Last week, we released a reality-style webisode on the Glendora deal. People loved the video, but they wanted to see more details… Well, here you are!
House Specs
Glendora is a 3 Bedroom, 1 bath rental property just west of I-35 in San Antonio. We located the deal through one of our realtors.
We liked the neighborhood because it was close to where we work (you can see it from our the window of our 6th floor office); and it is centrally located next to some major job-generating developments.
Rents were strong enough in the neighborhood to support cash flow for our company as well as payments to our private lender.
Acquisition Costs
This was a HUD home that we got at a steep discount. As you all know, we like buying DEEP.
Getting a home at 50-60 cents on the dollar helps to protect everyone involved. The low price protects our lender because they have the 1st lean on a property that is worth more than they are into it for. It protects us by giving us a loan payment low enough to cash flow and gives us plenty of margin when we go to sell.
Rehab is coming in around $12,000 to get it ready to rent and sell in a year. In fact, the rehab completed a few days ago and we already have taken several applications on the rental.
Closing costs were low because our arrangement with the lender is loaded at the back end instead of the front. Our claim to fame is “passive equity,” which means that our lenders get a piece of the sales profits when we sell in a year.
$35,500 – Purchase Price
+$12,000 – Rehab
+$ 1,000 – Closing Costs
=$48,900 – All In
Equity
This nice little house instantly created about $20,000 in equity for our company and our investors. One of the really great things about buying real estate correctly is that it changes your net worth from day 1.
Our plan is to sell the house in 1 year to get this equity out and distribute it to the investors. We do expect to pay about 7% of the sales price in realtor commissions and title fees, so the actual profit figure may be a little less.
Equity Capture
$68,250 – After Repair Value
-$48,900 – All In
=$19,350 – Equity Capture
-$4,777 – Realtor & Title
=14,572 – Projected Profit
Nice Bread and Butter Deal
Glendora is a good example of a bread and butter deal that makes money for us and our investors. It is a solid rental house to sustain cashflow for a year before we harvest the equity; and it has enough equity to make it attractive.
If you have any questions, feel free to ask in a comment below!
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Although this deal was great when it comes to the numbers, the key to this transaction was taking action and using all of our resources. The key to closing foreclosers, or HUD homes in this case, is being able to make decisive decisions quickly. We have worked very hard at building a team around us to complete these transactions. We actually only had 48hrs from being awarded the bid for this home, to decided if we were going to purchase. If it wasn’t for our realtors giving us true comparables, and our contractor giving us a complete repair estimate within the time frame we had, we would not have been able to complete this transaction. Great job guys! I look forward to doing many more.