Los Angeles, CA · Member since 2014 · 2k+ posts · 515 votes
I just found this forum for "Success Stories."
We purchase a 2.55 Acre Commercial Property that was unwanted for $500.00 total cost to the seller. I send an email to two of our "A List" buyers and sold it for $15K.
To my staff: Thank you so much for your help. I am consistently amazed at your capability and success. Keep up the great work.
Ok... there has got to be more to the story than 'Hey!' I bought property for $500 and sold it for $15K to some A-Listers'
NOTE: I am brand spankin' new, so maybe everybody on this site has the same story, but I feel that there is some parts of the story that need filled in.
We send out thousands of mailers to vacant land owners every month (if you search for "mailer here in BP, you will find that many many seasoned real estate pros do some version of this).
We only target landowners who no longer want the property. They "just want to get rid of it."
In the end we purchase about 1% of the property associated with the mailers we send out:
Steve, Thank you... I get that part.. (marketing). I am curious if the property value is 15K and what not..... It's decent profit (actually spectacular), but is the customer knowledgeable and understands what he purchased.
I'm the guy that purchased a home for 20K, sold it for 80K and only lost 15K on the deal.
To help new investors learn, from my experience, I can suggest the evaluation numbers were a miss. Either After Repair Value (ARV) was off (expected to sell the property for more than 80K in the beginning). I suggest having a good Realtor help you figure ARV to avoid this pit fall. Or repairs were off, (Expected to put much less into the project- unexpected expenses come up on every project). I suggest you have an experienced contractor help you put your repair budget together to avoid this pit fall. These are the two biggest variables. Buyer fees, selling fees and your offer are very predictable.
SUMMARY: Sales Price: $80,000 less Purchase Price: $20,000.00 less Costs to Buy/Repair/Hold/Sell $74,545 = PROJECTED PROFIT $(14,545).
Simply this is how you lose $15K on a deal you buy for $20K and sell for $80K.
Detail on the $74,545. in Costs:
Disclaimer: Some investors have other costs that are not included below (Lender fees, or special inspection items etc.). Some may not have expenses I have listed below (inspection / wholesale fee etc.) So if this investor didn't pay a wholesale fee, maybe his repair costs were 3K more than I have suggested, just move that number to cost of repairs, lender fees, interests or another expense I have not included below.
Costs to Buy:
$3,000 Wholesale fee
$440 Title and recording fees
$300 Inspection
$63K Cost of repairs (remodel, Sewer lines, roofs and mechanical)
$1275 Holding costs for 3 months (Property Taxes, insurance, utilities, not counting cost of cash if they had a loan)
$6530 Selling cost (Broker fees, Title escrow fees, Staging fees)
Every investor should have a deal analyzer spread sheet that they use to evaluate each deal, just plug in your purchase price, ARV and your costs. Your potential profit is then calculated!
I made one in a spread sheet that does most of this for me and it saves me a ton of time.
Great learning experience, I have had contractors off, but not double sorry the cost had to be that high for the education, but now it's time to start making money! Cheers to your next profitable deal!