저자: Kevin · 외국인
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과거 부동산 플립 건을 다룬 영상. 본인이 올린 영상 이후 제3자가 해당 매물을 약 $385,000에 매입해 리노베이션 후 $665,000에 매도, 약 $52,000 수익으로 추정. 주식·자산 가격 예측 발언 없음. 수강 코스 홍보 포함.
다듬은 글
so it looks like somebody that may have watched my YouTube video on a particular property might be flipping the deal. I was wondering, because all of a sudden there were multiple offers on that deal after I made the video on it. Now we're going to go talk to them and see what's up.
Today I have something very special for you. This is the trash, a fixer-upper I walked through on January 2nd, 2019. Yeah, last year it was flipped, but it wasn't flipped by me, because I was robbed. That's right, I was robbed of this flip. And today we're going to confront the person who stole my flip and stole my profit. In this video I'll also go through the exact before and after pricing so we can find out how much the person who stole my flip made off with.
It all started with this video and a host of text messages. See, this property hit the market for $499,900 as a total fixer-upper in October of 2018. Four months later, I found the legendary agent Dan Fantura so that I could buy this deal. And after you see all the effort that went into this, you better stay around for the confrontation. You might even learn a thing or two about money and real estate.
See, I had been angling to get into this property since the day it hit the market. When I was told that the owners were out of town and might not be able to let anyone in, well, let's just say I happened to take things into my own hands. Wink, wink. See, I later wrote Dan the man a message asking whom I should sue, I mean, whom I should call, if I happened to go on the property and die or trip and hurt myself. Y'all don't really think I listen when someone says no, right? Anyway, the house had my name on it as far as I was concerned, and that's not even to mention the big, yeah, but it had... but we'll talk about that in a second.
See, I was really excited about the deal. I'd love the original hardwood flooring, I thought I could restore it. I wasn't worried about the wall paneling. The kitchen was epic, the bathroom, the only bathroom, was great, the rooms were perfect. And you know what? Maybe they were small, but to me, small house meant small budget, and small budget means small risk. The worst thing you can ever do is get tied up on a 3,000 square foot flip, and then the market shifts on you as you have to throw more and more money into an entire large project just to get the thing back to market.
Although, let's be real, the place was getting chewed on by a couple termites. I mean, they even have their own Grant Cardone and exit strategy. Meanwhile, the real pro goes over here and says, looks like termites are making their own exit strategy. Either way, I really did feel like this house needed me, and I'd either flip it or I'd buy it and hold. So I kept trying. I kept trying to get my offer accepted and kept on going with the jokes with Dan. On November 20th, I even asked, I got for sure after my injury on Catalina, you guys would be sold? Did the other buyers walk? And well, you could see what Dan wrote about my mysterious disappearance, which oddly happened right around the time this video of me getting kidnapped by Grant Cardone surfaced.
Come on, you little... wake up, come on, screw the small D. Okay, in case you're wondering, I didn't die, I didn't get kidnapped. I'm here drinking Tennessee whiskey, or maybe it's apple juice.
So anyway, let's get talking about the Yaba of the DLC. It's easy to get excited about properties that need your TLC, your tender loving care. To fix those plastered walls, fix that bathroom and kitchen and the flooring, get rid of that paneling, and deal with the cracks in that concrete front porch. It's easy to deal with these things, but you always have to keep in mind, the abnormalities stick around even after you deal with some of them. And in this case, this place was parked right next to a car or auto body shop. The problem with this is that place isn't going away, so you never know what kind of noise to expect. Now you hope that they only make noise during business hours, but even then it's kind of tough to Airbnb a place when people are thinking, oh snap, I'm dealing with a car shop while I'm trying to have my bed and breakfast.
Now, on this particular deal I even went as far as coming up with a budget for the place. I thought, you know what, all-in: roof work, kitchen work, flooring, paint, you name it, I'd be in and out of that deal for no more than $96,000 as a flip. Now keep in mind, when you flip a deal you usually have to spend a whole lot more money fixing the place up than when you're doing a rental renovation. This is exactly why we got linked below.
