Anatomy of a Philly Real Estate Investment Deal

and maybe you get a perspective on how you can recoup all of your money invested in a deal and have positive cash flow every month.  And plus there’s a little added twist to this story in the end.
 
This was a home in “HOT South Philly”. It was a typical Philly row home.

The ARV (After Repair Value) for this property, was at $ 110,000. Recently banks have been pushing down their appraisal numbers, so we try to stay conservative. We use comps of similar sq. ft. and within a .3 mile radius of the property, that are no more than 6 months old.  With the volume of property sales taking a dip recently - we have to sometimes expand our parameters.
 
The comps ranged from $105,000 (which needed rehab too) to $258,000. The property we were wholesaling was a fixer upper, and the rehab was      $23,000. The price for the property was $49,500, which included our assignment fee.

WHAT IS THE GOAL IN AN INVESTMENT DEAL LIKE THIS?  Recoup all of your investment in the purchase and rehab of the property AND create a MONTHLY POSITIVE CASH FLOW by renting it out.

So how do the numbers work. Total into this deal for the investor was $77,239.50 - this includes purchase, rehab, closing costs and even refinance costs. After finding a tenant at $ 800, the investor has the bank refinance this property as income producing real estate. The bank ARV number was $ 105,000. $ 5,000 less than our projected $ 110,000.

which equals $78,750.00.  So, not only does the investor get ALL of his money out of the deal AND pockets $ 1510.50, but now has a monthly positive cash flow.

Realize what happend here. The investor’s $ 77,239.50 value has increased to $ 105,000 within a matter of 4 to 6 months. This is a 25% increase. Can you tell me what investment can do that?

Now the twist to the story. The investor decided to spend an extra $8,000 on the rehab. Something I would advise against. The property manager found a tenant right away at $ 850 per month. He spent an additional $ 8,000 and received an extra $ 50 per month for it. Was it worth it?  He should’ve stuck to the original plan.

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