Over Budget, Yet Still Profitable Fix-and-Flip

[Brad Noe]

Investment Info:

Single-family residence fix & flip investment in Louisville.

Purchase price: $75,000

Cash invested: $20,000

Sale price: $146,000

Contributors:
Christopher Vincent, Katie Noe

This one was a wild ride. First time working with other people's money and we went $10,000 over budget due to some unforeseen issues that came up - talk about stressed! In the end though, it all worked out and we all made money.

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

This lead came through our website. Our Acquisitions Manager Chris took the lead and met with the client. Our main contact was the tenant living in the house, whose brother owned the property. The tenant brother was ready to move out of the house and travel the country in search of his next adventure. He had lived there for many years, and the owner brother had no interest in keeping the property once he moved out. It was in decent shape but in major need of updating.

How did you finance this deal?

This was the first time we had ever used OPM (other people's money) on a deal. With most of our cash tied up in other projects, we enlisted the help of a couple of friends with cash to spare to make a 10% down payment to a hard money lender (SurePoint Equity).

How did you add value to the deal?

New roof, new furnace+HVAC, opened up a wall between the sunroom and kitchen, installed new kitchen cabinets and granite countertops, new flooring, new paint, gutted the bathroom.

What was the outcome?

We did NOT expect to have to replace the roof or the HVAC. We also did not expect to find roach-infested walls or termite damage when we opened up the wall to the sunroom!! Due to all of these surprises, we ended up $10,000 over budget! LUCKILY, the place sold in less than 24 hours at $6,000 over asking price, and we still netted a healthy profit on the deal, as did our investors.