1st Flip Turned 47k Profit!
Investment Info:
Small multi-family (2-4 units) fix & flip investment in New Britain.
Purchase price: $130,000
Cash invested: $30,000
Sale price: $270,000
@Rachael Agruso and I purchased a foreclosed 3 family house for 130k. Rehab budget was 50k, ARV was 275k. Financed with hard money. We originally attempted to BRRRR this property, but ended up flipping it.
After our full renovation we went 16k over budget. Our holding costs were $6600. It took about 6 months from purchase to sale. We sold for 270k, 5k less than asking.
Total profit (pre tax): 47k
What made you interested in investing in this type of deal?
We saw the new listing, knew the area well and wanted to BRRRR a property. The numbers seemed like they would work. However, after receiving an initial appraisal (projected value) we started to question BRRRR'ing it. The appraisal came in 40k below the expected ARV - but we knew we could sell for much higher. At that point we decided this would work better as a flip.
How did you find this deal and how did you negotiate it?
Foreclosure on the MLS- offered 12k over asking
How did you finance this deal?
We used a hard money lender. They financed 85% LTV on the purchase and 100% of the rehab.
Interest only payment of 9.99% 12 month no pre payment penalty, 2.25 pts
How did you add value to the deal?
- 3 new kitchens (cabinets, counter tops, appliances)
- 3 new bathrooms (flooring, vanities, toilets, bathtub surround)
- Refinish 1500 sq ft of hardwoods
- restructure garage
- new roof
- replace furnace, service 2 other furnaces
- replace 27 windows
- replace kitchen and bathroom flooring (Home Decorations LVP Flooring)
- paint walls, ceilings, trim (Sherman Williams Agreeable Grey)
Leased out 2/3 units showing a total income of $2090. Left 1 unit vacant for possible owner occupant buyer.
What was the outcome?
We ended up going 16k over budget but still turned a 47k profit pre tax on our first flip.
Lessons learned? Challenges?
Lesson learned... have everything in writing with your contractor. There were multiple times when he would come back for more money after not estimating well enough.
Lesson #2 learned: don't waste time trying to sell your property off market. We had monthly interest only payments to make so each week that dragged by was more $$ out of our pocket. After listing, it lasted 3 days on the market. Dealing with contractors was our biggest challenge. We will vet our next contractor better.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I sold the house as I am a licensed realtor.
