Investment Info:
Single-family residence fix & flip investment.
Purchase price: $96,000
Cash invested: $45,000
Sale price: $175,000
This was my first flip without the help of my family (mostly my dad). After the purchase, rehab costs and closing & holding costs (not included in the Cash Invested), I broke even. I consider this to be "free education". I learned to not take on so much of the rehab on my own (even though I enjoy it). Still really enjoyed this flip. It was in a great location right by the police station and schools. Plus it was on my way to my day job so I could drive by to keep an eye on other work being done.
What made you interested in investing in this type of deal?
I wanted to take on a flip by myself. I acted as the RE agent and General Contractor. The house was structurally in tact and had improvements that I was comfortable managing and taking on myself. I thoroughly enjoyed this flip as it pushed my skills just enough to be confident to do more RE investment deals involving rehab projects.
How did you find this deal and how did you negotiate it?
I found the deal on Hubzu (online auction site). I was able to view the property before bidding, which is less scary than sight-unseen auctions. I allowed Hubzu to increase the purchase price slightly above my final bid just because I want to get a deal under my belt. This is something I will never allow again.
How did you finance this deal?
I used a hard money loan from a Bigger Pockets lender. This was a very convenient way to go and the company was very easy to work with. I did include the rehab cost in the loan. I had to get inspections by the loan company for every money draw I took for the rehab costs. This was a bit of a pain, which is why I don't plan to incorporate rehab costs in my loans in the future.
How did you add value to the deal?
Rehab items included: Tear down and rebuild garage, all new grass (seed) on property, removed 3 trees, painted entire interior & exterior of house, updated electric throughout house, updated plumbing throughout (including new floor drain in basement), LVP flooring in kitchen & bathrooms, new roof, new water heater and many other little various improvements.
What was the outcome?
This house was sitting vacant for two years and is now a home to nice family. I didn't make any money on the deal, but the experience was well worth it and a lot of fun!
Lessons learned? Challenges?
The biggest lesson was to not do painting myself. While this is a low skill job, it is extremely time consuming. It took me two months to paint the whole interior of the home (ceilings, walls, trim each a different color and finish). This resulted in me not listing the property until Thanksgiving so I missed the hotter summer/beginning of school market. This lead to more months of holding costs. I should have just spent more money and hire painters to get it done in a couple weeks.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
The lender, Capital 11, was really easy to work with. Very responsive. I don't recommend buying properties via Hubzu. While it is nice to view the property beforehand, they only sent a notary to the closing. This was very inefficient as I had some issues with the contract and closing costs which the notary couldn't answer. Luckily the questions were answered after the closing, but it was a risk not worth taking in the future.