Well, anyway, after I posted my video and I revealed my own budget, that house mysteriously just so happened to get multiple offers from other people, and this made me really sad. Somebody else ended up buying my flip by January 31st, 2019, for $385,000. I really thought I had my numbers straight. This deal existed to increase Kevin's net worth by a hundred thousand dollars, not anyone else's. Well, unfortunately, I was dead wrong, and now it's time to confront the person who ended up buying my flip.
So it looks like somebody that may have watched my YouTube video on a particular property might be flipping the deal. I was wondering, because all of a sudden there were multiple offers on that deal after I made the video on it. Now we're going to go talk to them and see what's up.
Now let's start comparing before and after. Oh, just a heads up, one more thing. I don't want to sound like a late-night TV infomercial kind of dude, but I do want to say this: on December 26th, 2018, that's one year ago from the recording of this video, the real estate investing course sold for $249 with a 10% off coupon. Well, today the price after coupon is over $310. Now why does the price go up? The price has gone up because I've always continued to hold true to my promise that over time, as more course members join, as I analyze more of your deals, and as I add more content to the courses, the price will continue to go up. So hopefully, if you're looking for some more business write-offs or rental write-offs for the end of the year, consider some of the courses linked below. Obviously confirm that with your CPA, but consider joining and lock in those prices today. I'm very, very confident you are going to love everything that's available within these courses.
What's up, man? This place looks familiar. Yeah. Now, the first question I had after we got the confrontation part out of the way was, why the heck did you pay so much more than I did? What were you seeing in the market that I wasn't? Because everybody was freaking out at the end of 2018, beginning in 2019, that we were going to have a massive market crash and go back into recession. We'll also reconstruct his profit in just a moment.
So when you were buying this, it was, what, earlier this year? Yeah, there was a lot more uncertainty in the market earlier this year, so was your expectation that you were just certain this summer was going to be better? No, I wasn't certain it was going to be better. I just didn't think there was enough time for things to really get... hmm, I didn't realize how good it would get. No kidding, with the rates dropping and going the other way, and having another round of buyers now.
As we walk inside, remember that broken wall we saw before? Here's the after. Look what they did. Absolutely, it's beautiful, with that Santa Barbara style plaster. Every time it came on, I was there. Dan and I were in a text message back-and-forth battle: "I will buy this, nobody, see, Dan, I told you nobody else is buying this, I will buy it," and then you come along and take it. Look at this. This is unbelievable. This is beautiful.
Now, it was pretty curious as to why they decided to take the property to the studs, which, in case you don't know, just means removing all the drywall. There was a ton of termite damage, so maybe that is a realistic solution. But I really enjoyed his empowering answer about doing the right thing, because I remember there's like brick veneer over here, you're like, wall paneling. Look at this fireplace, it looks great. What would you do? This is drywall, concrete. Wow, it was easy. Look at the pictures. There was some bad furniture, wallpaper. This room didn't need much, but some LEDs and some decorative lighting. We did do new drywall, so when we ripped it down to the studs, I think in your video you talked about maybe not doing that. It wasn't something necessary we wanted to do, but it's so much easier to work on when you do that.
Now, as usual, I always like to ask what the hardest part of a transaction is for somebody. For Jeff, it ended up being the contractor. It was a big delay; the company just wasn't ready. There was a lot of BS. Yeah, and that can happen. So that was one of the things where I was upset, to let that go, or my materials. I think that's something you do a lot: you order your materials, you handle your materials, and then hire help. If you can control that, you can be in a lot more control. It just gets frustrating. With contractors, you get a salesperson pitching you on how great and smooth everything is, but then they sub it out to somebody else, and that other company is like, oh, we're getting inundated here, and then you get put on the back burner.
Now, I know what's crazy is this patio. This was the laundry room you saw before, that funky sunroom. Then I started expressing my concern. Remember, my budget was around a hundred thousand dollars for a flip on this place. They ended up spending much more than what I planned. They also did more, but that isn't always rewarded by buyers unless the market moves. I don't know, I feel like they overspent on this, because it's only about 720 square feet, and I would have done my numbers differently, not overspent this much. Because they're going for $665,000 for about 720 square feet. I mean, a thousand bucks a foot, you can be at the beach, on the water. So I don't know. We'll see what happens. But if they're into this for, with closing costs, let's say they put in $125,000, and we know they're between $155,000 and $25,000 in holding costs, they're in for $550,000. So you've got to sell this thing, and you've got to sell it for at least $610,000 to make some money here.
