I love to invest in low cost, internationally diversified, index funds (more or that later). That is where the bulk of my money resides. That said, I am always open to diversifying my investments beyond index funds. Last year I decided to purchase my first house flip property. There are many ways to find houses that are suitable for a fix and flip. Options include:
- Public foreclosure sales
- Bank owned properties (REO – real estate owned)
- HUD owned properties (www.hudhomestore.com)
- Online auctions (www.auction.com)
- Multiple Listing Service (MLS)
- Finding distressed properties through a direct mail program (I’ll discuss this in a future post)
I found a single family residence with an as-completed value of approximately $136,000 available at foreclosure for approximately $57,000. I chose not to bid at the initial foreclosure sale at the courthouse. I wanted to see how many parties were interested in the purchase before I jumped in. In North Carolina, where I live, you have ten (10) days from the initial foreclosure sale to put in an “upset bid”. The upset bid minimum if 5% above the original price. I made an offer 5% above the bank’s opening bid and ten (10) days later I was notified that I won the bid!
The remodel went really well for the most part. I learned a lot about job scheduling and working with contractors along the way. One of the biggest risks of purchasing a home from foreclosure, as opposed to the other options listed above, is that you generally don’t have an opportunity to see the inside of the property before you purchase … in other words you buy it “as is”. To say the least, I had a few surprises when my inspector went through the house after closing. That said, the house turned out great!
After finding success in purchasing and renovating the property, I failed to select the right realtor. I decided to hire my business partner’s relative. To make a long story short, she turned out to be a part time realtor, part time aerobics instructor, and part time stay at home mom. In spite of that, we had a lot of interest in the property. I turned down several offers in an effort to be patient with my investment. Looking back, I should have accepted those early offers. After switching to a full-time, full service realtor, I learned more about the proper pricing in the area and adjusted my expectations.
Well today, 1 1/2 months later, I signed a contract at full price! I am excited to have my first project completed and under contract, and I am looking forward to closing this one out. Most of all, I am so happy to have a made a profit on my first deal. Armed with the education I earned on this one, I look forward to starting another one this Spring.
I’ll keep you posted!