Know your neighborhood to spot a great deal when you see one

[Kara Beckmann]

Investment Info:

Single-family residence fix & flip investment in Scottsdale.

Purchase price: $364,900
Cash invested: $86,000
Sale price: $569,000

I was the most nervous that I had been when I did this deal, and it was my best profit yet! This was my first wholesale deal and I had to make a decision on the spot as other investors were looking at the property and I knew someone was walking home with that contract that day. No inspection period, $10,000 non-refundable deposit and 12 day close. I was not used to these terms but the numbers made sense every way that I calculated it. I ended up making a 30% cash on cash return and sold the house full ask only holding the house for exactly 3 months. This was my best deal to date.

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

I knew this neighborhood well as I just sold a house in this neighborhood and I got the highest comp at the time. I also flipped another house near this deal that you could see from this backyard. I knew the numbers well, and I knew what I could sell this house for.

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

I received an email from a wholesaler on a Saturday night with the zip code in the subject line. It was the zip code that made me open the email. I responded right away and scheduled to see it the next day. There were about 7 other investors look at the house on Sunday and I knew someone was going to go home with the contract. There was no negotiation on price, however I ran the numbers, and even worst case scenario was a great profit.

How did you finance this deal?

As much as I wanted this house after running the numbers, the problem was that I didn't have the cash...yet! I wasn't going to let that stop me. I knew my last flip was scheduled to close in 10 days so I was betting on that going smooth. I took all of the cash from my last flip, along with private money to fund the deal and rehab with cash.

How did you add value to the deal?

It was a complete gut job and it needed a new roof. I updated everything and my theme was a "Modern Spanish" style that went over incredibly well with the potential buyers. The total renovation was $85,000.

What was the outcome?

The house went under contract in 3 days at full ask! I had a full ask back up offer on day 5. I was able to price the house higher than what I expected when I first purchased the house because comps had continued to go up! I made a 30% profit and was incredibly thankful with how the remodel turned out.

Lessons learned? Challenges?

It is important to run and know your numbers and not just depend on the wholesalers numbers. I knew that my renovation would be more expensive than what the wholesaler was calculating. He was estimating about $46,000 for the renovation I came in at $85,000... big difference however I also knew that the ARV was higher than he was calculating since I had sold a number of houses in this zip code.