I Have a Potential Deal I Just Need Capital and Some Guidance!

[Matthew W Croulet]

Hello, BiggerPockets!

I'm 19 and currently a university student majoring in finance. I actively listen to every BP podcast I can listen to and about one third through "The Flipping Houses" book by J Scott. The reason why I want to get into flipping is mainly is to gain experience on how to deal with GC's and managing budgets on deals. So that way in the near future when I go into the commercial world of real estate, I will have some experience.

Enough about me back to the deal. So I was searching around for deals and saw the deal, and it was listed for 480k. I was interested looked at the pictures, and it looks like a real fixer-upper but not too bad but manageable with the right team. So I decided to call the wholesaler, and I was meet I no longer have the property. I was bummed out, but then I decided to search the address online and saw a realtor listed it for 600k. I forgot to mention that this property is foreclosed and looks vacant. So I started to do some number crunching, and I was thinking of using hard money loan to try and finance the deal but quickly found out as a college student making about 3-4k depending on sales on my e-commerce store that I was not going to be able to afford the monthly payments for just the interest alone. So I was wondering how I am going to find capital to finance the deal. So I went to a local real estate meeting asked the presenter who if he would be interested in such a contract and he said that he does not do flips that large. So tonight I went to another meeting, and this time it was new investors who have not done a deal. The presenter was a young man like myself, and he was a wholesaler, but he did not possess the capital to take on this type of deal. As I was driving home still looking for that investor, a light bulb went off in my head "where can I ask a community full of investors for capital or atleast point me in the direction of finding it." So here I'm writing this long post, and I hope I can find some help here. Some numbers for the deal and general location. 

Location: South Palm Beach County and North Broward County Florida. The reason why I'm giving a general area is cause I don't want the deal to get sniped. 

Status: Foreclosure listed by a realtor provided by the bank. So the lender is selling it. 

Listing price: 609k before they were willing to wholesale it for 480k or something less than that as the wholesaler makes his cut from the transaction. I think we can negotiate it down with the lender knowing this, especially if it is a cash offer. 

Bedrooms: 6 

Bathrooms: 4

Square footage: 3952

with a garage. 

Condition: Looks like it needs roof repairs and some new walls or repairs to walls. Possible mold. These are from photos I can see from the listing I have yet to visit it. 

Year built: 1980-1985

Possible ARV: 820k. These are some rough calculation and do not take it to heart.

Comp property: 1 

Condition: Unknown

Bedroom: 4 

Bathroom: 3

Sold for: $815,000 

Sold: within one month. 

Square footage: 3,064

Price SQ: 265.99

Comp property: 2

This is the closest property in terms of rooms and size. 

Condition: Unknown

Bedrooms: 6

Bathroom: 4

Sq: 4238

Price sold: $890,000

Price SQ: 210.55

Date of sale: Four months ago. 

Comp property : 3 

Date of sale: 2-3 months ago. 

Condition: Clean (looks nice inside)

Bedroom: 5

Bathroom: 7.5

Square footage: 5,820

Price per square feet: $150

Calculation: 

150+210.55+265.99=625.54/3=208.85

Now, these are very rough estimates. 

Now did not account closing costs: which around 5%.

Also holding or opportunity costs associated. 

Also, rehab costs: Now, I'm not familiar with calculating costs. I would say around 60-80k

Those are all the numbers I have right now. Please let me know if it is a good deal or not. I was going to try and negotiate around 500-550k on this property. 

How I would like to position the deal equity wise is 10-20 percent equity, and I shadow you as you go along this process. You do not have to mentor me or anything of that sort; I will sit and watch and take notes and help with the project any way I can. That is if someone is interested in doing the deal with me or knows someone who would be interested.  

Lastly, I do appreciate you reading this if you have. Also, any advice would greatly be appreciated. I'm not one to think about doing something I have a "just do it" mentality, and that is what I think it takes to be successful in these United States. 

Edit: I would also be open to doing all the work and dealing with the rehab for a 50-50 split. 

[David Collier Jr]

Hey @Matthew W Croulet, first of all good on you for thinking the way you do at such a young age and putting in the time to educate yourself. I bought my first biz at 21 and have been self employed ever since. Stay the course. Always be learning. Dive into self education and self improvement constantly and stay fit. "Your level of success will seldom exceed your level of personal development." 

What I wanted to add is that the reno budget of $50-60k seems very low for such a large property. To put it into perspective I am finishing up a remodel on one side of a duplex, 3/2 1200sqft, and i'll be $50k in when completed. It goes fast especially considering roof repairs and mold. Im in insurance and there is good reason many carriers limit mold remediation coverage to $10k. It is EXPENSIVE. 

3,900 sqft is a large home. To do things such as paint/landscape/flooring etc the cost goes up exponentially with larger properties. Also, the property has been sitting and like boats, the longer they sit, the more repairs they need. Any unexpected repairs on a prop that size can translate into big spends. 

I agree with @Jim Goebel on the base hit versus grand slam. A smaller deal can still teach you a ton and offer a great return without the high risk. More important than a monetary return can be the lessons learned, especially at a young age. Also keep in mind that if you found the property so did many seasoned pros (especially if it was with a wholesaler, is now listed with a Realtor and on foreclosure lists). There is probably a good reason it was not snatched up.