I love success stories. And I particularly love this success story of my client, Travis; he is one of the most thoughtful and honorable people I know. And that is a big reason why I want to share his success story with you.
A military veteran who served in the Middle East, I first met Travis through a mutual business acquaintance. At the time, the three of us were contemplating a real estate joint venture. After considering it, Travis decided not to move forward with it due to the risk. When informing us that he wasn’t going to participate, he said “I earned most of the money I have from my own sweat and blood so I want to be careful how I invest it.” I don’t think Travis meant this statement to be profound, but it resonated deeply with me. From brief comments he made when I asked about his active duty experiences, I know his statement was literal. Soon afterward, Travis asked me to be his real estate agent to help find him his first “fix and flip” opportunity. It is always an honor to have people ask me to help them achieve their real estate goals. But I found it very special to have Travis ask me to help him invest the money he earned while risking his life while serving our country.
One thing that was unique about Travis compared to my other clients was that he was viewing this process as an opportunity to invest in himself. He wanted to make a profit on his first “fix and flip” but his main motivation was to gain the knowledge by doing the rehab himself. “I won’t mind losing $5 or $10k; I just want to learn as much as I can.”
Fixer Opportunity Found But. . . . Cash Only Buyers?
After a couple months of searching, a potential “fixer upper” opportunity came on the market in Ewa Beach, O’ahu. It was a vacant and distressed property (short sale). At some point, people broke into the property and broke windows, put holes in the wall, and overall left the unit in disrepair. As a result, the owner removed all the bedroom and closet doors and used them to cover the windows and sliding door to the lanai. So for someone going into his first “fix and flip,” this was going to be quite an undertaking. However, the asking price was attractive and Travis believed he could do the work necessary to get it into “turn key” condition so he decided to make an offer. There were two hurdles we had to overcome in order to get his offer selected. First, the seller wanted all cash. Secondly, we had competition.
To try and overcome the first hurdle, I referred Travis to a lender that I’d personally used in the past. This lender can usually fund a transaction within 14 days and is comfortable financing “rehab” properties. For the second hurdle, he obviously had to submit the most attractive offer and I had to convince the listing agent a financing contingent offer could work. Several days after he submitted an offer, he was in escrow with 14 days to close once the short sale was approved.
Rehabbing and Reselling
Years ago I learned that when planning and budgeting a construction project (as well as many other things in life), it is best to expect the unexpected. Create your budget and add a bunch to it for a safety net. Fortunately for Travis, there were few surprises to his rehab project and none of them costly. Not everything went as planned, but when a challenge arose, Travis had great focus and would quickly come up with a workable solution. Lessons were indeed learned and much knowledge was gained. There were several times I’d see him and he’d tell me he was held up while he figured out a solution to a problem. The next time I’d visit the property, I’d find that he had conquered the problem and was on to his next task. The most memorable one was with the window frames. They had been damaged when the home had been broken into. When we first saw them, we weren’t sure if they could be fixed. However, one day I visited the property and was greatly surprised to see they looked almost brand new.
Despite no major surprises, the rehab project did take longer than expected. But finally, the day came when Travis was ready to list the property for sale. At the time, the market was quite strong in Ewa and I was highly confident Travis was going to receive multiple offers. And wow, indeed he did. The market response exceeded both our expectations. We received some offers nearly $90k higher than any other 3 bedroom unit that had previously sold in the community. Travis ended up selecting a “cash contingent” offer. It was not the highest priced offer, but by being a cash offer, we did not have to worry about an appraisal and I thought it gave Travis the best chance to net the highest net proceeds.
Patience Pays Off and Proving Doubters Wrong
Per terms of the contract, the transaction was supposed to close within 30 days. However, about 10 days prior to the scheduled closing, the buyer’s agent utilized an optional 14-day unilateral extension. Turns out the buyer of the home our buyer was trying to sell was having trouble getting loan approval and “just needed a little more time.” The short version (of a long, and at times stressful story) is it took a total of 4 extensions and 77 days to finally close. During that time, the buyer agreed to make her earnest money non-refundable and also pay Travis a daily fee until the transaction closed. Although the delay was stressful, it was well worth it. In the end, the selling price of his remodeled unit was almost 22% more than any other 3 bedroom unit in the community. It even had a higher selling price than a 4 bedroom, 2 bath unit in the community that had recently sold and was almost 500 sq. ft larger.
Obviously Travis was delighted and I was elated as well for several reasons. First, Travis had achieved his goal by learning a tremendous amount throughout this process. Secondly, he was financially rewarded for his hard work. This was all the more satisfying as early on, people in his sphere had told him he was making a mistake trying to rehab a property himself with no experience. It was wonderful to see the courage and belief that Travis had in himself paid off in spades. Lastly, and most importantly to me, I had a client relationship turn into a friendship. A successful transaction indeed.
The Biggest Lesson Learned?
When I asked Travis, what was the biggest lesson he learned from his first “fix and flip” project. He answered: “Never give up. Stick with it. Keep at it until you find a way to overcome the challenge.” Persevere. That is what Travis did and it was an inspiration to see. Bravo Travis!