Cove Court Rehab-Phase 1

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REO Gem!

Flip On The Water!

Allow me to introduce Cove Court, my most recent rehab-a flip project on the water in Discovery Bay CA. This house is a 3 bedroom, 2 bathroom, 1800 square foot home with a large deck in the back leading to a private covered boat dock. The house is on the Delta river and has a 2 car garage, fireplace, breakfast bar, 3 storage sheds, and a master suite.

I acquired the house through the local MLS as it was REO (Real Estate Owned by the bank after a foreclosure) The property was listed for 500k as is. In the home’s present condition, it was not eligible to be purchased with financing and needed an all cash offer. This kept other investors away because of the large amount of capital needed to purchase. A house across the street (same floor plan) with a shared dock and zero upgrades was listed for 640k. With summertime approaching and this area being very popular during the summer, I estimated my After Repairs Value (ARV) to be in the 625-675k range with full upgrades.

The house was purchased by pooling my funds with another investor. After several counters, the bank accepted my offer of 485k. Upon closing, I met with my contractor and we determined the total rehab costs to be in the 40-45k range.

Installing brand new cabinets in the kitchen, laundry room, and bathrooms.
New flooring throughout house.
Deck restoration
Dock repair and new cover added
Rebuilt showers in both bathrooms
Granite countertops in kitchen and both bathrooms
Rock added to indoor fireplace
Repainting of interior and exterior
Landscaping
New doors throughout house
Recessed lighting added in kitchen, bathrooms, and family room.
French doors added to one bedroom
New stainless steel appliances and sink
New lighting fixtures and fans
Blinds, drapes and window fixtures
New bathroom fixtures and mirrors
Rainfall shower head and traditional shower head installed in master bathroom shower
Repair exterior dry rot

As far as my exit strategy, I am currently evaluating three different options:

  1. Sell the house as a flip
  2. Keep the house and rent it out on AirBnB, VRBO, or Homeway.
  3. Move into the house, sell my current residence, and live in the rehab for two years before I sell to avoid capital gains taxes.

This is an exciting project and one of the first times I have ripped a perfectly functioning house apart in order to upgrade it completely. The project has potential to make good money as a flip or as a rental property and I feel good about my range of options moving forward. In addition to securing the property, I was able to develop a relationship with the listing agent where he now knows I buy distressed property and will hopefully get more deals from him in the future.

Be sure to keep an eye out for the next edition of the Greene Investments Newsletter were I will share more detail on the demolition, materials chosen for the renovation, potential issues, and more!

Have any suggestions, questions, or info to share? Feel free to ask them in the comments section below.

Takeaway tips

  • Make relationships with people who can help you achieve your goals, in this case, the realtor selling the house.
  • Pool minds with other experienced investors to help you come up with solutions you wouldn’t have found on your own.
  • Don’t forget the MLS can still produce deals too!
  • Look for value others will miss.
  • Consider multiple exit strategies to mitigate your exposure to risk
  • Never underestimate the power of an all cash offer!
  • Don’t forget to shop for deals in your own backyard.
  • The time of year matters. Selling a home with access to the water in the summer time is a huge plus. Selling your home during a time when home buying activity is increasing is always a big plus.
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David is a real estate investor/agent/author/entrepreneur/police officer in the CA SF Bay Area. David's goal is to achieve total financial independence through real estate and to help as many others do so as possible. When not hunting bad guys, he hunts deals and loves talking real estate. To learn more about David, visit his website where you can also sign into his free investor's newsletter and follow along as he walks you through his deals and shares his latest projects.

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