In January of 2005, 4R Management received a call from a person who wanted to earn more, and control her own future. Living in northern Minnesota limited her options for success, but she was undaunted in her quest for success. Hearing about rehabbing she searched the internet and found us. She was nervous, apprehensive, excited, and committed to succeed. After several months, our investor found her first project, a small single family residence having and ARV of $75,000. She calculated the repairs at $4,000 and negotiated a purchase price of $38,000 allowing her to incorporate the points and closing into the loan. Just a few weeks she sold the completed project for $57,000, giving her a $5,450 profit after loan pay off, taxes, insurance, holding, and other expenses. We agree, this doesn’t sound like a big success, well read on.

Our investor learned several things through her first sojourn through the rehab process. Instead using a project bid for rehab contractors, she hired them on an hourly basis. Without an incentive to complete the job quickly, they took more time to complete the rehab process. She estimates this project could have been completed in 60 days, not the 90 days taken. This was a very expensive lesson to say the least.

Here is the most important lesson learned. She did not implement an exit strategy until the rehab was completed and the home was in “show” condition. Had she implemented the Seller Financing exit strategy the property would have sold sixty days instead of 120 days.

So let’s look at her profit margin by cutting off 60 days of the flip cycle. The expenses would be reduced by $5,350 bringing the profit up to $10,800 excluding the potential savings on the hourly rate of the contractors. Now this really sounds like a good success story.

What is our investor up to now? She is in the process of closing on another project with an ARV of $50,000 that she purchased for $5,600 needing $10,000 in rehab costs. She is negotiating a project based contract for the rehab, and will begin the Seller Finance campaign immediately after closing. She still has her full time job, but going to work now is a lot easier. Yes, it is possible to succeed in real estate investing, you just need to be committed to the process and pick the right company to assist in your success. For our northern Minnesota investor we are glad she chose 4R Management, and she is too.