Buy and Hold Turned Fix and Flip - 77% ROI by Accident!

[Tyler Munroe]

Investment Info:

Small multi-family (2-4 units) fix & flip investment in East Boston.

Purchase price: $565,000
Cash invested: $30,000
Sale price: $665,000

Buy and hold turned fix and flip investment in E. Boston about a 6 minute walk to the Airport Blue Line T stop. Heavy cosmetic upgrades needed in the first floor unit, upstairs was rent ready. Idea when bought was to buy and hold but changing market conditions prompted me to sell to use money to invest elsewhere. Net gain AFTER tax came out to $87,306 for a 77% total project ROI. Property also cash flowed when owning it.

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

This initially was a buy and hold for me in an area of Boston with some serious upside. East Boston has a fantastic location to the city relative to the prices of properties. This is fast changing which I'm sure helped with the final sale price.

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

Found on MLS and definitely OVER paid for this. Was able to make it work by spending more hours than I'd like to admit fixing the downstairs unit but was able to keep my costs down doing so. Didn't even get an inspection before purchasing, which would have definitely helped my cause and allowed me to negotiate down a bit. Property was sitting on market for months. Mistakes were definitely made here!

How did you finance this deal?

Traditional 30 year fixed with 20% down.

How did you add value to the deal?

Was able to get away with mostly cosmetic upgrades to the bottom unit, which was in need of dire repair. Basically a LOT of cleaning, painting, and light repair work. I also re-did the finished basement so it could be used as accessory space for a play area or home office. I was able to AirBNB the top floor, which netted great returns until covid hit.

What was the outcome?

I decided to sell to pull my money out and invest elsewhere due to changing market conditions. The AirBNB was heavily dependent on travel to the city, which has all but disappeared due to covid, so there was a real risk of vacancy if my long term renters left in the bottom unit. I could have certainly rode it out, but as my investing knowledge grows I'm looking forward to putting that money into action elsewhere.

Lessons learned? Challenges?

Major lesson here is pick your markets carefully and manage costs. Had no intention to sell the property this soon, but when I did the numbers I realized I could free up some great capital for other projects. That was only possible because it was a strong market and rehab costs were low. All costs considered (buyer's agent commission, cap. gains tax, closing costs) netted a profit of $87,306 on top of getting my down payment back. Came out to a total ROI of 77%, not bad!

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

I'm a real estate broker so I represent myself in transactions. If anyone would like to chat about investments in the area feel free to reach out!