Second and third flip
Any journey is exciting when one tastes success in the beginning. The first rehab fix and flipproject was a grand success and bolstered my confidence to move on this path. The secondproject was purchased right of the mls though an agent who specializes in identifying properties for investment, putting them under contract and then assigning it to investors. The experience of the agent was the main reason for purchasing this property. It was a 1948 house in Mt.Baker area of Seattle purchased for $425,000. The house was in a good condition, need updating and the kicker was almost 800 sq.ft of unfinished basement. I learned that a finished basement commands the same sq.ft price as the main floors. The rehab budget of $80,000 included upgrading the kitchen with new cabinets, counter tops and appliances, upgrading a bathroom on the main floor, expanding and upgrading the bathroom for master suite. In the basement, we added a full bathroom, a bedroom and a media room. No major surprises except for the bedroom, the concrete foundation had to be cut to have bigger window at three and half feet height for egress and some struggle with the old galvanized pipes. The good thing is we were right around our budget of $80,000. Everything on track till we got to the listing. The Seattle market in 2014 summer was super hot (as it is in 2015) but when we listed in October of 2014, the market was dead, the selling price was $645,000. There was some interest but no bites. The only thing biting us was hard money interest. Believe it or not, we had to take the listing of the market. Meanwhile we were able to refinance the property out of hard money to a conventional loan. At the same time I was also rehabing my third property (yes in parallel), lower price point of $425,000 - ARV. Both these properties sat on the market for 45 days in the winter of 2014 and were delisted. The story though ends on a profitable note for one and a minor loss for the other. Once we listed the properties back in February of 2015, the $425,000 property had two offers in three days and the $645,000 value property had an offer in 3 weeks. Hard money cost ate all of the profit on the lower priced property but we still came out with a decent profit on the higher priced property. Lessons learnt, take the summer off - do not buy properties for rehab in late Summer as they will get listed in Winter, look for hard money lenders who will lend for a period of more than 5 months at lower cost. Incidentally I have lenders now who will loan for a period of 12 months to 36 months and not charge extra points for extension.
Overall enjoying the journey, having fun and currently rehabbing four properties in parallel.
Thanks BP for all the podcasts and forum posts.