Change of Plans: No Duplex--Flipped Instead

[Lance La Croix]

Investment Info:

Small multi-family (2-4 units) other investment in Jordan.

Purchase price: $255,500
Cash invested: $1,500
Sale price: $356,600

We purchased our first primary residence in February 2019. It had 3 bedrooms (2 main floor, 1 basement), 3 bathrooms (1 3/4 main floor, 3/4 basement), a bonus room in the basement (no windows. Surrounded by porch, garage, and interior walls), and a three-seasons room on the main floor.

Our plan was to finish the three seasons room, add a kitchen to the basement, and divide the home into two separate units.
Main floor: 3BR 1.75BA
Basement: 1BR .75BA

We ended up flipping the home instead.

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

The idea of house-hacking a duplex has always appealed to me; the thought of converting a single-family home into a duplex sounded like a fun challenge.

BUT--It turns out, we really like living alone! We strategically purchased this home knowing we would have multiple exit strategies. We decided NOT to convert the home to a duplex (which was plan "A") but perform a live-and-flip instead.

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

We were looking for a single-family home for quite a while. My wife showed me this home even though it was outside of our prefered price range. This home was being sold through Opendoor LLC. so we were able to walk through the home before we even spoke to a realtor. There were several aspects of the home (including entire rooms) that had not been mentioned in the listing and that made it a great match (and a great deal) for us.

How did you finance this deal?

We used a USDA Rural Development loan to purchase the home. We used a rebate program to find our lender and she covered her side of the closing costs as a result. We made an offer after watching the house decrease in price over time and then plateau at $255,000; we offered to pay the asking price as long as the seller covered closing costs. Again, our lease was ending, and we wanted to get into this house with as little out of pocket as possible. They countered, we didnt budge, they accepted.

How did you add value to the deal?

I updated the kitchen from original 1980's stained wood cabinates and laminent counter tops by reconditioning the cabinates (painting the uppers white with crown moulding, slate for lowers, and installing gold hardware), hand-pouring a white with black marble-type epoxy over the existing counter tops, installing white subway tile with black grout, and removing a large section of cabinates and replacing them with floating shelves.

We insulated and heated the former 3-seasons room and converted i

What was the outcome?

Recently, we made the decision to move from Minnesota to South Dakota. We contacted Opendoor LLC. (the company from which we purchased the home in 2019) and they made a cash offer of about $335,000 gross, $314,000 net. A local realtor estimated that, after a few more cosmetic improvements, 2 weeks of ads, and 2 consecutive openhose weekends, we would likely gross $336,000 to $355,000. Zillow offered us about $356,600 gross, just over $350,000 net.

Lessons learned? Challenges?

1. We learned we like our privicy. A duplex hack isn't for us.
2. Gaining a conditional use permit can take A LOT of time and the zoning office doesn't like people telling them they're wrong.
3. After working for someone else 6 days a week,the last thing I wanted to do was sand and paint cabinates. It wasn't the cabinates that got to me; it was knowing I spent so much time working for someone else that quality time with my wife and investing in my future had to be crammed in at the end.

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

We cut a $2,500 check for earnest money and used Team National to find our realtor and our lender. As a result, the lender covered her side of the closing fees. That, in combination with the seller covering their closing costs, meant we walked from the closing table with a $2,000 earnest money reimbursemnt check. A month later we get a realtor rebate check for just over $1,500. We got paid to buy this house!