The year was 2015, and I was looking for a rental for myself and two of my college best friends, Sarah and Andrew. Sarah was self-employed, and we were honestly having trouble proving the income requirements for most rentals. As I was applying for another rental, my thinking began to shift to, "Why don't I just buy a house instead?" Not one to let minor details get in my way, I decided to engage with an agent and, in parallel, see if I could find us all a place to live.
I toured a few homes with a large group of people usually, fired my first agent, and eventually set my eyes on what could only be considered a fixer-upper. It was owned by Housing and Urban Development (HUD) and had been previously foreclosed on. It had no utilities (gas, water, or electric) currently turned on due to the fact that it was vacant. It was built in 1962, which was probably the last time it was updated. Yellow appliances, yellow floral wallpaper, pink and green porcelain tubs, and some nasty carpet all came standard, but we toured it a few times and it dawned on me that we never needed to turn on a light because of the 7-foot x 13-foot windows in the front room. I started to see it! I could see the house in its final form and, since I was a construction project manager at the time, I thought it might be easy to renovate (spoiler: I was wrong).
So I did it! I put in an offer. Houses owned by HUD don't have a person you can negotiate with. There is literally an auction-style website where you make an offer and then you get an automatic email that either accepts or denies your offer. We offered $120,000 - Denied. $125,000 - Denied. $130,000 - Denied. $135,000 - Denied. $140,000. Accepted! Wow. $140,000 for a house that is less than 2 miles from the center of Downtown Raleigh seems crazy by today's standards. To make things a little more complicated, I was using a first-time homebuyer 3.5% down FHA loan on a HUD foreclosure with a 203(k) rehab loan. My agent said the paperwork for this deal was 3x the normal, but they got it done!
Long story short, renovations were more expensive than expected and took longer. I was about 30 days out from being 100% out of money, but we finished just in time, and my friends were able to move in (without proving income). My basis was about $165,000, and the rents paid for the entire monthly holding cost. It turned out beautiful despite some first-time renovation mistakes (dyed ocean blue concrete floors in a new bathroom). I moved to Colorado a year and a half later and sold the property for $225,000 and consider this my first home and flip. It almost ruined me! But I leveraged my skills and 100% of my paltry $15,000 in savings to make it work. You can do it too! You might feel overwhelmed, underfunded, and overworked, but I've done this before and am ready to help. Let's connect soon about how I can help make your real estate dreams a reality.
