Bank owned. I purchased and went in 50/50 with my realtor whom I've been close friends with since grade school. We both lived there and fixed up with property to be sold after having to live in it for one full year.

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

My realtor found it on the MLS. It was foreclosed with mainly only cosmetic changes needed. It helped that it was in a great up and coming neighborhood. I knew the house would be an easy sell with four bedrooms, 2.5 bath and attached 3 car garage.

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

My realtor that I partnered with found and negotiated the deal. He needed me for the construction knowledge and bank roll. I needed him for finding and brokering the deal. It was a win-win for everyone involved.

How did you finance this deal?

5% down on a 203k loan. We each split the 5% down and used the 203k to fund the more time consuming/tedious renovations.

How did you add value to the deal?

The house was structurally sound. It just looked like the previous owners stopped caring. We repainted the cabinets, added all new stainless steel appliances (most were given to us through various deals we struck with people), granite counters, all new flooring and carpeting, painted all walls and ceilings, put tile in all bathrooms, replaced all the ugly lighting fixtures and door knobs/accessories. We cleaned up the outside and added some simple landscaping that was there - just overgrown.

What was the outcome?

We both lived in it for a year and a half and found a mutual friend to move in with us for added rent since there were two spare bedrooms not being utilized. The outcome was perfect. I knew that renting out the side of the duplex I was living in at the time would make my portion of the mortgage even out so I could live there for free again. We had a few pretty minor arguments. Any argument stemmed from me being cheap by looking at the numbers and him looking at it from a resale perspective.

Lessons learned? Challenges?

Be very conscience of your comps. Buy your renovation material based on the type of neighborhood and the income levels it attracts. Around here... People expect granite counters in homes selling in the mid 200s, but you wouldn't need that added expense for a rental or homes in the 100s. I also learned not to raise capital from nonconventional ways for foreclosed flips. There's no need to hold the house for at least a year if you aren't constrained by the type of loan. also, always get 3 quotes