HELOC Funds First Flip

[Justin Denfeld]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $310,000
Cash invested: $150,000
Sale price: $500,000

We acquired an off market 880 SF hoarders drug house built in 1926 with an unfinished basement and did a $150K renovation where we replaced EVERYTHING in addition to adding 750 SF by finishing the basement. The project included adding a master bedroom, walk in closet, full bathroom, laundry room, and tech space. It was a big project to start my investment career. However, the good thing about starting with a huge renovation is that most projects in the future will seem "small" in comparison.

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

I consider myself a BRRRR investor but have never done a BRRRR yet. First, I need cash to sink into a BRRRR so I started out flipping a house to generate my BRRRR funds.

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

I took Brandon Turner's advice of making a post on my Facebook page. Low and behold, my childhood best friend's Mom had a relative's dumpy property that they needed to sell.

Our negotiations were very nube-like. The seller told us what they thought they could get from a realtor selling the house, we subtracted what the real estate commissions would have been and put the house under contract. After inspections, we negotiated another $10K off for having to replace the knob and tube.

How did you finance this deal?

My partner and I used our HELOCs for the purchase and all renovations.

How did you add value to the deal?

We finished off the unfinished basement to add an additional 750 SF. We also did as much work as we could ourselves. This was a blessing and a curse at the same time. We learned a lot, saved a little, but stalled the project.

What was the outcome?

We sold the property on the first day for over asking price, and made $40K.

Lessons learned? Challenges?

Hire competent contractors and don't pay them ahead of time. Fire them immediately & move on if they aren't meeting your expectations. They are who they are and will never get better or become more reliable. You get what you pay for.

Do your own work only if you are good at it, enjoy it, or want to learn the trait. I'm glad I did some work because I have an idea of what it takes now but I will never do it again.

Not all realtors are created equal. Don't trust them, do your own numbers.