RE Lesson: Adapt and Overcome

[Joshua Poitras]

Investment Info:

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

Purchase price: $717,300
Cash invested: $196,080
Sale price: $806,500

RE Lesson : Adapt and Overcome. A planned buy and hold turned condo conversion. After filling out a permit wrong we triggered a city of Boston ordinance of having to require a sprinkler system put in. Rather than just correcting the permit, we went ahead with the sprinkler system and decided to split the building into three separate condos. On paper numbers look good, but after paying contractor overages and extremely high hard money fees and payoffs. We about broke even. However, the lesson is invaluable and I still use the experience today.

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

It was the first ff-market deal we were offered. At this time South Boston was in full gentrification ad Eastie hadn't been touched yet. This property we got for 400K today needing a full gut job would of went for 900K today.

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

A fellow realtor offered me this deal. Price was too good and off-market, we went for it, as-is.

How did you finance this deal?

Herd Money Loan in Conjunction with a Private Investor who accessed his 401K for funds.

How did you add value to the deal?

Gut Rehab. I ran the contractors and project.

What was the outcome?

After all fees, finances, Hard money mortgage payments for an unanticipated long project, we pretty much broke even.

Lessons learned? Challenges?

Do not write "full gut job" on permit application. Write one repair at time. Also always get a refi loan estimate, we could have likely refinanced out of the hard money loan with a cheaper long term loan and held on to it as a buy and hold even though budget went way over.