My First Live-In Flip
I'm not sure if this is a "success story" or not, but I think I consider it my first successful move as a real estate investor. It all started about 2 years ago when I decided I was going to buy a house. For some reason, I had interest in buying a multi family, but knew nothing about real estate investment. So I did what any millenial would do, I googled it. Just so happens that the first thing that came up was BiggerPockets and a video by Brandon Turner on the 50% rule. I was hooked from the start.
Fast forward, I worked with my mortgage lender for 2 years building back my credit and working on getting approved for a house. The middle of last year I was final in a position to buy a house. I looked at a bunch of multi families and made offers on many of them. I would look at a multi and put an offer in an hour later after looking at it, sometimes $40,000 over list price, and wouldn't even get a call back. I'm glad I found BP when I did. Using simple math, I knew exactly how much I could pay for a property, and I wasn't going to overpay like a lot of people were doing.
So after a while of no offers getting accepted, and a baby on the way, my girlfriend and I decided to start looking at SFH. I told her the only way I would buy a SFH is if I could put sweat equity into it. I have been doing construction my whole life and I love fixing things and doing construction so I wasn't afraid of the work. So I called my real estate agent and told her to find me the smelliest, ugliest house you could find. We looked at a couple houses but most were asking too much for a house that needed too much work. Then we found this house...
It was originally listed for $307,000 and sat on the market for 90 days. In that time there were a couple price drops. It was now listed for $250,000. We went and looked at it, and boy was it ugly. Wallpaper EVERYWHERE, a lot of deferred maintenance, water damage, drop ceilings in living room, a toilet that obviously backed up recently telling by the walls below, a lot of ugly....It was love at first sight.
My RE agent and I talked outside the house for a little bit and I did some simple math in my head and I came up with an offer: $230,000. We got a call back that night with a counteroffer of $240,000. Boy were we excited that we finally got into the game! So I told my RE agent, "I guess this is the part where I say $235,000". I offer was accepted.
I did a 203(k) loan and rehabbed the property myself. I did everything but the plumbing since you need a license for that. A buddy of mind knew a plumber and he did a great job. It sure took a lot out of me and the scope of work grew by the day. I got into this pattern where I would say, "If I'm doing this, I might as well do that" Grew and grew. Mind you, I was going all this after work at nights and weekends. I've been working 7 days a week 18 hour a day to get this house done all while having my son born 3 months prior. Needless to say we had a lot going on.
Work completed:
-Complete gut of living room dining room including removing dividing walls.
-Removing 20' of bearing wall and heading off with LVL's to open up space
-Jacked up and leveled house and installed lally columns
-Poured new footing for lally columns
-New roof
-Complete gut and remodel of bathroom including removal of joists and reframing and a complete new layout including all new fixtures, tile, vanity, etc.
-New electrical run through the house (the first guy was a hack. There were junction boxes buried everywhere. They even ran 220 up to the 2nd floor with a 3 wire then split it to run 2 different homeruns to the same circuit...scary stuff)
-New oak staircase
-New windows and trim, baseboard, crown moulding, etc.
-New paint everywhere (obvisouly)
-New drywall in living room/dining room and one of the upstairs bedrooms
-New entryway tile after closet was removed and reframed to open up the siteline to the oak staircase
-Removed old oil fed radiator heat. Put in new furnaces and central air system fed by gas.
-Repainted kitchen and cabinets.
-And a whole lot of other stuff....
Now, the success story part:
After 8 months of renovation work I am in the midst of refinancing to remove PMI. I have to show at least 20% equity in the house. We got the appraisal back last week and it is valued at $331,000! Very exciting! We are removing PMI and my payment is going down by $201/month!
The numbers:
Purchase price: $235,000
Rehab: $31,000
Downpayment 3.5% (Skin in the game): $9,310
Total financed: $256,690
Appraised value: $331,000
Total added value from purchase price: $96,000
Total Equity: $74,310
I am very excited. I had a plan and executed it and it became better than I could have imagined. I believe this has set me up for success to become a RE investor. I now have equity to borrow against to purchase my next property. I looked at a local credit union that I belong to and they will do 95% LTV equity loans! So thats $50,000 I can borrow against my sweat equity to buy the next property. This is a very exciting time and I look forward to continuing my RE career. Below are some pictures of before, during, and some afters. I haven't taken any final pictures yet, the after ones are from the appraisal report.
Thank you BP community for helping me start out in this industry.
Existing Pictures:
Some Construction Photo's:
Finishes Product (Sorry haven't had time to take pictures, these are form the appraisal):