Cascade Classic - Client Project Turned into Personal Flip

[Justin Puetz]

Investment Info:

Single-family residence fix & flip investment in Rochester.

Purchase price: $70,000
Cash invested: $122,900

We had a client bring us this project in January of 2020. They found the house on the MLS and made a full price offer within the first day or two on the market. We started on the project in March of 2020. After not loving the layout (and having a designer friend in their network) they chose to pause the progress and evaluate their options for layouts and/or possible additions on the property, trying to maximize the potential of this deal. After a series of unfortunate events, that ate up nine months of time, the owners decided they wanted to cut their losses and sell the property as it sits (now fully gutted from our time there in March).

That's where I stepped in and threw out the idea of me taking it over completely and keeping them on as a private money investor funding the deal. The only way this worked was for them to keep the existing financing in place and for me to complete the project. This allowed them to wipe the stress of the rehab off of their minds and allowed them to collect a healthy interest rate to hopefully recoup some of their expenses lost during the failed design phase, while we collect the profit at the end.

We are currently close to finishing up the framing phase of the project and are hoping to have it ready to hit the market on the first of May 2021! Thanks for reading!

Have a great day!

Justin

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

It started as a project that our client had us working on for them and then the opportunity arose for us to take it over. I love large rehabs like this, it allows us to maximize the home's potential and gives us more control over the final product (as long as the numbers allow for that).

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

We started as just the contractor for it and later became the investor on the deal. We discussed an interest rate that would go to our clients for continuing their financing on the project and I chose to give them a great rate from the start as a thank you for allowing us to take things over and hopefully help them recoup their initial investment.

How did you finance this deal?

Owner Financing. They used their cash to purchase the property and a bank loan for the rehab.

How did you add value to the deal?

We fully gutted the home, added three bedrooms and one bathroom to it. We also heated the garage and refinished the front porch.

What was the outcome?

To be determined. Set to make about $30,000 after all expenses are paid.

Lessons learned? Challenges?

Opportunities to get in the game are everywhere. Just jump in and get after it. - I'll let you know the biggest challenge once it's sold, I'd hate to jinx myself this early in the rehab... haha

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

So far we have great professions working with us! I'll let you know more about it once the project is wrapped up.