1st Deal - Lots of Lessons Learned

[Michael Holmes]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $80,000
Cash invested: $55,000

600 sq ft garden unit originally purchased as a fix and flip which turned into a buy and hold after the housing market collapsed in 2008

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

I took a "course" on real estate investing and this happened to be an available "deal" offered by the instructor and a previous student. I didn't have a plan or niche to focus on as much as it seemed like an opportunity.

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

The deal was found through the course mentioned above. Very little negotiating was done. It was a short sale for the seller and at the time the price was 50% of the expected after repair value.

How did you finance this deal?

Paid cash for the deal

How did you add value to the deal?

The unit had been gutted so it was a full rehab as oppose to a few cosmetic improvements.

What was the outcome?

I had a total of $135,000 invested in the deal and expected to sell the unit for approximately $165,000 once repairs were complete. When the market collapsed the value dropped to about $60,000 which forced me into a buy and hold strategy and have held onto the property for the past 12

years. The property is finally worth about what I have invested and I'm looking to sell in order finance a deal locally.

Lessons learned? Challenges?

- Be open to change; understand that circumstances change and you may be forced from one strategy into another
- Know what level of risk/reward you are willing to accept; paying cash significantly reduced my ROI but saved me from financial devastation
- Inspect the property you are going to buy; I bought site unseen because it was such a "great deal" which lead me to buying in an up and coming (aka marginal) neighborhood