Investment Info:
Single-family residence fix & flip investment in Midvale.
Purchase price: $193,000
Cash invested: $20,000
Sale price: $280,000
Live-in flip that I got at a foreclosure auction. Was able to rehab in six months, do a cash out refinance to pay my parents back for their help with the down payment, and still come out at 80 LTV to avoid mortgage insurance. Very lucky and awesome first experience with real estate! We lived there for another year and a half before selling and moving down to St. George, UT.
What made you interested in investing in this type of deal?
I had set a New Year's Resolution that year that I wanted to purchase a home. It seemed a little crazy because although I had effectively no debt, I was working part-time at a call center making $13.50/hr and I had very little savings. I didn't really know what I wanted to do with it . . . either a quick fix and flip, live in it with roommates, or rent it all out, but it just kind of fell in my lap and the strategy evolved.
How did you find this deal and how did you negotiate it?
I got really lucky. I was living with my parents and saw a foreclosure notice on their neighbor's condo while we were out on a walk. We were able to get in touch with the owner who gave us a walkthrough. I actually made an offer for $225,000 that he took to the bank, but the decided to go through with the foreclosure anyway. Apparently the law firm responsible for auctioning the home had an online list that was down for maintenance, so I was the only person who showed up. Got it for $193k.
How did you finance this deal?
A $20,000 down payment was required to bid at the auction. I brought $5,500 of my own funds, borrowed $13,500 from my dad, and $1,000 from my mom. The rest of the funds we secured through a private money lender out of St. George. He gave us a pretty great deal with 2 points for a loan fee (financed in!), 9% interest with no funds due until maturity in 6 months.
How did you add value to the deal?
Most of the issues with the house were cosmetic. It was FILTHY, but aside from that, there wasn't a ton of renovation work required. We replaced carpets and repainted. Some baseboards had to be replaced. I re-grouted the entire second floor (kitchen/living/dining area) which ended up being very time consuming and labor-intensive. We also had to replace a shower valve. Aside from financing expenses, our rehab costs only came to about $10,000. It was fantastic.
What was the outcome?
I had a great place to live for almost 2 years, no mortgage insurance after refinancing 6 months in, and about $60,000 in cash when I sold a little after two years.
Lessons learned? Challenges?
I actually wasn't even planning on bidding on this property so I showed up to the auction with no funds, just to see what it was like. When I heard the price, I had to scramble to see if we could get a bid in before the end of the day. I learned that you can put together 6-figure financing in less than 24 hours if the numbers work out right. That was crazy to me. Probably the most important lesson was that crazy good deals are out there. You just have to be looking and be ready.
