First Fix and Flip. Eye-sore SFR into beautiful home.

[Nathan Sharp]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $78,000
Cash invested: $59,000
Sale price: $137,793

After years wanting to invest in real estate, I finally took the plunge and made a cash purchase of an older SFR in SERIOUS need of TLC. I found the deal through a wholesaling company that has me on their email list. This particular home had sat vacant for 10 plus years since the previous owner had passed away. It's only occupants in that time were small mammals and insects. After an extensive rehab that went way over budget (both in terms of time and money), roughly 600 hours of mine and my wife's time, and some hard lessons learned, we listed the property and managed to sell for top market dollar. We managed to barely break even.

My approach of throw a lot of money and hard manual labor at the problem would have almost definitely resulted in a massive loss if it weren't for my wife. Her choices in design and decor resulted in immediate interest from lots of buyers, and the fact that she had just received her real estate license allowed us to avoid paying a seller agent fee. She really saved the day!

The whole situation made me reassess if fix and flip is the strategy I want to pursue. For now, as of April 2019, we are saving capital and focusing on our education.

Some highlights from the experience:

I purchased the home and paid for the rehab with a combo of cash and lines of bank credit and consumer credit cards. I love my Home Depot CC and it's 0% APR!

The GC we went with estimated the rehab time at 4-6 weeks. He took 13 weeks. This alone had a serious hit on profits due to how I had financed the deal.

I personally spent about 20 hours crawling through the attic on hands and knees with trash bags and a shop vac, removing critter pee-soaked insulation, rodent poop, snake skins and a dead squirrel. Can't recommend the experience.

Growing up, we had no mature trees in our yard. I always thought I wanted big trees. Clearing a half acre of overgrowth and fallen limbs by myself made me reassess this desire.

I won't get into particulars, but we learned that it would have been prudent to check the sex offender registry map prior to buying a fix and flip. A potential buyer's due diligence on that front lost us a contract and ultimately set our close date back a month. I spoke to family of the offender, and I honestly believe he got a bad break (serious baby momma drama - not to get all men's rights activist here, but it is truly unholy how much weight the word of a woman-scorned carries in our justice system, particular if the accused cant afford a decent attorney.) That being said, I can't blame a buyer for getting cold feet based on registry results.

After the sale, I looked at where in process I could have saved money. I came up with roughly $12k that could have been profit had I gone about things differently. We learned a lot, and now a long-standing eye sore is a cute house with a nice family living in it.

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

I was looking to supplement my W2 income and get my feet wet with real estate investment. I underestimated the depth of the water and its contents.

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

Wholesaling company that I had first spoken to a couple years prior and had been on their email list since. I paid them what the were asking.

How did you finance this deal?

Cash and loc's

How did you add value to the deal?

Full rehab. AC, electrical, kitchen, baths, roof, floors, paint, appliances, etc.

What was the outcome?

Break even, not including hundreds of hours of my time.

Lessons learned? Challenges?

Don't put the time-pressure of high interest credit on yourself when you have a lot to figure out. Prime example: I rushed into accepting the second GC bid I received. He seemed nice and honest enough but there were some serious conflicts between his expectations and mine that put us far over our time and money budgets. Had I a clearer idea of what I needed in a GC and taken a couple more weeks to settle on one, this process could have been much less painful and more lucrative.

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

My wife! Dominique Sharp is a top notch agent and I can't wait to see her achieve massive success as she progresses through her career.