San Diego, CA Duplex deal looking for partners

[Kevin Yoo]

2 Units on 4044 Cherokee Avenue in City Heights
This is a 2 unit property in City Heights that was approved for $350K. The first unit is 3 bed/1bath rented out at $1250 and the second unit is 2 bed/1 bath at $1100. The larger unit is a Craftsman home in the front that is in bad shape and needs a lot of rehab. The property is zoned for 3 units and it also sits on 2 parcels and could have up to 8 units. We need to close by July 11, 2013. We will need to raise about $360K to close the deal. At the time of the original brief listing on the MLS, there were 41 other offers besides ours with the highest being $450K. We are looking at 3 possible exit strategies in decreasing order of preferences.

1. Wholesale
a. As soon as we close, we will put it back on the market to find a buyer.
b. We should receive multiple offers quickly; anything above $420K will make us a profit.
c. This process should take 60 days if not sooner.
d. The fact the property is zoned for 3 units and has 2 parcels that can actually have 8 units makes this property attractive.
e. This is our most preferred and first option.

2. Fix and Flip
a. If we cannot get a buyer for the property at an acceptable price of over $420K within a month, we will refinance, rehab and sell the property.
b. BNF Enterprises who is a hard money lender in San Diego will fund 75% of the appraised value. Refinancing should take approximately 2 weeks.
c. Half of funds from the refinancing will be returned to the investors except for funds needed for the rehab.
d. This property will need about $100K and 4 months to fix and sell for retail price.
e. The sales price should be about $540K for owner occupant who rents out the other unit.
f. This is our plan B.

3. Buy and Hold as Rental
a. If the market turns and we cannot sell this property, we will raise the rent, rent out to current tenants or new tenants, and hold while we continuously try to sell it.
b. One of the principals of this company will refinance with conventional investor loan.
c. This is the least desirable and worst case scenario third option.
d. This is also the least likely scenario with the current market conditions.