Valley Glen, CA Development Deal

[Will Barnard]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $565,000
Cash invested: $340,000
Sale price: $1,000,000

Original home was a 2 bed, 1 bath 713 SF with a 1 car garage. We demolished much of the original home and then designed and built a new 2,269 SF modern home with an attached 2 car garage. We went over budget due to the materials going up dramatically due to the trade wars and also had city and utility company delays which extended our hold time.

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

This is what we do day in and day out.

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

From a trusted wholesaler.

How did you finance this deal?

From my network of private investors as we do on almost all of our deals.

How did you add value to the deal?

Turned 713 SF into 2,269 SF with high end modern finishes and a contemporary architectural design which sells well in my area.

What was the outcome?

This deal took too long and the costs took us well over budget so it ended up as a small loss but all my investors made money on the deal.

Lessons learned? Challenges?

As I have stated many times, time is your enemy in this business so don't waste any of it. Many of these delays were out of our control as was the cost increases from the trade wars which affect us all in our industry. The challenge is - how do you estimate future trade war cost increases? That is difficult to answer as using a higher contingency in your construction costs could price you out of getting the deal in the first place so one needs to find a happy balance.

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

We listed this home ourselves as we do with many of our deals.