First Flip - learned a lot and still made profit

[Matt Kukulies]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $95,000
Cash invested: $50,000
Sale price: $160,000

This was the first property we bought with the intention of flipping. After BRRRRing our first two rentals successfully (but doing all the work ourselves over many hours and a few months), we decided that the next project would be hands off by spending less than 40 hours total of "hands on" time, and hiring everything else out.

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

We're familiar with the area and local market, and we knew that if we were able to purchase any property here for $100k or less, it would be hard to lose money even with the learning curve of hiring everything out. With the minimal risk accociated with this deal, we thought this was the prefect opportunity to test our 40 hours or less goal.

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

We happened to drive by the FSBO sign minutes after they put it out. We were the first to call, first to look, and had an offer in that night. They were asking $140k and we were offering $90k. After a couple hours of negotiation, they were down to $100k so we met in person again and "met in the middle" at $95k. We used a method learned from Bigger Pockets, where we prepared a letter with three options, rather than just a single offer. This way, the seller feels as if they are "choosing".

How did you finance this deal?

Line of credit.

How did you add value to the deal?

New roof, new basement ("Michigan basement", new paint, small updates throughout.

What was the outcome?

Our projected $30k profit turned into $15k due to issues along the way. Overall, still profit.

Lessons learned? Challenges?

We decided to go against what everyone else says, and hire a couple of "craigslist specials" because we knew them and figured we could easily cut cost. This caused us to get behind schedule with subpar work, costing us more than we would have spent if we would have used licensed contractors from the beginning.

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

We bought the house FSBO and I used my agent to sell the house.