Description

My First Flip a few years ago… I am a computer systems analyst living in the bay area of northern California and a long-time do-it-yourself remodeler around the house. My interest in real estate investment was recently sparked after the taking the weekend seminar at the local community college.

I hooked up with a real estate agent and began scouring the countryside for a bargain property. We spent numerous hours looking at properties, but nothing seemed to fit. Then finally my agent got word of a potential bargain in nearby Pittsburg, California. It was a 20-year old, one bedroom, one bath, 1,200 square foot ranch with a “Florida room.” The house was vacant and a total mess—junk piled up everywhere, but on closer inpection in needed mostly minor repairs and updates to the kitchen and bath. Best of all, the owner lived in Oregon and was very motivated to sell (gotta love those out of state owners!)

Comparable homes in the neighborhood showed the value would be about $118,000 and $125,000 in top condition. I submitted an offer of $79,000 and it was accepted. Because I had good credit, I was able to get a 95% loan at 9 percent with no points and 30 years fixed. It pays to have good credit and a good banking relationship! Everything was all set—then disaster struck!

A day after closing, a fourth grade vandal broke into the property and had a little fun—to the tune of $7,000 in damages. Ouch! My bank decided they weren’t going to eat these costs, so they went back to the seller who reluctantly agreed to a $10,000 price reduction. So, I ended up closing the deal for $69,000.

Now the fun started—renovating this little palace. Fortunately, I found a great contractor who ended up living at the property until it was ready to put on the market about a month later (yes, he lived there… possibly the best contractor in the history of contractors)

I put $18,000 of my own money into rehabbing it. Interior and exterior paint, new kitchen cabinet fronts, a small microwave, small deck (sizzle items.) New carpet, tub enclosure, new vinyl in bath and kitchen. I replaced the all the broken windows from the vandalism, and put up a 20-foot long, 6-foot high wooden fence to eliminate the path through the property by the school children.

After a couple of false starts with buyers. I signed a contract with a young, first-time home-buying family, and got full value of $125,000. The buyers got a conventional FHA loan and cashed me out of the deal. After closing costs, my check at escrow was, $45,750. Giving me a net profit of $27,000.