New Construction Flip

[Denny Faircloth]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $369,597
Sale price: $475,000

New construction buyer deported due to expired visa. Company failed to file paperwork in time. Builder took 18 months to build the home so the value had increased significantly. Lender won't lend money to buyer in another country with expired visa and no job. Buyer was going to lose the home and earnest money. Agent doesn't get commission after working with buyer for 2 years. Builder wanted to cancel the contract and find a new buyer at current market prices which were 20-30% higher.

What made you interested in investing in this type of deal?

I could make the buyer whole and help the agent get paid while taking advantage of the rapidly increasing market.

How did you find this deal and how did you negotiate it?

The agent posted in my Facebook group that she needed an investor or hard money lender, so I called her and ask for details. Then solved the problem with a little creativity.

How did you finance this deal?

Cash from a private lender, so I used $0 of my own money. Made the lender a 50/50 equity partner on the deal.

How did you add value to the deal?

The contract was not assignable and builder wouldn't let the buyer change any of the terms of the agreement. We gave the buyer a 0% hard money loan collateralized by the property in under 48 hrs. With some pretty steep penalties if it wasn't paid off in under 2 weeks. The buyer was able to close. The agent got paid. The buyer sold us the home for the full price + some transaction cost, so he got his earnest money back and paid us back with our money. We got the property.

What was the outcome?

I ultimately sold the property for $105K more than I paid for it.

Lessons learned? Challenges?

The builder hadn't completely finished the property but they were forcing buyers to close before the end of the year. So it was challenging getting the builder to do the punch list with urgency since they had been paid. Some teenagers also broke in and vandalized some things which exacerbated the problem. The builder was ultimately responsible until they delivered the finished product. Then we had to wait 90 days post close to accept an FHA buyer, so it took about 5 months to get SOLD.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I'm a realtor and investor so I brought all the experience and knowledge, but couldn't have moved so quickly without my private lender, who wired all the funds in under 48 hrs with now contract in place. It pays to build relationships.