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PROJECT, before and after photos
The Salisbury Magnolia House is the first Wayfinder Homes fix and flip real estate investment project ever. It was a foreclosure home bought on online auction for way below market value. Read on for details on this project and some before and after photos.
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This was our first purchase of a home off of an online auction. The home had been a foreclosure home and bank-owned property that had been sitting on the market for a really long time. We watched it go on auction over and over and noticed the starting price was dropping each time. We eventually decided to take the plunge and put our bid in. Salisbury, NC is only now getting noticed in the investor world for its affordability and the number of available homes that can be purchased with less competition then around Charlotte, NC.
We initially thought about just flipping the home and we got it under contract for our asking price of $110,000 within 24 hrs of listing it. Our buyers were “pre-qualified” for financing and things were going really well until about a week later we were notified that the buyer’s lender could not finance the deal when it came to underwriting. We put the home back on the market and got another full-price offer within a week.
Once again we were under contract and the same thing happened…I was listening to a couple of Bigger Pockets Podcasts and heard about the BRRRR method (Buy, Renovate, Rent, Refi, Repeat) and thought this property would actually be a perfect candidate to implement this type of method so we switched tactics. We were able to get the home rented out for $950 per month which significantly helped the refi go through quite smoothly and in the end we will be making more cash when we finally do sell vs. just flipping the home.
The BRRRR method was perfect in this scenario because we were able to acquire the home for an affordable price, fix it up, and refi into a buy and hold loan with reasonable rates. We were also able to get some of our cash back out on the refi to start a second project. Using the BRRRR method helped to keep the mortgage low and allows us to cash flow monthly on the higher rent rates.
We not only cash flow monthly, but we are also now able to avoid the high capital gains when we finally do decide to sell, we can take the tax benefits that are tied to buy and hold properties, and we are also building equity over time along with appreciation. Our current renters have since then renewed for another year and the home is currently renting for $1000 per month!
Numbers Breakdown
Here is a break down of the numbers for you geeks (like me) out there:
Final auction purchase price – $42,500
Renovation budget – $35,000
Appraised ARV – $110,000
updated Numbers Breakdown – 8/24/20
We finally decided to sell this property and hopefully take advantage of the market high that we are currently experiencing so we can reinvest some of the capital we have tied up in this property and our efforts paid off. See below for the final numbers breakdown for this property:
Purchase price: $42,500
Renovation cost: $37,000
Rented for 12 months at $950/month and 8 months at $1000/month: Cash flowing around $300/month on average
Sold: $126,500
Total Profit on Sale (not including taxes): $42,000 (Rental income not included)
Total Profit with Average Rent Cash Flow: $42,500 + $6000 = $48,500 Total Profit
