My First Fix and Flip House that became a Rental Instead
Investment Info:
Single-family residence buy & hold investment.
Purchase price: $50,000
Cash invested: $75,000
Sale price: $124,000
Single family house that had a tenant months prior to my purchase. A brick home with 3 bedrooms, 2 baths, 1 car garage and a fireplace with a privacy fence and a big backyard that had a 20' x 20' awning. House needed new floors, light fixtures, paint, sheetrock repair, doors, receptacles, light switches, tubs, toilets, cabinets, vanities, roof shingles ect. Everything had to be replaced except for the sheetrock. I had a contractor work with me on all the repairs to the house. We gutted both bathroom and installed new tubs, toilets, light fixtures, vanities and ceramic floor. Installed ceramic around tub and on the floor. Installed 6 panel doors with aged bronze door knobs throughout the house. Installed good quality laminate flooring throughout the house except for the bathrooms.
I was going to fix and flip this house but decided that I got such a deal on the house that it would be better to have it generate a monthly income. Total invested into the house was $75,000. That included the labor and material cost. It appraised for $124,000 and it is being rented for $950/month. I could have gotten $1000 but this is my first house and its all about the learning process. I did a cash out refinance and was actually able to get back $92,000 from the equity. After closing cost, insurance and taxes, I was cut a check for $83,000. So I actually made $8,000 more than I put into the house plus its generating $950/month. It was rented 3 weeks after completion. My mortgage note is now $517/month with insurance and taxes escrowed. For my first deal, I call this a success.
What made you interested in investing in this type of deal?
I've been interested in owning rental property. I want to generate a monthly income from rental properties and when I began to actively look around my area, I came across this house and ran the numbers using Bigger Pockets information and it just made sense to me. I knew that I could save money by doing most of the work myself.
How did you find this deal and how did you negotiate it?
I found this deal through Zillow. I negotiated the offer because I had cash available and I knew a bank wouldn't loan the money to just anyone looking for a house to live in due to the amount of work it needed in order for it to be habitable again. I knew it would be an investor that would get it and I didn't waste time.
How did you finance this deal?
I bought the house with cash. I paid the labor cost, roughly $5,000 with cash. I bought all the materials for the house with my credit card. Once I did my cash out refinance, i paid my cards off.
How did you add value to the deal?
I added value to the deal by updating and remodeling the entire house.
What was the outcome?
I feel the outcome was as good as expected. I was able to make $8,000 from the cash out refinance as well as generate a monthly income of $950 before the new mortgage note. After the monthly mortgage note, I am left with $433/month.
Lessons learned? Challenges?
The decision to sell it or keep it needs to be made from the jump. That will play into the cost of the quality of materials you will put into the house. Initially I wanted to sell the house but after about 3 months i, I decided to keep it and rent it. Because of that I bought better cabinets and better quality floors as well as light fixtures. It wasn't that bad off budget but it could have been even better of a profit.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I have a mortgage lender that I have dealt with now that I like. They did good for me on my personal house I bought 3 years ago and again on the rent house I just finished with. The lender is American South Financial and the VP of operations is Nathan Braud out of Thibodaux La. If you do business around there, let him know you heard about him from me.
