I closed on this house 3 weeks ago and decided to share the process start to end. It was an off market property but there were agents involved. I looked at it with mine and even for a contractor/flipper it seemed a little intimidating. The place was originally built in 1961, had what looked like 4 additions, and multiple remodels. It is 2650sqft plus garage. The neighborhood is more expensive than I have ever dealt with in combination with an ultra strict and pricey HOA (tennis anyone?). Oh yea, it was also covered in mold.
The house was hitting the MLS on friday for 300k. It was thursday afternoon, I was the first to see it. We walked through the house like we always do - brainstorming the new floorplan as we go. We both bring up potential issues, value adds, what to keep, what to leave, levels of finishes for the neighborhood, etc. I ran some rough numbers in my head and in combination with an ARV from my agent I had him write up an offer.
250K cash. 10 day inspection period. No other contingencies.
The next day the offer was countered as expected. 270k and they would throw in the patio furniture. We have a deal!
Next step - find some money. Figuring out how to make offers before I had any money lined up was a game changer for me. I know it might sound crazy but finding $320K I think is easier than finding $320. I called up a few of my investors and mentioned to them that I had a project I wanted to show them. One of them was more interested and so I gave him the tour and a proposal for terms. I like to make it easy on these guys. They are done doing any sort of work. He said he thought the house sucked but the lot was a home run. Exactly what I thought. We agreed he would lend me 320K and I would put in the remaining 80k. I have about 70k liquid to my name.
Sale Price 550K
Closing Cost 35K
Ok enough talk here are some pics
My favorite tool is the hammer. Stay tuned for demolition.
Just in case you stumble across this and are wondering if its worth a read, I want to be clear as to my goal of this flip diary and perspective within. My main skill that I leverage is by far my carpenter/contractor experience. This is likely going to be my most successful flip to date and I would like to share it because the value created relies heavily on these skills. Doing a 100k remodel in 3 months, being your own boss, and getting paid 100k+ to do it is quite the experience. It is amazing how motivated I become when there is that much money on the table. It's nothing I could have imagined when I started shoveling holes at age 15. Or even when I built my first house as an assistant carpenter at 20. At age 25 I thought I was living the dream making 25/hour doing filthy remodels 40 hours a week with checks coming into my fancy new LLC. Potential is always beyond scope.
All this ascension I think hinges on a deep belief that I hold of abundance, positivity, and a passion for being a carpenter. Similar to a REI - we value freedom above all. This often times means you gotta turn up the rock n roll, put your head down and get laser focused.
My niche has become finding the houses that are the most messed up. They have the most problems and are the most difficult to solve. Yes, i know this is what many flippers do. However, what most flippers don't do is figure out how to do the remodel in half the time, for half the cost, and with a result twice as good, sell the house at a discount to an ecstatic new homeowner, and pay everyone involved handsomely. A tall order, I know, but if everyone isn't winning then is it really worth it?
Awesome! I am excited to see the finished product.
Looks like a solid win. I'm funding a very similar project with a 1960's ranch on 6 acres - House requires complete reno, but it's on a great lot w/ a barn that we plan to renovate with the house. $180k purchase (my investment), $110k rehab (my partner's investment), list for $399k. You must have felt very confident in your ability to find an investor, if you went under contract with no financing in place? Nice job.
@Morgan Klein Over the past few months I had been talking to multiple investors who were capable of pulling something like this off and I made sure they all knew my track record from previous projects, in advance. For every deal I do I actually make a hot sheet for the deal that includes projections, estimates, and actuals for both rehab and time frame. So far my records indicate that I consistently underestimate the rehab, and consistently sell for more than anticipated and am fairly accurate at timeframe. This is not because I am bad at estimates, but more so because I generally refine the project as a go and find more ways to value add. I admit I have a hard time doing the quick and dirty job but it helps me sleep at night and my houses so far have sold quickly. This data also shows that I am conservative in my ARV. I like to position myself to where worst case scenario everyone gets paid and I make wages. Most likely I will make a bit more. And there is always a chance for a home run.
The main confidence other than a clean track record is that when I offer an investor a 1st lien position for a house that is about equal to the value of his loan even before repair, and they know I am going to be increasing the value from day 1 with money out of my own pocket it creates a fairly strong equity position for them. I purposely put all the risk on me.
I forget what podcast it was but I utilize a strategy I heard where I wait to make the pitch directly. I generally call the investor and say I want them to take a look at a project and get there opinion/advice on it. I like them to reach there own conclusions on the place and so far it works like a charm.
Glad to hear you have a similar project going on. Let me know if you have any questions come up on the remodel.
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