All Forum Posts by: Richard Goore

Budget was $98k. Came in at $91k. Normal closing costs except I didn’t take a commission as the listing agent.  Just paid a small fee to my brokerage.  

Investment Info:

Single-family residence fix & flip investment in Sacramento.

Purchase price: $520,000
Cash invested: $520,000
Sale price: $750,000

Great location in East Sacramento - 2 bedroom/1bath, 1373 sq ft. This was an off-market purchase from a wholesaler as a fix-n-flip. Took 6 months to rehab the entire home - new kitchen, bathroom, added a 3rd bedroom, new flooring throughout and new paint inside/out. My investment partner and I did a majority of the work ourselves. We hired out for the drywall, trim work, kitchen countertops and flooring. Came in just under our proposed budget!

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

I had been looking for a flip opportunity for a number of years but hadn't found the right deal for me. I have flipped a condo in Lake Tahoe but the level of work needed was significantly less. That is now a STR.

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

I am on a bunch of wholesale lists and was contacted by one of the wholesalers about a property he was helping another wholesaler with. I think the guy who got it under contract didn't have a network in Sacramento. The guy I was contacted has a small network. I think I was the only one who viewed the property but I am not sure. My investment partner and I viewed the property, came up with a rehab budget and made an offer for less than what they were asking. I got lucky with this one!

How did you finance this deal?

Cash on hand and used other personal finances to loan the money to ourselves.

How did you add value to the deal?

I knew it was a large 2/1 on a good sized lot in the heart of East Sacramento. It was totally original. We added a bedroom by taking a corner of the very large family room (35'x35') and framing out an additional room. We remodeled everything including a new kitchen, new bathroom, and everything else.

What was the outcome?

I listed it for sale on July 5, accepted an offer within 2 weeks and closed on August 7. It was a 2 week escrow with a cash buyer.

Lessons learned? Challenges?

I learned that I don't want to flip another home where I need to do that volume of work. We did create some great contacts with various tradespeople. I will plan to use them for both future flip projects as well as refer clients to them.

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

Yes....MYSELF! I do work with great lenders and have a great title company that always takes care of me.

I would strongly suggest you run your numbers, using various scenarios of interest rates, and potential rents as the market could be significantly different two years from now. I work with a number of investors and they all seem to have different criteria for what works best but I think they are all successful because they run detailed numbers for their investment goals. Work with your agent he should be able to help you with varying scenarios. Finally, I'd suggest starting to track rental rates for an equivalent home and equivalent size ADU so you can see where the trends are. Heading over the first couple years. Good luck with everything! sounds like a great opportunity.

First thought is, hang in there! There are approximately 45% fewer listings in the greater Sacramento area year to date. That coupled with fewer people moving because of interest rates makes it very challenging right now, especially under $500,000. I am I'm sure your agent is guiding you two properties that possibly have been on the market longer, may need some work, but would still pass, FHA guidelines, etc. With this market, you can be a little more aggressive on price and still be fine. You'll also have the contingency of the property meeting an FHA loan minimum. I was just able to get my FHA clients into a property at what I thought was a very aggressive price, but it ultimately appraised. It was on the market 60+ days and still needed a bunch of work . Again, just need to be diligent and hang in there.

Following!

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $520,000
Cash invested: $520,000

Great location in East Sacramento - 2 bedroom/1bath, 1373 sq ft. This was an off-market purchase from a wholesaler as a fix-n-flip.

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

My investment partner and I wanted to do another flip in Sacramento.

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

I am on a bunch of wholesaler lists. I got a call from one of them about the property. Went and looked at it same day with my investment partner. Ran the numbers on what we thought it would cost to completely remodel the entire home. Walked the wholesaler through our numbers and gave them a price we would be willing to pay. They accepted!

How did you finance this deal?

We used cash on hand and pulled additional funds from insurance policies we can tap into.

How did you add value to the deal?

We will be completely remodeling the home - kitchen, bathroom, flooring throughout, new fixtures, paint inside/out, drywall, new dual pane windows, and adding a bedroom to make the home a 3/1 instead of a 2/1. The home is 1373 sq ft which is large for a 2/1 in this area. The living room was an enormous so we added the 3rd bedroom in a corner of that space.

