Pretty simple fix and flip 2019

[Shawn McCormick]

Investment Info:

Single-family residence fix & flip investment in Groveland.

Purchase price: $100,000
Cash invested: $33,500
Sale price: $229,000

This was a lead I received from a Realtor that didn't know how to help the seller since it was deep in foreclosure, had squatters at one point, the sellers were divorced and one filed bankruptcy.

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

This property was a lead from another Realtor that knows what I do and she didn't want to spend the time or have the knowledge to complete the process, so she turned to me and I was able to help. This house is located within 15 minutes from me which made it very attractive.

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

I reached out to a friend that is an expert in short sales and she did all the heavy lifting with the lender to negotiate a fair price and make sure they would close with us. Our initial offer was $65,000 and they came back at 140,000 after several rounds of negotiations, we settled at $100,000 and closed it as a short sale. I listed the property (which is required with a short sale and also represented the buyer ( a land trust that my partner and I formed to buy the property), so I was paid 6%.

How did you finance this deal?

My partner and I reached out to private money lenders that we know and found one that offered us the purchase price of $100,000 at 6% for 6 months, no points, no origination. We used the 6% commission earned on the purchase along with my personal funds to complete the rehab.

How did you add value to the deal?

We did all the basic things, but couldn't over improve due to the area it was in, there just wasn't any value in that. We made it the best house on the street, but didn't go over the top. The comps suggested the ARV was $190,000 tops, so we were careful with our selections and I did a lot of the demo and clean up and handyman work as I could to help keep costs down. With my connections to local contractors thru my REIA, we were able to get quality products reasonably.

What was the outcome?

We finished in less than 90 days and listed well above market value (almost $40k more than any comp!) and had a couple showings, went under contract with a USDA buyer and appraised at contract price and closed. We were amazed that the appraisal came in at what it did and thrilled with the outcome.

Lessons learned? Challenges?

Although it saved us alot of money by me being very hands on and doing a lot of labor at the house, each investor has to weigh the value of their time. I had a partner in my retail real estate business that could handle that business while I was working on this, so for me, on this deal, that worked out okay. Many investors don't consider the travel time and costs involved in being on site every day (gas, tolls, lunch, snacks) that adds up quickly.

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

My partner Marcy Angulo was amazing and super communicative throughout the process. She was invaluable in negotiating and dealing with the servicer, title, private lender and everyone else.