First Flip - NYC Suburb

[Brandon B.]

Investment Info:

Single-family residence fix & flip investment in Island Park.

Purchase price: $300,000
Cash invested: $35,000
Sale price: $390,000

https://www.youtube.com/watch?v=mETrbHFI-3k&feature=youtu.be - Video walkthrough of the property. Suburb southeast of Manhattan, NY.

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

I wanted somewhere to live that I could afford. I knew I would build equity the second I bought it, but I did not intend to move so soon.

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

Was an REO listed for 310,000. Saw some water in attic and told bank it was probably a roof leak so they cut it to $300,000.

How did you finance this deal?

Mix of personal cash and borrowing from family with with an ELOC.

How did you add value to the deal?

New PVC fence, new landscaping, pest extermination, new paint, updated bathrooms, updated appliances, new carpet, heavy cleaning, serious trash cleanup. Cleared permitting issues and brought electrical and heating to compliance with post-hurricane building codes.

What was the outcome?

Cash-at-sale of $372,000. Annualized ROA of 11%, if we did not live in it for 5 months without doing any work would have been an annualized ROA of 20%.
At 50% down and 5% interest per year...
372000 - 165000*5%*(6/12) - 165000 = 202875 ... ... ... ... ... 202,875 - 165,000 = 37,875 ... ... ... ... ... 37,875/165,000 = 22.95%

22.95% for 6 months of work is an annualized cash-on-cash return of 45.91%.

45.91% ANNUALIZED ROE if financed at 50% at 5% interest rate.

Lessons learned? Challenges?

The presentation at final walkthrough is very important - if everything is not in perfect condition the buyer will walk and fight over their security deposit, even if they agree to accept the property as-is. Also negotiate appraisal contingencies to have buyer contribute more cash if the home does not appraise at the negotiated price - bad appraisals happen. Always get 3 contractor bids - almost had an electrician rip me off by $1,300 dollars.

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

Realty Trends Corp - highly recommend - best brokerage on Long Island.
I DO NOT RECOMMEND CROSS COUNTRY MORTGAGE - the lawyer refuses to travel and I had to go to a different county than the property was in to close, when buyer and seller lived five minutes from each other. Lender's lawyer made every party involved travel to another county.