My First Live-In Flip

16 Replies

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):

Congratulations! That is quite a success. You saved so much money doing the work yourself. I'm also doing a live-in flip, with a 203k loan. My numbers aren't quite as good as yours but I haven't lost any money. Construction is done and I have a few minor things to address before having it appraised. Who did your appraisal?

Congratulations! It's really encouraging seeing your success. Could you talk a little more about the 203(k) loan and how you structured that? 

@Tamara Taylor

The appraisal was a guy by the name of James Hamilton, who was hired by the mortgage company.  I was funny because he actually did the appraisal for when I bought the home, he did the appraisal for the 203(k) loan, and he did the appraisal for the refinance.  So he saw this house from start to finish and had a benchmark of how much work had been done.

This is awesome and inspiring! Also going to use it to convince my wife of doing a live-in flip. She isn't too keen with a 2 y/o and 2-month old lol.

@Keanu Mitanga

The 203(k) loan part was probably the biggest struggle.  There is a lot of paperwork involved, but I was actually able to get everything done within 30 days.  I was told it was the fastest they've ever seen a 203(k) loan close.  You just got to be prompt to get a quote from GC and all other paperwork and get it in quick.  

I ended up doing a streamline loan because the renovation was under $35,000, which means they gave me half the money up front and half the money when it was done.  Only a final inspection was needed for this.  The full blown 203(k) loan is a little different and requires multiple inspections.

My buddy owns a construction company who was the GC and had him write me a quote for the value I needed.  

@Torin Murphin

Hahah.  It is was very difficult to try and get it all done.  Our lease was up at our apartment and we had to move in when the house was half done and she was not very happy with me hahah.  After we were done she did use the phrase "Never again".  Good thing she has a short term memory.....

This is what it looked like when we moved in.  Yes there are couches buried underneath all of that stuff.  There was a good solid month where all of our stuff was piled in the house with no place to go.  I thought we were going to be on that show Hoarders!  It was fun trying to to trim, crown molding, and paint with all of our stuff in the way....  But again, it's put us in a place where we can start looking at investment properties

@Nick Noon looks like it was hard-work, and I can imagine with a baby and upset wife (lol), but definitely worth it for future investments now! My wife would probably say "never again" as well but when you pull out that much equity it's hard to say no!

Originally posted by @Nick Noon :

@Keanu Mitanga

My buddy owns a construction company who was the GC and had him write me a quote for the value I needed.  

 I was going to ask about this. I would like to do a live in fix and flip but was under the impression you had to have a contractor do the work? 

How do you set it up to where you do the actual work? It just needs a GC to sign off in some manor or...?

@Natalie Kolodij

The quick answer is Yes, you need a GC.  You are typically not allowed to do the work yourself, or even a relative for that matter. 

I don't want to go into too much detail, but as far as everyone is concerned all the payments went to my GC and paid for the work.  The bank now has a property with a substantial amount of equity which makes their investment that much 


@Nick Noon congrats!   I feel like it might almost be easier with kids that are younger because they don't really mind the mess and you are already used to living in the chaos of kid stuff. 

 Seriously though, it looks great and I know firsthand how hard it is to get work done with little kids. Congratulations, looking forward to seeing your next successful project. 

Looks Good Nick, you're pretty close to 75% LTV have you refinanced out of the FHA into a better conventional loan and removed the FHA monthly MI yet?

I would do that before I recommend getting your 95% LTV HELOC or 2nd fixed loan from your local bank (because after you get this it will really complicate and increase your pricing on the refinance of your first lien).

@Albert Bui

Yes, the appraisal was part of the refinance I am doing which proved that I did have at least 20% equity in the house. I am reducing my payment by $201/month getting rid of the PMI. I well then take out a equity loan after I close on that loan.

@Nick Noon

Congrats!!! It's so exciting that all of your hard work and living in the construction zone paid off!  It's easy to get hooked on this!  Best of luck on your next project!

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