What was the outcome?

Estimated completion of the project is end of May 2023. It will then go on the market for sale.

Lessons learned? Challenges?

Good planning and conservative estimates are very important. We appear to be right on budget or slightly over so far. In the end, if we are over budget, it should only be by about $5K.

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

Not for the purchase. The listing agent will be me!

Investment Info:

Condo buy & hold investment.

Purchase price: $540,000
Cash invested: $30,000

Purchased as a rental for a 6 month period then converted it to a STR. After the 6 month term was up, we did a complete remodel of the unit. All the work was completed by my partner and myself, along with assistance from our families. The only thing we contracted out for was the counter tops and flooring. We completely changed the layout of the kitchen but kept the loft overhead as a feature of the unit. The property is now a STR with high rental activity.

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

We wanted to try to find something to rent as a STR in the Tahoe area that we could put in "sweat equity" to so if it didn't work out as a STR we could always sell and most likely come out ahead.

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

As an agent, I started looking on the MLS. This was the beginning of the pandemic so it seemed like half of Northern CA was up in Tahoe looking for pandemic purchases.

How did you finance this deal?

This was an all cash purchase. We used cash on hand as well as tapped our life insurance policies. We had to pay interest but it goes back into the cash values of the policy so the cost of doing this is very small. After remodeling the entire unit we were able to do a cash out refi and pull almost all of our money out.

How did you add value to the deal?

We completely remodeled the entire unit - brand new kitchen, new flooring throughout, mostly new bathrooms (left bathtubs, but replaced everything else (including the 30 y.o. carpet in the bathrooms). We retiled the fire place surround, oiled and conditioned all the wood paneled walls, and replaced all lighting fixtures.

What was the outcome?

We began renting the unit as a STR in July of 2021. Based on research of the local market we conservatively estimated rental days per year at 110 days, or 35%, and an average nightly rental rate of $300 for the year. Starting in July we had half the year of 2021, and we beat our estimates for that period. For the full year of 2022, we were at a 54% occupancy for the year and averaged $402 per night.

Lessons learned? Challenges?

It's been a great learning experience overall. By doing the work ourselves we saved a ton of $$$. This would happen in general but even more so in the Lake Tahoe area. Through strategic planning, we were able to finish the remodel on time and under budget. It pays to work with great partners who share the workload and have differing expertise. That being said, I learned I don't want to do an out of town remodel by ourselves ever again.

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

Yes, ME!

Investment Info:

Condo buy & hold investment.

Purchase price: $270,000
Cash invested: $55,000

2 Bedroom, 2 bath condo, 2 stories, nice centrally located complex with pool and small gym amenities. Purchased to rent to a family member. Property has gained in value but we are a wash with expenses and rental income.

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

It made sense based upon the location.

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

Found on the MLS. Since I was purchasing for myself the only deal I got was to reduce the price by the amount of the commission I would have received. It was more about the location, size and amenities of the unit.

How did you finance this deal?

Standard conventional loan. This was for a parent so we were able to purchase as an owner occupied and not have to put 30 % or more as we would have if it was a loan for an investment property. This type of loan is available for a parent, disabled relative, and one other I can't remember.

How did you add value to the deal?

Purchased at the beginning of the pandemic. Haven't done anything to the unit except add can lights in the primary bedroom. I have been lucky with the run up in property values.

What was the outcome?

Still own it and is rented.

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

Yes, myself!

Interesting!  I don’t have an answer for you but posting as I wanted to follow along and learn from others comments.  

I’d say in very general terms Thao we are mostly correct but do not take into account the breakdown of areas within each zip code. I’d refocus and look at budget first then dig deeper into what area may be best for the type of rental you want to have. In working with investor clients, I’ve learned what works for one might not for another, and vice versa.  A good agent can help you with the process.  I’d be happy to work with you in this process.  I’m an investor as well as an agent and grew up in Sacramento. You’ll undoubtedly get replies from a number of agents.  I’d talk to a few (hopefully myself included) and get a feel for who’d be the best for for you and your needs.