Hi fellow BPers -
I'm so excited about my first rehab deal I just have to share.
Last Monday a colleague approached me with a potential deal - a SFR, 3/2 about 30 miles from where I live. ARV of 180k, Purchase price of 113k, with about 20k in repairs needed. I was interested, but didn't have 113k (plus the 3.5k assignment fee she was looking for) to buy the property. But hey - find the deal and the money will follow, right?
Well it's better than that. The seller only owed about 93k on the existing mortgage. The colleague who wanted to sell me the deal had negotiated a "subject to" purchase, where I'd only need to come in with 25k to close, with the seller netting 20k. The other 5k went toward closing costs because I asked the colleague to partner with me (so no assignment fee). She agreed to do so because she lives closer to the property and has a ton of experience running rehab deals. The deal was I fund the purchase and the rehab and my partner runs the whole thing, with me supporting and learning as I can (I still work a full time W2). We split the profits 50/50 on the back end after I fully recoup my purchase and rehab investment.
Well - I also didn't have 25k in cash to put down, so I called my bank. On the spot they gave me a signature loan at 25k. (Keep your credit score and relationship with the bank strong, people!) For rehab funds I presented an offer to some family members to borrow 15k at terms which will all be paid in full at settlement.
We closed just last Friday (6 days ago!) The attorney created a land trust for the seller and we bought the interest in the trust 50/50. Since Friday we've completed demo work, replaced a floor joist, and removed an ugly and useless wall (other than being load-bearing, that is) to open the floor plan. Supporting beams were put in place and the home is really coming together now!
We may even already have a buyer. The original ARV was estimated to be 180k, but upon further review of the comps and our planned work we are looking at more like a 200k ARV based on going with a 26k rehab instead of a 20k rehab. The interested buyer is dying to get inside to see the property so we are working on getting drywall up this week and get moving on the paint and cabinets ASAP.
So - here's the bottom line:
ARV - 200k
Purchase price (sub2) - 113k
Repair costs - 26k
Total "in" the deal - 139k
Potential profit after disposition costs (closing, commission, etc):
A whopping $41,000!
(Estimated based on a very rough 10% disposition cost) to split 50/50. That's a clean ~20k of profit for me for just being able to take action and find a solution that works for everyone all-around!
Total cash from me, out of pocket will end up being about 9k, because of the fact that I was lucky enough to have been saving for a bit to prepare for an opportunity like this (and didn't want to pay more in interest than I needed to). I also only had 4 days until closing to take advantage of the opportunity and find the cash!
So 9k out of pocket to make 20k in profit over a 2 month project isn't bad at all!
My eternal thanks to you, Bigger Pockets, for being part of what is making this possible for me and my family. The information I've found here on the site, through the podcasts, and through books like J. Scott's Book on Flipping Houses has been invaluable and essential not only in learning the fundamentals, but helping me get over the hump and getting out there and making it happen!
About the project -
We're two weeks ahead of schedule and so far everything is looking great!
Check out our progress in the photo album at the link in my signature.
Thank you all,
Congratulation's on taking action Jay!
Thanks, @Vince Beusan !
I'll be sure to post updates here as we get closer to finishing up the project and closing it out.
This deal defines Creative Real Estate at its best. Syndication, Loans, JV, Notes, rehabs, etc... good stuff keep us updated.
@Jay Sebastian Way to Go Jay! Keep up great work. You put a great deal together. Tom
@Jay Sebastian congratulations!!!! Awesome work in putting it all together.
Congrats Jay! Awesome way to put the deal together.
Congrats! Looking forward to seeing the progress in the next photos.
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