Single-family residence fix & flip investment.
Purchase price: $86,965
Cash invested: $1
Sale price: $167,829
This was my first Sheriff's Sale purchase. I made two big mistakes: 1) Without due diligence, I ended up spending $24,000 more on the renovation than budgeted, and 2) My asking price was too high and I chased the market down as the housing bubble burst. One thing that worked in my favor is that I had a cash investor who contributed 100% of the cash into the deal. We were lucky to get out of the deal with only a $1,700 loss.
How did you find this deal and how did you negotiate it?
I bought it at the Sheriff's Sale.
How did you finance this deal?
A busy business owner agreed to invest 100% of the money for the deal as long as I did 100% of the work to find it, manage the renovation, and sell it.
How did you add value to the deal?
We dramatically improved the home with a $64,000 renovation.
What was the outcome?
We sold it a year later for what we had into it. The total loss was $1,700. The housing bubble burst right after we bought the home, and we were lucky to sell it with only a minor loss.
Lessons learned? Challenges?
We budgeted $40,000 for the renovation but went $24,000 over budget when we discovered wood rot behind the walls. We did not perform our due diligence. We also priced the house too high (we started as a For Sale By Owner at $215,000) even though the housing bubble was bursting. We were overly optimistic on the eventual sale price and on the renovation costs.
If you haven't lost on a deal, you haven't done enough deals. Consider the losses as "tuition" and go get more. It's only a mistake if you didn't learn from it. Good luck!
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