Looking for possible partner or investor

[Tony Gatto]

Hi there everyone,

I am hoping to get some feedback on a situation we are finding ourselves in. So here goes…we are in the Myrtle Beach area and are getting back into fixing and flipping houses. (We have lived overseas for the last few years after our last fix and flip in 2007.) Even though we have great credit, we are not finding banks that want to lend money.

We have a home that we would like to fix and flip. Here are the details:

We found this home when we were actually looking at the one next door. The house is vacant. We looked it up through a tax search and wrote a letter to the owner who lives a few hours away. He called us and was willing to negotiate with us in order to get out from under the property.

Purchase price is $27,000 ($25,000 is what is left on the mortgage and $2,000 to the owner)

The good:

No termites

Brick exterior

Solid foundation

Solid sub-floor

It is a 3 bedroom / 2 bath

Conway SC in a good community near CCU and close to the Myrtle Beach and the ocean

Cabinets are in place

The heating system looks to be good, but cannot test without power to the home

The plumbing looks ok , but will need to be pressure tested for leaks.

Nice palm tree in front yard

I can and will do all the work

The Bad:

The house has been vacant for 4 years with no maintenance having been done to upkeep it.

They enclosed the carport, however, the wood door and surround area has been completely destroyed as there were people trying to get into the house.We will make it back into a carport and remove the nasty wood “walls". Others in the area have converted these into square footage for the home.

There is a small roof hole on the back over hang (gable end) will have to be patched

Yard needs cleaning up (Big tree fell down).

All new flooring is needed .

The cabinets will be painted and a new counter added

4 new lower window sashes

New window for the side entrance door

New shower needs to be added as previous owner ripped out tub and made it a closet. No typo there.

Heating / Cooling system may need to be replaced. I do HVAC work but with no power to the house I am not sure if I will need to add that to the pricing structure at this point, so i added it anyway.

Popcorn ceilings need to be scraped and finished/painted.

Lighting fixtures might need to be changed

Trim has to be removed, painted ,and then extended to make it a bit taller

The owner says that the title has no liens on it and that he only owes 25k on the home. He is sending me his final payout information for exact number as I am writing this. He is living in another county about 4 hours away and has no time to deal with the house. So here are the numbers

Acquisition – $27,000

Closing - $500

Counter top -$300 (non-granite as the neighborhood does not have any granite tops) was thinking of getting the fx counter-tops that look exactly like granite though

Paint cabinets -$100 (I have a Wagner power sprayer)

Roof repair -$700

Side door window - $100

All Flooring - $3,000

Drywall - $50

Install new shower - $500

Plumbing set aside - $300

Windows set aside - $640 – I set aside enough for new vinyl replacement windows, however, I would rather repair the wood sash on the wooden windows.

New Condenser - $600 – Not sure if this is needed ,but I worked it into the price anyway to cover myself.

Inside trim extensions - $100

Interior paint - $150

Total acquisition and repairs - $34,040

10% holding costs and overruns - $3,500

Total- $37,540.00- This is a very conservative number, in my opinion.

Comps of homes in the area are $64,000

Total profit should be around $24,460 and a lolly pop.

Exit strategy is to have signs in the front yard and entrance to the subdivision as soon as we start work to stimulate interest. This property has been an eyesore for a long time and the work will draw tremendous attention by the neighbors who can help spread the word. Sell the property a bit lower than the comps say at around $62,000.

I will also start advertising right away in craigslist and local paper.

Second exit strategy is to hold the mortgage with $10,000 down and 9% to 12% rate. The price of the home can be raised to $79,000 using this method. Make a balloon note for 1 or 2 years and require the new owner to get a bank loan to pay off the note.(These are working really well in the area).

Third exit strategy is the same as the second but instead of waiting for the note to pay offit can sell to aninvestor who buys notes.

What we are looking for is someone to finance the deal. I have two options on this home, I can

1-Wholesale the home and bank 6 or 7 k

2-Fix and flip. Which I would rather do to get another f&f under my belt and build a rapport with an investor. This also gives me more profit then a wholesale.

Okay. I am ready for any and all questions and suggestions. Feel free to contact me here, via email or even phone if you like.PM for phone number and my email is [email protected]

Tony