Second and third flip

10 Replies

Any journey is exciting when one tastes success in the beginning. The first rehab fix and flipproject was a grand success and bolstered my confidence to move on this path. The secondproject was purchased right of the mls though an agent who specializes in identifying properties for investment, putting them under contract and then assigning it to investors. The experience of the agent was the main reason for purchasing this property. It was a 1948 house in Mt.Baker area of Seattle purchased for $425,000. The house was in a good condition, need updating and the kicker was almost 800 sq.ft of unfinished basement. I learned that a finished basement commands the same sq.ft price as the main floors. The rehab budget of $80,000 included upgrading the kitchen with new cabinets, counter tops and appliances, upgrading a bathroom on the main floor, expanding and upgrading the bathroom for master suite. In the basement, we added a full bathroom, a bedroom and a media room. No major surprises except for the bedroom, the concrete foundation had to be cut to have bigger window at three and half feet height for egress and some struggle with the old galvanized pipes. The good thing is we were right around our budget of $80,000. Everything on track till we got to the listing. The Seattle market in 2014 summer was super hot (as it is in 2015) but when we listed in October of 2014, the market was dead, the selling price was $645,000. There was some interest but no bites. The only thing biting us was hard money interest. Believe it or not, we had to take the listing of the market. Meanwhile we were able to refinance the property out of hard money to a conventional loan. At the same time I was also rehabing my third property (yes in parallel), lower price point of $425,000 - ARV. Both these properties sat on the market for 45 days in the winter of 2014 and were delisted. The story though ends on a profitable note for one and a minor loss for the other. Once we listed the properties back in February of 2015, the $425,000 property had two offers in three days and the $645,000 value property had an offer in 3 weeks. Hard money cost ate all of the profit on the lower priced property but we still came out with a decent profit on the higher priced property. Lessons learnt, take the summer off - do not buy properties for rehab in late Summer as they will get listed in Winter, look for hard money lenders who will lend for a period of more than 5 months at lower cost. Incidentally I have lenders now who will loan for a period of 12 months to 36 months and not charge extra points for extension.

Overall enjoying the journey, having fun and currently rehabbing four properties in parallel.

Thanks BP for all the podcasts and forum posts.

Originally posted by @Inderpal Chadha :

I learned that a finished basement commands the same sq.ft price as the main floors. 

....

Lessons learnt, take the summer off - do not buy properties for rehab in late Summer as they will get listed in Winter...

First, I disagree with your assessment that a finished basement commands the same sf price as the main floors.  While a buyer might give it a relatively close value (not equal), an appraiser will certainly not give it a nearly equal value.  

As for the second point, a better option is to just buy a better discount in the summer in anticipation for selling in the winter...

Thanks J for the input. Yes, pick at a better discount in summer is great suggestion. Always on look out for that.

In Seattle metroplex, appraisers are assessing equal value and that is what I have experienced but that said, you are the master and I am just starting in this field, would definitely discount the basement in future acquisitions.

Thanks

Regards

Inder

Originally posted by @Inderpal Chadha :

In Seattle metroplex, appraisers are assessing equal value and that is what I have experienced but that said, you are the master and I am just starting in this field, would definitely discount the basement in future acquisitions.


Certainly trust the appraisers in your area over anything I say...I'm just very surprised to hear this.  Pretty cool...

@Inderpal Chadha - awesome to hear about your experiences and successes. Were you planning on coming to the BP meet-up on Friday in Bellevue? It would be cool to hear your story in person and have the opportunity to network.

There was a really good turn-out on Monday at the Lakewood BP Meet-up, I linked the Bellevue one below in case you hadn't seen it posted yet.

http://www.biggerpockets.com/forums/521/topics/225190-pacificnw-real-estate-meetup---eastside-edition---sept-4th

Yes, I am planning to be there on Friday.

Thanks

Awesome story, @Inderpal Chadha ! We're starting to be in the same boat as well, having multiple properties set to release in Sept and Oct. We're hoping the hot areas that they're in (Cap Hill, West Seattle, North Seattle) will somewhat protect us from the seasonal tides. 

Curious: how were you able to refinance from hard money to conventional? I'm assuming the flips were purchased in your own name? Or was it through your LLC?

I've been wanting to meet you in person, but unfortunately I won't be there this Friday in Bellevue. But keep a look out for my partner, @Khanh Nguyen .

Hi there! I would love to chat with you this Friday, Inderpal. Will be looking out for you. :) 

Nghi Le - One property was in LLC name and was not refinance. One was in personal name of mine and partner and was refinanced.

Thanks

Originally posted by @Inderpal Chadha :

Any journey is exciting when one tastes success in the beginning. The first rehab fix and flipproject was a grand success and bolstered my confidence to move on this path. The secondproject was purchased right of the mls though an agent who specializes in identifying properties for investment, putting them under contract and then assigning it to investors. The experience of the agent was the main reason for purchasing this property. It was a 1948 house in Mt.Baker area of Seattle purchased for $425,000. The house was in a good condition, need updating and the kicker was almost 800 sq.ft of unfinished basement. I learned that a finished basement commands the same sq.ft price as the main floors. The rehab budget of $80,000 included upgrading the kitchen with new cabinets, counter tops and appliances, upgrading a bathroom on the main floor, expanding and upgrading the bathroom for master suite. In the basement, we added a full bathroom, a bedroom and a media room. No major surprises except for the bedroom, the concrete foundation had to be cut to have bigger window at three and half feet height for egress and some struggle with the old galvanized pipes. The good thing is we were right around our budget of $80,000. Everything on track till we got to the listing. The Seattle market in 2014 summer was super hot (as it is in 2015) but when we listed in October of 2014, the market was dead, the selling price was $645,000. There was some interest but no bites. The only thing biting us was hard money interest. Believe it or not, we had to take the listing of the market. Meanwhile we were able to refinance the property out of hard money to a conventional loan. At the same time I was also rehabing my third property (yes in parallel), lower price point of $425,000 - ARV. Both these properties sat on the market for 45 days in the winter of 2014 and were delisted. The story though ends on a profitable note for one and a minor loss for the other. Once we listed the properties back in February of 2015, the $425,000 property had two offers in three days and the $645,000 value property had an offer in 3 weeks. Hard money cost ate all of the profit on the lower priced property but we still came out with a decent profit on the higher priced property. Lessons learnt, take the summer off - do not buy properties for rehab in late Summer as they will get listed in Winter, look for hard money lenders who will lend for a period of more than 5 months at lower cost. Incidentally I have lenders now who will loan for a period of 12 months to 36 months and not charge extra points for extension.

Overall enjoying the journey, having fun and currently rehabbing four properties in parallel.

Thanks BP for all the podcasts and forum posts.

I don't know the details of the property but the problem sounds like counting the finished basement as above grade square footage. The below grade finish basement should count as 50% of the above grade. Not sure who advised you otherwise, but I know that most realtors know this. The ARV that you used maybe have been too high based on comps wifh the wrong square footage.

The market in Seattle is still hot and as agents my retail team is still making multiple offers on most properties for sale. If the property is not selling, it maybe overpriced.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here