Me, my brother and our friend bought this property in April 2011, with the intention to flip it in about 18 months. The reason we planned for it to take so long it because we all work full-time and we would be doing all the work ourselves on nights/weekends. The house needed a complete rehab: Windows, baseboard heat, roof, siding, doors, foundation, new water/sewer line, we even did the 220 ft. driveway. The only thing we kept was the kitchen tile. We hired out the foundation, water line, and driveway. Soon after we bought the house our friends company was being sold and he had to take a job out of state. He continued to pay his share while out of state. We planned on financing everything with a HELOC. We asked for 60k to do the rehab with proposals from contractors( the bank wanted proof of what we were doing). After all that the lady at the bank we were dealing with only wanted to give us 40k. Not know we had other options being so young and inexperienced we took it and figured we would get the rest later because we knew the house had plenty of equity in it.
The foundation and water line took longer than we expected so that put us on hold for a little bit. We went there and basically tore it down to studs after that and let it sit for the winter because we had no heat. Spring of 2012 came, we ramped up and got stuff done. Finished about 85% of the interior, just needed to finish framing and a new bathroom and redo the basement stairs and sheetrock the basement hallway. Also some small cosmetic things throughout the home.
At this time summer is over and 2 things happened: 1.We had to get the rest of the loan to finish the exterior, which was a hassle and it shouldn't have been. Went to a new bank told them our situation and went through 2 months of back and forth paper work. Calls me one day and says we're approved, YAY! ......NOT! The lady I dealt with did the loan for the wrong amount. We owed 30k on our first HELOC, so I told her we need 60k, 30k to finish the house and 30k to payoff the other bank. Well she only did it for 30k total. I'm not sure what happened but I let it go, on to the next bank. 2 more months of back and forth paper work, approved for the correct amount, woot woot!
2.Friends of friends heard we were fixing a house and were looking for a place to rent. So we structured a lease that would allow us to work on the weekends while she stayed there. Are holding cost we around $700/month. We got her in there at $1200/month( which is a few hundred under market rent for Lenox, MA)
So we got the loan, got a tenant in there with a year lease. We continued to work for the next 18 months on the weekends. March of 2014 rolls around, it's time to finish this house up. We notified the tenant we would be selling and gave her 90 days to move out(her lease is up and is on month-month now). This house is in a very sough after neighborhood. So I get an email from our friend that had to move out of state saying that people who rent in the area want to come look at it. So their realtor contacts me and I setup an appt. A week later we have an offer!
Here's the numbers:
Purchase price: $75k
Closing costs (purchase): $2,500
Renovations: $65k (5k off original guess, the driveway put us over. I paid for that out of pocket)
Holding costs: $13k (18 months)
Rented: It was rented for $1200/month for 18 months. Bill were around $700/month so we cash flowed around $500/month. Which makes a total of $9k.
Closing costs (sale): $5500-6k (saved 9k because I have got real estate license during the rehab, which was planned ahead of time)
Sales price: $230k (we believe we could of got $240k but we didn't want to risk losing out. Actually some more neighbors came up to us a few weeks after we accepted the offer and were interested in buying it as well. They wanted an easement off our driveway to build behind the house they rented because their grandfather owned the land.)
Split it 3 ways. Now me and my brother are a team and our 3rd partner is gone(still good friends). Throughout this whole ordeal we also have a SFH rented and our home that we live in and are currently fixing.
I learned so much throughout this process between project management, tenants, dealing with contractors, learning that nothing and I mean nothing goes according to the original plans. I do wish I found BP sooner, that would of saved a lot of headaches. I feel like I can do just about anything now though, whether its a hands-on fix/flip or one we would hire out.
1. We are going to finish fixing the house we live in before we buy anything else (unless a good deal come up)
2. Focus on buy/holds in our area and I would like to learn and connect with some out of state investors. I'm still researching a lot of areas.
3. Move my 401k over to a solo and learn some note investing.
Sorry if there's some holes in the story, I didn't intend for it to be so long. Feel free to ask any questions.
Congratulations!!!! That's a great story. You guys put in a lot of hard work and it paid off in the end. At the same time, you got a pretty comprehensive education in real estate. Just keep on keeping on and good things will come your way.
That's great. You learned some good, 'inexpensive' lessons, and live to do another deal :) Awesome!
Definitely look for solid markets out of state. Great way to diversify, and learn a new market / model.
I have great solo / self directed ira company referral if you'd like.
$91k profit!! Wow, that's amazing. My first deal I did a small fraction of that! Good job!
Feel free to PM the name of the company you work with for a solo 401k. I've been researching a couple
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Congrats! I love the idea of renting it out during renovation to help cover holding costs!
Maybe I'm looking at this wrong, but splitting that 3 ways leaves 30k each. If you were the contractor, wouldn't you say that you've put in more than 30k's worth of labor? There are people that do nothing and make 30k within one month.
Me and brother did the work together. The friend who had to move paid more of the holding cost and gave us extra after closing. Granted he did make out for not doing as much as me and my brother, the original plan was structured to be split 3 ways and we stuck by it.
I hear ya! To me it does sound like you got a lot of valuable experience and education out of it.
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