the place and keep it as a rental.  House was in a A+ location blocks from the downtown business district (restaurants, train station, grocery, entertainment, etc.).  Also next door to one of my rentals, so would have made for some easy management.  Wasn't having any luck getting a bank to lend me on a new appraised value without holding for at least 6-12 months and I had promised the investors a quick exit.

Happy to answer any questions and always looking to network with investors in my area.  Some pictures included.

Thanks BP!

Justin