I’ve been in this business over 25 years…buying, rehabbing, and reselling distressed property.

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When you’ve been at it this long, once in a while the opportunity will arise to purchase and rehab a house that you’ve rehabbed and resold before. In recent years, I’ve had this opportunity about a dozen times. I have never actually done it, until now.

Related: Anatomy of the Grand Slam: How I Made $800,000 on One Flip

The First Time Was Worth Forgetting

It’s not that I was particularly ecstatic about doing this house again.

Things didn’t go as planned the first time around. It was 2003, the house was an old piece of junk in a small northern California city, and this was my 49^th flip. I had enough experience that you would think I knew what I was doing.

The house was nothing special, but it was located on a large corner lot. My purchase price was $59,000 and I planned on spending about $20K on rehab. I bought the house on the courthouse steps so I never saw the inside until I owned it.

The house turned out to be in worse condition than it appeared from the outside. Floor joists rotted, wiring was bad, plumbing was bad, you name it.

Final tally: $75K in rehab and a lot of heartache. To add insult to injury, selling the house took longer than I had planned. That meant $16K in holding and exit costs. I finally sold it two years to the day later for $155,000 and made a measly $5K.

I even had to carry back a small second to get the deal done, so I didn’t even get my tiny profit for another year. This was hardly a success story, but it could have been worse.

Good Things Come to Those Who Wait

About a year after I sold property, the new owner refinanced for $240,000 (how they did that is beyond me!) and paid off my seller-carryback note.Then, they totally rebuilt the house (yes, even after I had just spent over $75,000 on it myself) and converted it into a duplex.

Last year, the duplex fell into foreclosure. The opening bid on the courthouse steps was $61,875. I saw the address pop up in my database on the morning of the auction and I immediately recognized the address. I thought to myself, "oh, no, not THAT house again".

I guess I’m a glutton for punishment so despite the bad taste in my mouth from round one, I thought I’d see if this house was worth round two. Besides, I’ve done hundreds of flips since the first time I bought this place so certainly I could do it better this time, right?

But Wait…Something Is Weird Here

Successfully buying foreclosures is all about due diligence, so stick with me.

Before bidding on the property, I began my usual routine of examining the title and estimating the value. This usually involves a look at Google Maps and Street View before going out to the property to see it in person.

Looking at the aerial, I discovered that the deep corner lot wasn’t so deep anymore. There was a structure in what used to be the back yard! Because I owned this house before, I knew that the lot used to go half-way down the block.

This got me to investigating. What I learned was that the owner split the lot into two lots and built a new duplex on the second lot in 2007, presumably using the proceeds from the refinance.

When the foreclosing loan was originated, the property had one single-family dwelling on it. So it makes sense that the lender only had the original address on record.

The lender had approved the change in legal description when the lot split was performed, but obviously wasn’t aware that there was another structure subsequently built on the second lot.

My guess is that when the BPO agent visited the property, they drove by the one address that was given to them and assigned a value accordingly. The opening bid was likely based off of that value.

My prior knowledge of this property gave me a huge advantage because I knew the size of the lot and knew that it had previously encompassed the area where the second duplex was built. A methodical analysis of the legal description proved that my intuition was correct.

Free Duplex, Anyone?

No one else caught this, obviously, because I was the only bidder at the auction. I bought it for one cent over the opening bid. Less than $3K more than I paid ten years prior, and this time its four units!

So what was the end result? I got two duplexes, in near perfect condition.

Adding the purchase price and some light rehab, I’m all-in on this property for $68,000. I rented out the four units for a total of $2,700 per month. The current market value of both properties is over $180,000. I’m keeping it this time!

Sometimes A Failure Is Setting You Up For A Success

There is a lesson in every failure.

If a deal doesn’t turn out as planned, it might be a learning experience. Or it might be a set-up for you to win big later on. Perhaps this story will serve as a reminder to look for the hidden piece of information that gives you a tactical advantage. If nothing else, I hope it motivates you to keep turning over every stone, knowing that every deal you do is setting you up for higher levels of success later.

Have you ever flipped the same house twice?

What was the outcome?

Be sure to leave your comments below!