Investment Info:
Single-family residence fix & flip investment in Del City.
Purchase price: $41,000
Cash invested: $53,000
Sale price: $159,000
This house was a fire damaged property that was originally a 4 bed, 2 bath, 2 car garage purchased for $41,000. An additional master bedroom and master bath were added over the garage to add value. A wall was also taken out of the living room to create an open floor plan. The house was given a modern farmhouse look to appeal to the high demand for urban farmhouse type properties in this market. It sold for more than the asking price in under two days.
What made you interested in investing in this type of deal?
After spending several month reading and watching videos I knew I just needed to jump in. At the time I still thought investing meant fix and flips. I come from a construction background and knew how to do all the work myself. I did not have a lot of my own money to put into a property but I understood the concept of leverage. After talking to several banks I knew I could get a construction loan for 20% down and they would pay for construction costs up to 80% of ARV. So it only took $8200 to buy
How did you find this deal and how did you negotiate it?
I actually found this property on the MLS. The property had sat vacant for a couple of months while the insurance company did their thing. When I saw the listing, the owner was just trying to get a little more money out of the house because insurance would not pay full replacement of damages. The property was originally listed at $45,000 and being inexperienced I just thought "It would be cool if I got $4000 off" so I made the offer.
How did you finance this deal?
After talking to over 9 banks (not kidding), I finally found a small local bank that would finance a fire damaged property. I used a construction loan that was 20% down on sales price and they would fund 100% of construction up to 80% of the after repair value.
How did you add value to the deal?
The entire house was a complete gut and rehab. All windows, electric, plumbing, and HVAC replaced. The fire started in a small mechanical closet over the garage. Since the roof was burnt through and needed replaced anyways, an additional 250sqft master bed and bath was added over the now open garage area. (the decision to add the bed/bath was made mid construction) The exterior was updated with new siding a cedar trimmed porch.
What was the outcome?
After a long and hard nine months of working a full-time job and renovating the property, it finally paid off. After selling the property I walked away with over $60,000 but much more than that in knowledge and experience. The contacts that I was able to make during that one property is already paying off. I would NEVER do a complete rehab by myself again but at least it got me started in real estate.
Lessons learned? Challenges?
NEVER give up and NEVER take No for an answer. There were over a dozen times I thought I was done for before I even got started. Over 9 banks said they won't even look at it because of the fire damage. The property had a clouded title and the title company said I couldn't buy it. The HVAC guy screwed up and the inspector said he wouldn't pass it with a complete redo. The bank wouldn't extend my loan. NO NO NO is all I heard the entire project but I pressed on and found a way. Just don't give up.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
If you are in the OKC metro area and are looking for an investor-friendly realtor check out Chance Daggs with Right Way Realty. The guy is freakin amazing.
