Unique Flip (no fix) - Worcester County Massachusetts

[Jonathan Bombaci]

Investment Info:

Small multi-family (2-4 units) fix & flip investment in Fitchburg.

Purchase price: $184,529
Cash invested: $36,906
Sale price: $250,000

Contributors:
Jonathan Bombaci, Matthew Perimian

Purchased this Multi-family as part of a commercial package, 8 Properties for $1,850,000, based off of the income it generated. Divided them up into 8 separate residential properties and by doing so increased the appraised value by over $500,000. We then sold off some of the properties at the new market value and we will be using the capital to do it again with a larger portfolio of small multi-family properties. We plan to keep a few of the properties as buy and holds for essentially free.

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

We were not looking to do flip but we recognized the opportunity to treat the 1 commercial package as 8 residential properties and maximize the value.

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

There are no good deals on MLS.... we found this on MLS. 40 groups showed up at the group showing. By the 2nd house half were gone. By the end of the day (8 houses) only 8 groups remained. It wasn't a good deal based on cashflow but it was based off of comps.

How did you finance this deal?

Jeanned D'Arc Credit Union in Lowell MA gave us a commercial loan at 3.5% on a 5/1 arm, amortized over 25 years with a 20% Downpayment requirement.

How did you add value to the deal?

repurposed from part of a commercial property to a 3 family that was eligible for a FHA Loan

What was the outcome?

Well we sold this one at a pretty nice profit

Lessons learned? Challenges?

had a bad appraisal which decreased the ultimate sales price. It doesn't matter what people are willing to pay the bank will always pull comps and set their own value. We originally had an accepted offer at $265,000 but had to decrease sales price in last 2 weeks due to appraisal coming in very low.

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

Jeanne D'Arc was great from a lending standpoint and Doug Mercurio law office in north reading did a great job representing out interests.