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Real Estate Deal Analysis & Advice

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Kara Beckmann
  • Flipper/Rehabber
  • Scottsdale, AZ
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42
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A deal full of firsts became a home run deal

Kara Beckmann
  • Flipper/Rehabber
  • Scottsdale, AZ
Posted May 19 2019, 16:22

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $302,000
Cash invested: $138,850
Sale price: $550,000

This deal was full of firsts - It was the first property that I added on a full addition, the first deal that I paid all cash, and the first deal that I brought on another investor. That investor happened to be my Mom. We split everything 50/50. I managed the construction, design and entire renovation process while she managed the sale of the property as she is a Real Estate Agent. This turned out to be a home run deal for us both. We added on 820 square feet onto this home.

What made you interested in investing in this type of deal?

I knew the neighborhood, and there was a huge side yard that made me realize we would be able to add value to this deal my adding on square footage to the existing home.

How did you find this deal and how did you negotiate it?

My realtor (my Mom) found this deal on the MLS and sent it to me. We negotiated the deal down by $18,000 even with other offers on the table. We met the home owner and had a really good connection with her.

How did you finance this deal?

I brought my Mom in as my investor and we were able to put our funds together to fund the purchase and renovation with our own cash.

How did you add value to the deal?

This would not have been a good deal without the 820 sqft addition (added on a large open concept kitchen, powder room, 4th bedroom, laundry room and dining room). It was priced too high per square foot when we purchased, however we were able to do the addition for $110 per sqft and then sell for $265 per sqft. This was a major (and beautiful) remodel, and everything in the home was replaced - new A/C unit, new duct work throughout, new irrigation system in the backyard and designer features!

What was the outcome?

This was my first investment listing in the $500,000's and I wasn't sure how fast this would sell in that price point. It went under contract for $562,500 in 14 days. The appraisal came back at $545,000 the buyers agreed to come up with an additional $5,000 to get the deal done. It closed at $550,000. We had $138,850 into the remodel (I budgeted for $135,000) and the total profit was $92,000. We each made $46,000 and I immediately re-invested into another fix & flip 1.3 miles away.

Lessons learned? Challenges?

This was the first time an appraisal came back so much lower than the listing price, even when we had comps to support the listing price. I will now get appraisals done before we list the home to have on hand to support our listing price.

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