Fix & Flip Bank Owned
Investment Info:
Single-family residence fix & flip investment.
Purchase price: $294,000
Cash invested: $30,000
Sale price: $384,000
This was a bank owned property that we had to pay cash for. It was in pretty good shape and our plan was to do a few cosmetic upgrades. We offered 70% of the projected ARV and the bank countered. We were willing to go a little higher because the property was in very good shape and we didn't expect too many unknowns. Plan was for new carpet / flooring, new paint, and a new fence for privacy in the backyard. Our hope was to be in for about 15K of repairs and sell for 399K. As happens, things took a little longer, we decided to add granite and new appliances, and costs grew closer to 30K.
We listed for 398K and had an offer within the first 2 weeks. A BIG MISTAKE was accepting an offer that was contingent on the buyer selling their house. Their realtor assured me that their house was market ready and would sell "within 2 weeks" - 4 weeks passed, our listing grew cold, and the buyer failed to get an offer on their house. MY MISTAKE - I will never make the mistake again - Next time I will take a large non-refundable deposit or reject the contingent offer. When our house went back on the market, agents were suspicious and asking, "why did the previous deal fail" - it took us 6 more weeks to get a buyer. We had to throw in a new roof to spice up the deal.
All told, carrying costs, realtor fees, and final sales price meant that we made about 30K in profit. I'm happy that we were cautious with our estimates before we purchased; it allowed us some breathing room.
Typically I purchase properties for buy and hold, long term income but, I like to be nimble and make the money where the opportunity presents itself.
What made you interested in investing in this type of deal?
This deal was close to home and was appealing because of its location.
How did you find this deal and how did you negotiate it?
This was a bank owned auction property. I knew the value far better than the large national bank who was holding the note.
How did you finance this deal?
Financing was done through a partnership with an investor.
How did you add value to the deal?
We provided cosmetic fixes.
What was the outcome?
Successful sale after a longer than desired holding period.
Lessons learned? Challenges?
Find the balance between improving and sale price. If an improvement will just drive the price higher but not provide greater net cash in my pocket, it isn't worth it.
I won't be so "willing" and "nice" in taking contingent offers from buyers unless I have a sizable non-refundable bit of earnest money. If the buyer doesn't have skin in the game then they aren't "in the game".
