100% Cash on Cash ROI in 92 Days - Duplex in Miami, FL Case Study

[David O.]

7700 - 7702 NE 3rd Ct Miami, FL 33138

Strategy: Value Add Investment / Flip

Acquired 4/12/2016 for $230,000

Mortgage: $161,000 (private hard money lender)

Down payment: $69,000

Sold: 7/14/2016 for $324,000 (92 days after acquisition)

Renovation cost: $5,100

Net Profit (after holding costs, closing costs, and capital expenditures): $81,000

Total Hold Time: 92 days

Cash on Cash ROI: approximately just over 100+% in 92 days; annualized ROI = 396+%

This is a classic example of a small value add deal -- with an amazing ROI -- in the bustling emerging investment neighborhood of Little River in Miami, FL. It may sound hard to believe, but the results can be verified by public records in Miami-Dade County. This is how real estate investing should be done....From an ROI perspective, this was the best transaction we did in 2016.

Moreover, this was an MLS listed property, that we aggressively put under contract within 10 days of being listed on the market. Who says you can't find deals on the MLS? They are out there, you just need to know your market intimately, down to the neighborhood, and be able to strike aggressively when opportunities arise. Remember liquidity, timing, and location is king in real estate.

The Ocon Group acquired this duplex property for $230,000 on 4/12/2016. With an actual living area of 2,500 sq/ft, this equated to only $92/sq/ft. Due to troublesome tenants, we had to put the duplex under contract before going inside of the property. There was no interior photos listed on the MLS, but the exterior showed a great skeleton. To our surprise, during the due diligence period we were allowed to enter the the property and it was in fantastic shape, built in 2008 with modern finishings, no structural issues, and very light cosmetic touchups needed.

There was existing month to month tenants paying only $1,100 / month. Given our market knowledge of the neighborhood, we knew a modern 3/2 apartment with 1250 sq/ft in the area could fetch a modest $1,700 as the market rents ($1.36 sq/ft).

This was a fantastic value add opportunity to raise rents to market value from $1,100 to $1,700, an increase of 54.5% almost immediately. Since we knew there was a large value add opportunity, we decided to take out a hard money loan with a private lender at 70% of the purchase price for $161,000 out of the $230,000 acquisition price, leaving only $69,000 down payment needed to close.

The day after closing, tenants were given a 30 day notice to vacate. Tenants left after 30 days notice (given the high increase in rents) and a two-man crew spent 5 days re-painting the entire apartment top to bottom, installing new lights, pressure cleaning exterior walls and driveway. Also misc expenses such as fixing ice maker in fridge, buying new microwave, etc were needed. In total, only $5100 in "renovation" expenses were spent on total parts, material, and labor.

Units were pre-marketed for $1,700 a month rent during the 30 day notice and renovation period, and new tenants were signed up with year lease, screened, and moved in exactly 9 days after renovation, 39 days after closing. Tenants paid FPL & water (all utilities). We pride ourselves on moving with speed and efficiency, not wasting anytime, in order to capitalize on exceptional ROI opportunities and get the property sold.

****Generally for larger acquisition and investments in Miami, FL (in excess of $2,000,000+ for multfamily properties, we hold for a year and a day (366 days) to qualify as investment capital that can be differed via 1031 exchange by IRS tax rules & reinvested into large acquisitions. Since it was only a duplex, a smaller capital expenditure, and a very large value add opportunity, I knew re-selling quickly would outweigh a holding period of longer than 365 days.

With the new market rents at $1,700 and the duplex now stabilized to reflect market value, the property was listed for sale for $359,000 40 days after closing. I accepted an offer of $324,000 a few weeks later after being listed on the MLS, and the property closed for $324,000 exactly 92 days after closing. The buyer was a real estate investor with a real estate license, however commissions were waived since we sold direct to owner and incorporated into the closing sale price of $324,000.

With an acquisition price of $230,000 & a resale closed price of $324,000, the difference is closing price and resale price was $94,000. With a $69,000 downpayment, $5,100 capital expenditures, holding and closing -- net profits were approximately $81,000 (including negative holding costs from hard money loan) reflecting a cash on cash ROI of approximately just over 100% in a little over 3 months.

Moreover, this was an MLS listed property, that we aggressively put under contract within 10 days of being listed on the market. Who says you can't find deals on the MLS? They are out there, you just need to know your market intimately and be able to strike aggressively when opportunities arise. Liquidity and timing is king. Check out my website www.oconrealestate.com for my current (and past) portfolio.

Note from David Ocon, Principal and Managing Director of the Ocon Group, LLC:

Yes, real estate deals like the one described above are possible to be made and the proof is all there! Granted, this was a great find, executed extremely fast, and everything went smoothly. You must find diamond in the rough properties, know the market numbers extremely well down to the specific area, conduct thorough due diligence, and be aggressive with making offers and executing your planned through a well-thought out and realistic time schedule. Access to great financing relationships, brokers, and agents is also very important.

On a much broader level, what you need to become successful in real estate investing is to become a master of hard work, with a purpose and dedication. As long as you wake up and your mission is the first thing on your mind you’re on the road to greatness. Immerse yourself in everything real estate related. Read books, learn the market, drive around town and analyze trends.

Always stay learning about real estate principles and your market. Think differently and creatively and always see the upside potential when examining a property. Appeal to all your senses. Do not leave out any details when analyzing the potential or upside of a property. The brain is very linear when it comes information. So inputting the image of you making it will help your subconscious bring you there.

Being raised in Miami I encountered a lot of people with great ideas. Everyone was an entrepreneur; they all had their hustle. Only thing is no one ever followed through on his or her hustle. At first they push forward on their ideas: create social media, have a business plan, start collecting a fan base, and then once they hit resistance; they quit. What a lot of people don’t understand is that resistance, solving problems, and adding value is what makes you the money in real estate. You need to push against that resistance until you break through it and become a successful real estate investor.

You must understand that there is someone who is striving to get exactly what you want. The only difference is he or she is waking up an hour earlier and going to be there an hour later. As long as you stay committed to your real estate craft you are on the road to riches. Everybody has to start somewhere.

You need to enjoy real estate as well. Everything from running numbers, scouting properties, building relationships and networking, etc. There’s a difference between job and career. A job is a simple means to an end. A career is something you intend on doing for the rest of your life and you have to slowly start to methodically build it.

Become a master or area expert in a certain niche neighborhood. I pride myself in being a Miami expert in certain areas such as Miami Beach, Little River, Little Haiti, Hialeah, Little Havana, South Miami, Coral Gables, Coconut Grove, Design District, Hialeah, Wynwood, and other investment neighborhood throughout the Miami, FL real estate investment market. The word master may intimidate some but it’s really a state of mind, analysis, and successful executions of dealings. You must understand that if your credibility and knowledge check out no one will compete with the argument that you are a master. You must have a track record, proven results to demonstrate to potential clients / investor / partners.

Moreover, keeping up the the latest real estate trends and market conditions is key. Read from reliable sources, talk to others in the industry and always be willing to learn from others. Keep momentum by taking daily action towards reaching your visualization of making it. This is by far the most important. Without taking daily action then all you have is an idea. Taking daily action makes your work tangible. Daily action plays a use part of having a plan. Without daily action you are just praying for something to happen. You’ll might as well play the lottery.