First flip 2007 half successful

[Michael Trees]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $110,000
Cash invested: $20,000
Sale price: $185,000

Demolition of rear extension to floor slab, rebuild on same footprint, new kitchen, bathroom and cosmetics. A lot of sweat equity.

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

I was younger. I was a university student studying architecture. I was working as a contractor, a product supplier and a publican in my spare time, and I thought, "I don't have enough on". The median house price in my area was around $450K and soaring upwards. I felt that if I did not capture some of the appreciation I may never be able to (I was naive). I couldn't afford anything in my market. I purchased a flea infested squatter house 2.5 hours away.

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

As a student with no time I had a very restrictive budget. On my local version of zillow I looked at every house in the state I could afford for around a year, and eventually settled on this house.

How did you finance this deal?

At the time there was a $7500 firat home buyers grant. I cobbled together some extra money for a deposit and I was in business. A childhood friend, now banker, waved a magic wand and got me conventional finance on the property.

How did you add value to the deal?

Even as a student I had worked in a lot of areas of construction. I had worked part time as a framing carpenter on my holidays and had helped build family members houses, so I had enough ideas to be dangerous, I demolished a non compliant addition to the house and rebuilt it to code on the same foundation. I used my connections as a product supplier to fit it out in a popular style and upgraded the whole house for almost nothing.

What was the outcome?

I missed the peak of the market and advertised on the downward slide. The property was listed for $240k and sold later for $185k. There was a lot of heartache in between where I rented it out extremely poorly, had it damaged extensively and did a lot of soul destroying rework.

Lessons learned? Challenges?

1 - I could do the work. That did not mean I should do the work.
2 - The quality of property managers and tenants make or break a housing deal and can cause all sorts of problems.
3 - My young enthusiastic sweat equity made me dollars an hour. Thankfully I walked away with cash in my pocket but at what cost?

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

I worked with "The Loan Company" in Western Australia. They did a fantastic job. Everyone else did not.