Murphy's Law on First Flip

[Daphne Boyd]

Investment Info:

Single-family residence fix & flip investment in Charlotte.

Purchase price: $19,000
Cash invested: $35,000
Sale price: $88,000

We bought this 3 bed/ 1 bath 912 sq ft REO for 19,000 after it had sat on the market for almost a year. We obtained a hard money loan for purchase price and 25,000 for repairs and we estimated the ARV to be 88,000.

It was such a mess and had such a stench. I believe the previous renters had been drug addicts so the house was in terrible shape and every room was missing a door, every window was busted, and every room had different flooring. There was no heating or cooling of any kind.

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

We wanted an affordable fix and flip deal to get our feet wet. Boy did we!

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

This house was an REO that had sat on the market for ever a year. We saw it listed several times in Zillow and we drove by it in person a couple of times.

Once they dropped the price from 56k to 20k we jumped on it and offered 19k.

How did you finance this deal?

We obtained a hard money loan for 44,000 to cover the purchase price and 25,000 for repairs. We estimated the ARV to be 88,000.

How did you add value to the deal?

We ended up spending about 10,000 over budget on the rehab which included a brand new HVAC system, a new deck, a privacy fence, and almost all new windows and exterior and interior doors.

We did open up the living room and kitchen and placed a bar area in between and added custom recessed lighting throughout. We installed all new flooring and kitchen and bathroom cabinets and sink. Overall we were very happy with the work we had accomplished and how the project turned out.

What was the outcome?

The project turned out very nice, clean, and updated with a new HVAC and new lighting and a slightly more open concept.

Lessons learned? Challenges?

It ended up costing more than we had anticipated but we also added way too many personal touches. We know that now.

This house was in a bad location and sat on the market almost a year. Ouch!

We call this one Murphy's Law. Everything that could go wrong, went wrong including being broken into 2 days after purchase and then later right before a showing. It was our first real estate deal and our first flip, so we learned a lot.

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

Yes we went through 2 different realtors and real estate companies to get this thing sold.