First Fix-n-flip became a profitable rental

[Debashish Majumder]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $12,000
Cash invested: $59,000

This was my first flip - bought a bank-owned REO and did a complete rehab knowing that it might not sell at the appraised value, given the neighborhood it is in. It was a calculated risk - the property is rented and after the BRRR strategy, it's netting me a nice monthly return as I wait for the neighborhood prices to catch up.

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

It was my first project - a full potential rehab.

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

On the MLS - my wife is a real estate agent. I had to know whether I could do this fix-n-flip thing with relatively low exposure. So I bought a run-down bank-owned REO at a great price and obtained my first rehab loan.

How did you finance this deal?

$12,000 out of pocket - my tax refund and a little bit of savings took care of the purchase price.
Hard part was to find the right rehab loan partner who would give an inexperienced flipper a chance.
I went with a company called Lima One Capital - they have good programs for first-time flippers.

How did you add value to the deal?

Read up on flipping, made a detailed list of what needed to be done and the biggest place I added value was ACCURATELY predicting the rehab costs. I used 100% of my rehab loan on schedule and did not go over.

What was the outcome?

It did not sell for the appraised price so I rented it out to the most qualified, stable-income buyer and promptly refinanced to pull equity out.
Netted almost $25,000 and got a stable cashflow with a decent mortgage rate.

Lessons learned? Challenges?

I have the most beautiful property in the neighborhood - which is a problem :-) - I did not study the neighborhood in great detail to realize that the property might not sell at the price point I was aiming for. So for my next few deals, I did more analysis and found the comps before I made my offer.

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

I have an unfair advantage - married to a real estate agent.
Lenders I used were Lima One Capital for the rehab loan and FlipSimpli for the refi.