There was a Meth Lab in my neighborhood that got busted by the Police. I contacted the Owner, and after he spent a year arguing with the Insurance Company, and finally got them to pay $20,000 to have it cleaned up/certified as safe to live in and free to resale. This was a perfect distressed property and distressed owner situation in a decent neighborhood to jump all over.
What went right was that I bought it on July 2, 2009, and on October 7, 2009, I closed the deal. The deal being my sale of the Distressed House to an Owner-Occupant for a profit of $35,000.
Let us back up. My name is Matt Seidel. In my investing experience, I have flipped & rehabbed a few homes, done a wholesale deal, and I own several rental properties. One time I bought a condo at an Auction for $27,500 that previously sold for $107,000, and it came with a Tenant paying $565 and needed NO Repairs. Equally as important is that I am a Realtor, so I have been involved in a lot of residential deals that my clients were doing. I even successfully listed and sold an Apartment Complex in 78703 last year for 900k.
Ok now that you know a little about me, let me explain how working with this distressed owner and home landed me a cool $35K profit.
I was in and out 95 days total from the day of purchase, all the way through remodel, and resale, and closing. That is pretty darn good. My Hard Money Lender and I put the After Repair Value (ARV) at $190,000.
Yes, you read that right. I got a Hard Money Loan at 13% with Interest-Only Payments of $1,192 a Month.
I purchased it for $80,000 from the distressed seller, it was after all a former Meth Lab, and he was motivated. Turned around and took out a Hard Money Loan for $110,000. They took my 5% fee out of that, and I used the rest to rehab the property.
I also ended up spending an additional $5,000 of my own cash to finish up the House the way I wanted to finish it, which was very High-End. I did real wood floors, tile in baths & kitchen, carpet in bedrooms, granite slab counters in kitchen, and both baths. Custom maple cabinetry throughout, new tubs, toilets, paint, baseboards, sinks, upgraded plumbing & lighting fixtures, new exterior doors and new stainless steel appliances rounded out the complete rehab.
Here were my 5 Steps to Profits:
1. Located Distressed Single-Family Home (Austin)
2. Bought for $80,000.
3. Took Hard Money Loan for $110,000.
4. Spent the $30,000 on the Remodel.
5. Sold for $172,000 — Real Profit was $35,000.
All was not smooth sailing. What went wrong was that at one point, when my Tile Guy was busy, I had some idiots do the tile surrounds in the baths, and they totally did it wrong and it looked like crap. They also chipped both of my new tubs, which I then had to have refinished for $300 each. In addition, of course, I had to pay my Tile Guy extra to tear out what they did and do it over, correctly.
The great thing was that I had a rehab flip completed in 3 months, and I used Hard Money to buy it and remodel it. It was awesome!