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Rehabbing & House Flipping

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Maria Vogel
  • Rental Property Investor
  • Whitefish, MT
11
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60
Posts

Need advice: House deal

Maria Vogel
  • Rental Property Investor
  • Whitefish, MT
Posted May 17 2016, 17:49

I just sold a house and I want to do a flip to increase my cashflow so I can get into multi-family. 

I made about $40K on the sale of the home. 

Background on the market: Most houses here under $200k on the MLS are under contract within days (sometimes before they are even doing showings). Even total dumps are selling quickly if they're priced around $150k.

I found a FSBO 2 bedroom with a HUGE heated shop (very big selling point in this area) similar homes that are on the MLS like this are selling for between $140-160k without any reno. This house would be a big reno but nothing major. The roof, siding, heat system foundation are all good.

It needs a new bathroom, new kitchen, doors, lighting new flooring and paint. Maybe a new fence. It has a really cute yard. I estimate about $10k in supplies $15-20k if we hire people instead of doing the work ourselves (we've done quite a bit of this ourselves but I want a quick flip so would probably hire out the work). 


Asking price is $110k however, the owner is a nice gentleman that owns the house clear and free and says he knows it needs more work than he realized (renters just moved out) and is willing to negotiate. He could easily get that or more if he puts it on the MLS.

I'm thinking of offering him $95k cash. However in order to come up with the cash I have to tap out all my resources. 

$40k cash from sale of the house

$30k personal loan at 11% interest 

$21K HELOC at 3.5% interest

$4k personal savings. 

Total $95k 

Reno credit card with a 17k limit 0% interest for 18 months with a 2% transaction fee. 

Is this smart? I feel I can sell this house for MINIMUM $150k after the reno. I figured it out and I stand to make a MINIMUM of $20k even with unexpected costs and holding costs (taxes insurance and payments) and I feel it will sell quickly. Is this smart to tap out and use my finances in this way? I have a few other investors here telling me its a bad idea, too risky but they all have cash so they don't have to do this. 

Other ideas? My back up plan is, I can always go to the bank and pull out a loan or a HELOC on the house after I have purchased it with cash. I was able to get a HELOC on the house I just sold because I had purchased it with cash.

Please! Any advice is appreciated!! 

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