The "Woodpecker House"

[Brad Noe]

Investment Info:

Single-family residence fix & flip investment in Louisville.

Purchase price: $80,000
Cash invested: $100,000
Sale price: $250,000

Contributors:
Katie Noe

We lovingly called this house the "Woodpecker House" due to its *awful* wood siding. It was truly a hot mess when we bought it, and definitely the largest project we have ever tackled. We endured many trials and tribulations throughout the entire process, and it truly was a labor of love for us for many months as we continually had to maintain our resolve and power through each obstacle as it came to us.

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

It was in a great area on the east end of Louisville, Kentucky. Deals like this do not come along too often in this area, so we were quick to jump on it.

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

The seller contacted us directly. It was a woman, her partner, her son, and her mother living in the home, which had been in the family for over 30 years. They did not have the means to pay contractors to make repairs to the house, so it had been slowly deteriorating and was to the point where it was now a safety hazard for them.

How did you finance this deal?

We used a local hard money lender. Required a 10% down payment, and 10% interest with no actual payments due until month 7.

How did you add value to the deal?

The sellers desperately wanted out of the house but there were two problems: they needed the money from the sale of the house in order to purchase their next home, and THEN they needed to rent for approx. 6 months to build up their credit scores in order to secure financing for their next home as well. That is where I was able to step in and offer a solutions that other investors had not been able to: I had a brand new rental property just down the road that they could move into.

What was the outcome?

There were many "surprises" throughout the project that caused us to have to pivot and make adjustments to our plan, the largest of which was discovering major water damage caused by a fire that the sellers had conveniently neglected to tell us about. The ensuing repairs increased the budget by roughly $12,000!!! Additionally, we decided to throw an additional $20,000 onto the budget in order to reconfigure the hall bath into a master bath, and add a second bath off the kitchen.

Lessons learned? Challenges?

We had lots of issues with our contractor. The project was supposed to take 2-3 months and ended up lasting over 6 as the contractor continually dragged their feet and made excuses. It's extremely important to have a mutual agreement in contract form with the contractor prior to starting the work, which lays out the scope of work, timeline, and other expectations from both sides in great detail. We had an agreement but it was not nearly detailed or explicit enough, and that caused issues.