3br/1.5ba rehab to 3/2 - $89K PROFIT

[Jonathan Davis]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $70,000
Sale price: $170,000

3 BR 1.5 Bath at purchase.

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

I love the result! Both the aesthetics, after project completion and, of course, the profit! Just as importantly to me is we provided a very nice home to a deserving family.

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

Through a Realtor friend. Made a cash offer pending inspection and maximum rehab costs. Renegotiated rehab costs over max as a direct reduction in price +20%. Seller countered, then we countered. Secured contract at reduction of additional rehab costs +12%. 90 day closing window. We closed in 20.

How did you finance this deal?

Funding partner.

How did you add value to the deal?

Total rehab & modernization. Expanded 1/2 bath in master to full making it a 3 br/2 bath. Added laundry closet in large dining area. Added vinyl windows, vinyl exterior trim (soffit, facia, some exterior walls, carport ceiling), new architectural roof, new cabinets and granite in kitchen, new fixtures and cabinets/tops as well as tile in baths. Removed and replaced cloth covered electrical wiring and upgraded box. Replaced old iron plumbing.

What was the outcome?

Purchased for $70k with funding partner. $70k in rehab. Sold for $140,000. $30,000 PROFIT at sale. Funding partner financed $130,000 to new buyer at 7% interest with 30 yr amortization, balloon in 7 years. Total interest earned $55,989,91. Total profit $85,898.00 split 50/50 ($42,949.00). We received $15K at sale plus residual interest payments during mortgage term.

Lessons learned? Challenges?

Funding partners with money want to maximize their profits, but they also want their initial investment back as soon as possible (so they can move it to another project).