Starter Home(run) - Portland, OR - 2010

[Nate Bell]

Investment Info:

Single-family residence fix & flip investment in Milwaukie.

Purchase price: $143,000
Cash invested: $85,000
Sale price: $340,000

My first home, and ultimately a home run. I bought this in 2010 as a short sale at the bottom of the market. It needed a full remodel, so I used a 203K loan with 3.5% down as a first time buyer. I had the help of a contractor but also did a bunch of the work myself. It ended up taking a few months longer than expected and left me completely drained financially and emotionally, but that was all soon forgotten once I started living in it. I would characterize this as a "slow flip". Once the Portland market was really surging again, I wanted to move out and cash out, and did just that. Walked away with about $120K after 5 years.

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

I wanted to stop renting, and this home was affordable and the financing was favorable. Also located within easy bike riding distance to my work.

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

It was on the MLS as a short sale, as were many others at the time. I got it under contract for $160K, and then had a stroke of good luck. A giant tree in the backyard broke off at the top and the broken piece pierced the roof. The bank wanted out so I got it for $140K-ish

How did you finance this deal?

203K loan, FHA with 3.5% down

How did you add value to the deal?

Full remodel, landscaping

What was the outcome?

Sold it after five years of living in it for $120K profit.

Lessons learned? Challenges?

203K loans are great, but take a lot of time and patience. It's best if the contractor knows what they're getting into with 203K, and that they are financially stable. My contractor was spread thin, and the whole draw process and rigor of the 203K just beat him down- I think he got out of the business after my job :(
You should also have some cash reserves and a contingency fund for 203K, because adding scope and cost is not easy, but you're going to want to do it. Best if you can cover it.