Fix and flip turned Airbnb in Lexington near downtown

[Megan Day]

Investment Info:

Single-family residence other investment.

Purchase price: $61,000
Cash invested: $10,000

This project was meant to be a flip and had quite a turn of events. 2 month acquisition period because of title issues, 3 month full gut rehab, longer than expected on market (2.5 months) before it went under contract. Buyers backed out (with no legitimate reason) right around the time I needed a place to live - so I moved in, waiting to decide what to do. When I moved out of state for a new job I listed it on Airbnb and it almost instantly booked out for 6 months.

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

This was my first real estate project. I wanted to dive in and make my first deal big. Plan was to profit ~25k on the deal.

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

MLS. Negotiated through realtor.

How did you finance this deal?

Initially a commercial construction loan through an LLC. Once I decided to move in I refinanced under a 10/1 ARM, in house, non-compliant loan (because other banks required a 6 month seasoning period since the LLC was solely owned by me). Now that I have moved out and moved cities and plan to keep it with Airbnb, I'm refinancing again to a 30 year fixed rate in my personal name with a much lower interest rate which will lower my payment.

How did you add value to the deal?

Total gut rehab. ~80k worth of renovations.

What was the outcome?

Home is currently a thriving Airbnb! I'm working on improving systems/processes to make it more passive.

Lessons learned? Challenges?

I underestimated the difficulty of selling in this neighborhood. It's a transitioning neighborhood and a lot of homes are being flipped and improved, but it's not quite there yet. Thus, difficulty selling and inability to rent long-term for what I would need to cover my monthly costs. Luckily I could do an about-face and make Airbnb work.