Investment Info:
Other fix & flip investment.
Purchase price: $40,000
Cash invested: $10,000
Sale price: $100,000
Contributors:
Brian Kraut
.31 acre residential lot flip. Utilized partnership and raising money to get into this one with low money down.
What made you interested in investing in this type of deal?
The plan was to buy the lot cash and seller finance it to the end buyer to get a solid stream of income and maximize the profits, but the buyer we found ended up paying all cash.
How did you find this deal and how did you negotiate it?
Our VA cold caller was calling a "vacant house" list and this property was still considered a house in public record even though the house burned down in 2015. When we called the seller he was very eager to let the property go and hadn't used or been to the property in years, so it was completely useless to him. He wanted $70k and we locked it up after a day or 2 of talking for 45k, then during the investigation period we got it down to $40k and removed contingencies.
How did you finance this deal?
I put in $10k of my own money for 33.4% ownership and later assigned 2 partners onto the deal to each pay the entire remaining amount in return for 33.3% each. We all split proceeds at closing accordingly.
How did you add value to the deal?
Did nothing, the seller just called a neighbor and had them remove their junk from the yard that's it. The lot was already in great standing and had no violations.
What was the outcome?
Called an engineer to get a septic report and he told me he was great friends with the next door neighbor and that he may want to buy it. He gave the neighbor my number and the rest is history, didn't even have to list it. He paid all cash with a 10 day close.
$58k net profit total, $23k net profit for myself.
Lessons learned? Challenges?
Always verify all permit history and code violations when dealing with land, especially when the lot is on well and septic. If this lot couldn't get septic reinstalled it would basically be useless.
