Flipping during Covid.
Investment Info:
Single-family residence fix & flip investment in Santa Cruz.
Purchase price: $755,000
Cash invested: $1,300,000
Sale price: $1,750,000
Fixing up a house for a flip in January 2021 and the start of Covid in February 2021.
What made you interested in investing in this type of deal?
Opportunity and location. We had no idea Covid would create new challenges.
How did you find this deal and how did you negotiate it?
Local Lender who was going to foreclose on property.
How did you finance this deal?
We bought it for cash and funded repairs with cash. We did end up using local hard money financing to refinance the purchase to use that cash for repairs. All loans were simple interest loans paid back at end of the close of escrow. Monthly Interest charges were booked as holding costs.
How did you add value to the deal?
Complete remodel of SFR house that had been divided into two rental units. We took a look at the neighborhood and put it back to an SFR 3 bedroom 2 bathroom with a big open plan kitchen and living areas that aligned with the neighborhood.
What was the outcome?
Made a net profit of over $450K on sale after paying ourselves back for closing costs and remodel costs and holding costs.
Lessons learned? Challenges?
Doing a flip during Covid had its challenges as the City Government had very limited hours and workdays to approve permits and plans which added about 6 months to our project. The upside was that we held the project for just over a year which allowed us to reduce our short-term capital gains taxes to long-term capital gains.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
We are real estate professionals.
