Example real estate deal we did in Edgewater FL.
- Nov 6, 2017
- 3 min read
This deal is meant to show the power of finding a good investment for our investors money, and having the money work for us and our investors.
Sagy and I started investing in the US back in 2013. After learning by doing a few deals, we decided to go and learn from Robert Shemin, one of the best residential real estate investors in the world. In our opinion he is the best.
We learned a lot from Robert and his trainers about building a great team in the US local real estate area we chose to invest in, and having them help us find good deals.
We only invest in non crime zone areas, and focus on buy fix and sell deals like the one described below.
Real estate has 3 important numbers to check before any deal.
#1 Purchase price - or how much can we buy the house for?
#2 Repair and holding costs - how much does it cost to rehab the house according to the area we chose to invest in? The more bids we get from local referred contractors we can get a better picture of cost of the repairs and make a decision. Holding expenses are power and utility bills and property tax, also other costs like lawn care are added here etc...
#3 After Repair Value (ARV) - what is the potential value of the house if rehabbed according to #2 ? This we check with local experts like realtors who sell a lot in the area or other active investors in the area (We should subtract about 9% from sell price which are closing costs).
307 Edith st, Edgewater FL 32132
This deal is in a middle income area area with home buyers looking to buy houses, and not a crime zone. According to the 3 numbers explained above we will analyze the deal here:
#1 we were able to get the house after negotiations at the price of $67.5K.
#2 We got 2 repair bids one bid from a licensed contractor and one bid from a licensed handyman. One bid was at the price of $19K and the other was $21K pretty close in numbers and included almost the same list of items in the rehab.
Both bids were with appliances included.
Holding costs through out the investment period were $2k.
Total cost of Rehab + Holding is $21K.
#3 We consulted with local realtors who sell in the area and got to the conclusion that the house could sell for $115K, according to similar properties sold in the area in the last 90 days.
Here is what actually happened
So let's review the deal:
#1 Purchase price $67.5K
#2 Rehab + Holding costs $21K
#3 Potential Sell Price $121K
Since prices are moving up in the US now, we were able to make extra $6k in the 6 months that we owned the property.
Now let's calculate the profit:
Purchase + rehab = $89.5K
Sell price $121K
Closing costs $10.5K ~ 8.7% of sell price, this include the realtor commission and title company closing costs.
We got $110.5k from sale after expenses.
Minus our investment costs it leaves us with profit of $22k ~ 24% return on investment (ROI) in 7 months.
Of course we split the profit with the investors, however I don't know of other tools which can make such profit and still be considered solid investments (Banks loan money on Real Estate).
To finish this article I am attaching the pictures of the rehabbed property.
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