Investment Info:
Single-family residence fix & flip investment.
Purchase price: $42,500
Cash invested: $5,000
Sale price: $110,000
Contributors:
Ian Reeves
3-1 1600sf in a low income but low crime area of KCMO that is currently a hotspot for REIs.
Purchase Price: $42.5K
Out-of-Pocket $5K
Rehab Cost: $25K
Total: $72.5
Comps: $90-140K (Average $115K)
Potential Profit: $42.5K
Final decision on whether to sell or rent will depend on appraisal.
What made you interested in investing in this type of deal?
I had previously worked with Ian Reeves who was my initial inspiration for beginning my real estate investing journey. My motivation was compounded by my background in residential construction and industrial construction management.
How did you find this deal and how did you negotiate it?
Searched the MLS for 3 months running the numbers until I found this one which worked financially considering the ARV and rental rates for the area.
I didn't really negotiate the seller down at all which in hindsight, I should have. There were multiple issues on the inspection that I could have used as leverage to negotiate down. I also had a terrible real estate agent at the time who seemed to be acting more in the seller's best interest rather than my own. Consider this a lesson learned.
How did you finance this deal?
I secured a personal loan for labor costs and a Home Depot credit card for material purchases. Both are %8-9 APR but I will quickly cash-out refi once the rehab is complete in 1-2 weeks so I've only had to make 2 payments on each loan thus far.
How did you add value to the deal?
Rehab includes:
Full Bath Remodel
Full Kitchen Remodel w/ butcher block countertops
Removed wall between kitchen and dining room
New Furnace
Added Central A/C unit
Updated Electrical
Updated Plumbing
Refinishing of original hardwood floors
Interior Paint
Exterior patch and Paint
What was the outcome?
Still in progress.
Lessons learned? Challenges?
I purchased this property sight-unseen which was both a blessing and a curse.
The curse was that the house was not in the condition as advertised. The house was filthy and infested with cockroaches. Had I known this in advance I could have used this as leverage to negotiate the seller down. (Agent didn't inform me either)
The blessing was that if I had seen it in advance, I might have talked myself out of the purchase. The numbers worked and I always had the inspection clause to fall...
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
... back on. Ultimately it all worked in the end because the house is structurally sound and I am proud to say, cockroach free.
Joy Stamps is currently my acting Real Estate Agent, General Contractor and Property Manager. She is top notch in all aspects of her business and I'm looking forward to working with her on future flips and/or buy and holds.
