Historic Brick Bungalow in Downtown Phoenix

[Reilly Carpenter]

Investment Info:

Single-family residence fix & flip investment in Phoenix.

Purchase price: $410,000
Cash invested: $60,000
Sale price: $535,000

This 3 bedroom, 2 bathroom brick bungalow is located in one of the most desirable neighborhoods in Central Phoenix, the Willo Historic District. Though the house was built in 1940, it had great bones and mostly needed design updates to bring it back to life. The house has 1,312 square feet plus a detached 2 car garage with workshop.

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

I am from Phoenix and know this area really well. Over the years it has seen continued appreciation and continues to be one of the most desirable neighborhoods in Phoenix. I knew the area was strong and would appeal to buyers, renters and visitors alike so I'd have a number of strategies available.

Initially, I purchased the property as a vacation rental, but after watching the market as I began renovations, I decided it might actually make sense to resell it.

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

I found the deal from a real estate agent I contacted after finding him through Instagram (he's @thehousejudge if you're curious). I chose him because of his expertise in Central Phoenix and experience doing flips, rentals and Airbnbs himself. I felt like his experience aligned with my goals and he was able to find a deal that made sense for me.

How did you finance this deal?

For this deal, I used traditional vacation home financing and was able to get an interest rate in the low 3% range and put 10% down. That financing worked because I was initially purchasing it as a vacation home and the lower down payment was going to leave cash for renovations and furnishings.

How did you add value to the deal?

When analyzing this deal, I used neighborhood comps and price per square foot as the primary basis for my valuation. The home was originally listed for $439,000 but had already fallen out of contract so I saw an opportunity to negotiate. I was also looking at what my purchase price would do to cash flow as both an Airbnb and a traditional rental to make sure I was underwriting the deal with wiggle room for multiple strategies.

What was the outcome?

I ended up selling the property after 75 days as an off market deal through my realtor. Because of his expertise, network and brand in the area, he had several off-market buyers interested before I even completed the renovations. So it was a fairly seamless transaction. Additionally, I sold it to a realtor and was able to only pay 3% commission to my realtor, which helped with the profit margin on the deal.

Lessons learned? Challenges?

1. Having an amazing realtor is an invaluable asset. Someone who can connect you with local experts for the renovation as well as move the deal quickly is the number one reason this was a success.

2. Know your numbers and don't deviate. In negotiations, I knew what I needed to pay and I knew what I needed to get and that helped me not get emotionally invested on either end of the transaction. I had a plan in place and it was about executing it.

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

If you're in the Phoenix area, I highly recommend James Judge with HomeSmart. He is an investor himself so he understands the strategies you can deploy to make the most from a property. And he's really well networked and very generous with his advice/help, which was invaluable for me as an out-of-state investor.