We took action and bought our first rehab!

10 Replies

I don't know if this is much of a success story compared to the others, however we did buy a house to rehab and flip. Albeit its the house we are living in, none the less it was a foreclosure and we are flipping it. Just not as quickly as you would an investment property.

So here's our story....

For the past few years my husband and I have been working diligently to pay off our massive debts and while we have paid off over $40k we still haven't made a DENT in my massive student loan(over $100k). After we had our son, I wanted to be a stay at home mom, but being that I have the bigger of the two incomes, I couldn't because of our debt, which frustrated the crap out of me. So one night, I started to brainstorm what could we do that would allow me the freedom to be home for our son and make great income to demolish our student loan debt.

Ding! Ding! Rehab and flipping!

Crazy idea I know. But flipping is something I have been wanting to do for the past 10 years, but didn't have the confidence to do it. However since then, I have educated myself on how to run my own business. In fact I have run a business or two, I am a graphic/web designer, so I do freelance all the time. I've had my own online retail store and I ran a wedding invitation biz for awhile, but I ran out of steam for both. However, I have never lost the passion of taking a dilapidated, messed up house and reviving it to its former glory. Especially historical homes.

So I decided it was time to take action and that's what I did. I got on BP, read, read, and read some more. Got involved. Talked to people. Read J Scott's books. Researched and researched some more. Stared the local BP meetup here in Milwaukee. Started to save money. Called a real estate agent on a house and the rest is history!

We decided we would do a FHA with a 203k loan. We got approved and went house hunting. I knew we wanted to stay in Wauwatosa(good school district, happening suburb in Milwaukee and tons of homes with character) However trying to find a foreclosure in Tosa is a needle in a haystack. But our real estate agent was a trooper. He worked hard for us and listened to what I asked for. And low and behold we found her, by chance driving around one day.

She was an REO on the market for 2 years. Adorable, but beat up. 3bdrm/2 bath, 1800sq ft. The bank was just finishing up having the foundation fixed and they had her listed for $144k. After doing the numbers I knew we had to come in at $100k. The bank said they wouldn't take anything less than $105k, so that's where we started and ended at $116k with a $25k reno loan. The comps in the neighborhood are from $175k - $200k. Overall renovation cost will be around $35k, but she will be a beauty when we are done:) Now if I could just figure out the exterior paint color.

My goal is to keep buying foreclosures and flipping. Currently I am working on a business plan in order to go find a private investor or a portfolio lender. This is my PASSION and I am not going to walk away from it again.

@Nicole Pettis,
That is so inspiring. I too feel the same. House flipping is what I think I was put on this earth to do! I too am looking for my 1st flip. After listening to BP podcast, reading books and jumping into the community, I said to myself, IT IS TIME TO TAKE ACTION!!!! I have began networking with local neighborhood association leaders, homebuyer specialists and not to mention all the wonderful people on BP. Please keep us all informed step-by-step. I think I am closer to finally finding the funding for my project and I will keep everyone informed as well. We should start a blog, “I Live in Flipping Milwaukee”… lol
I would say good luck, but you don’t need it!
P.S.
Paint color – I would go with a beautiful siding of neutral color, if that is in the budget. Have you seen @ Tucker Merrihew’s website? His finished products are some of the most well-done flips that I have ever seen. His site is TTM Development Company. That is where I will draw my ideas from.

William

that's great... i dont like when people just talk about and dream, but take no action and never jump in. you need just one to start... the rest is easy. :)

There is definitely an opportunity to do exactly what you're doing.

My only question here is what the numbers really look like on this deal.
Based on what I read, you paid 116k and you're rehab estimate is 35k.
That puts you all in at 151k.

Is that including all the FHA 203k loan fees and all the closing costs on the purchase?

You said the comps were between 175k and 200k. Thats a pretty big range there. What do you think this house will sell for once your rehab is done? 175k or 200k?

My only thought is that if it sells for 175k, I'm not sure how much money you'll be making. Closing costs, realtor fees, tax credits will take out a big chunk of money of that profit. But, then again, even if you make 10k, thats a great way to knock down that student debt. 10k or 20k every year? Thats huge.....

The one nice thing you have going is that by living in the home, you really don't have "holding costs" for the deal since the interest you're paying is basically your mortgage. That really helps the numbers there.

@Mike H. Yes, we paid $116k for the house & our 203k loan is $25k. We will cash flow $10k.

We had an amazing broker who waived all fees and we received amazing credits because of the employer I work for, so our closing costs/fees were minimal around $3k and that included the 3.5% FHA down payment

Yes, those are the comps. The subdivision is huge and was built at various times. You have homes built in the 1940's to homes built in the 1980's. They are varying sizes as well. Anywhere from a 2/1 1100sq ft to 4/2 2200sq ft.

Based on my research, if the home is completely remodeled, comps close to ours are selling in the $180k - $190k. Currently, there is a home a block from us, on the market for $220k. I am keeping a close eye on that one, because it is pretty comparable to ours. I don't think we will be able to ask that for ours when completely updated, but it will definitely give me a solid idea on where we can land when we are ready.

I plan on getting my real estate license soon to keep the fees down for when we sell, but if not, your right, those are all things to keep in consideration. Even if we do only make $10k on this, I'll be happy!

I know its not ideal profit for a flip, but considering it is our first and the bank wasn't willing to negotiate any lower(they put $22k in the house, before we bought it) I think its a good win!

Congratulations @Nicole Pettis , I look forward to hearing how it progresses. I'm sure all the MKE BP members know what a great area Tosa is.

It would be nice to see some renovation pictures! A lot of people love before/after pictures. :)

yikes a 100k in loans. That's crazy could have put 25k down on 4 houses and been on the way to freedom.

Are you doing most of the work yourself?

Even though you are owner occupied be sure to pull all the permits needed to show the future buyer that it was done and inspected.

Very inspiring story @Nicole Pettis! This is exactly what I am still dreaming about doing. I hope that everything goes splendid! You better keep us updated! @Scott K...could you elaborate on your reply a bit?

@Dan C. Thank you! We are excited that the weather has finally cleared up so we can move forward with the work.

@Dawn Anastasi I definitely plan on it. I am taking a bunch of photos and I am going to start a blog of the progress

Haha! @Scott K. , yes I know. I didn't know anything about REI when I was going to college. At that time, my goal was to get my degree and a good paying job/career so I wouldn't struggle like my parents. My dad tried to get me into Real Estate in my 20's a few times & I was like NO WAY! I had no interest. Not sure what changed my mind or what happened over the years, but I wish I had listened. All the code work is being done by the contractors. We will be taking care of the interior cosmetics. Yes, permits are being pulled and we have to have a final inspection so the contractors can get paid.

@Adam West Thank you! You will get there. It does take a lot of work, discipline and sacrifice, but it can be done. Will do! If you have any questions, feel free to PM, I will help in any way I can.

Have a great day!

Originally posted by @Adam West :
Very inspiring story @Nicole Pettis! This is exactly what I am still dreaming about doing. I hope that everything goes splendid! You better keep us updated! @Scott K...could you elaborate on your reply a bit?

When you have income property or want to flip a house. You always need to get the proper permits and get the inspections that the work was done up to code.

Like with electrical. The old knob and tube should never be connected to new outlets. Or you do any plumbing at all they will want it all done up to code with the proper venting and cleanouts. Most of the time when you come in behind a homeowner that did most of his work himself they are never done right.

For flips the last thing you want is to get killed at the buyers inspection. It makes you look bad and will cost you money and sometimes just kill the deal.

Or for a rental property you also need to pass inspections and also for section 8 housing.

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