Yeah, but you're at $665,000 now. How confident are you? I'm pretty confident. Okay. Yeah, we have people threatening cash. Wow. As a flipper, the best thing you could hope for is the market appreciating while you're flipping. Given that it took them over 270 days, start to finish, to do this project, market appreciation would have been a must to make this deal profitable. We'll see shortly what ended up happening.
For now, check out how they redid the garage. I'm actually really impressed they were even able to salvage the garage. Oh yeah, you reframed this thing. This thing was gone. Look at all this. Oh wow, I mean, cool. I'm destroying your property here, but that is amazing, it's all salvaged. This looks really well done, though. For you guys, the PEX plumbing. Are these even required by code? The water hammer arrestors are, but you put them in, which is awesome. That's going above and beyond. So this is all licensed contracting work, and most of it seems like it. Usually you can tell when people are cutting corners, and look at this: the 20-amp GFCI, tamper-resistant. Usually people go to HD Supply and buy the cheap non-tamper-resistant ones, trying to save 50 cents on the outlet. So it looks like you really did go to the next level here. And why tankless? Why would you just throw a tank in here to save money? Because these were like three grand installed. And just that demographic, I read that, the turnkey... yeah. Any problems pumping the hot water over to the house? They've tested it a couple of times, and they'll continue to do it. No issues. Wow, okay.
Now back in the house, let's take a look at this kitchen. They knocked it out of the park, really good job. But just a reminder, this is what the kitchen looked like before. Just take a moment to admire what they've done here. They are still planning on installing and ducting the microhood, but that has been saved. Wall, they get the property to market. Now take a look at the bathroom. Honestly, this is where you should look and go, wow, it's amazing. With some basic subway tile and bronze trim, you can really turn a bathroom around.
Something else I found is that Jeffrey purposely left some things for buyers to do themselves. In this case, we were talking about, but this is what you're looking for. If you could find that minimalist person, to this exact perfect... exactly. It's a middle, it's for the middle-most person. Yeah, you do have a lot of room in the backyard. Yeah, do the ten by twelve storage, you can make a little she-shed back there. Oh no, have you been watching that TV commercial? Somebody burned down... nobody burns... she should, Cheryl. Well, she sheds on fire now.
Here's something I always talk about: the things people touch and see, like light fixtures and Ring doorbells. Like a Ring doorbell, and maybe some of the higher-end light fixtures, which it seems like you went with. Like the four-inch cans instead of the six. Why that choice to spend more? Was it just to try to convince somebody that really just wants that finished product, that appeal? I think that's valuable to a person who wants it done right and perfectly. Is that then your vision for the neighborhood, like, look how nice we made it, now we're going to do another one? It's not all about this one house. No, it's about making presentations in the community. The neighbors saw the work. They see my sign, they see me here all the time, and if one of them wants to list and feel like a twenty-five-thirty-thousand-dollar upgrade is worth it before they sell, that's going to make a huge difference. Here's your sample product. That's awesome. It might also help you buy deals in the future.
Now, before we hit the budget, I want to share with you how Jeffrey got the deal and how he financed it. Listen to this. He financed it with a hard money loan. What about financing on this deal? How'd you pull that one off? So I had... it was the best situation you can be in. You have a sound like this so far, yeah. I don't know. For anyone who's taking your class or going to other classes, you want that angel investor. They talk about it way up, someone who's open-minded enough to understand that there's risk, and they're open-minded that, hey, if we make money, it's going to be good; if we don't, that's bad, but that'll be our last deal. And it's someone who can trust you to do that, and then you're in a good situation. The tough thing is, if you're pitching someone and you've never done it before, you know, proof, you know, to do it. But because I had done all that bird-dogging for other investors, and because I had worked through these before with other people, I had been there. I just hadn't done the full project on my own. So we feel really good about it. We'll be doing more, and there are a lot of deals out there. They just got to hunt them down.
Sure. So you were able to buy it all cash, essentially, because it was a private party financing. He didn't have to go through a bank and worry about the condition of the property or fumigation, this, that, or the other. Got it. And this is how he got the deal. As far as getting started, just get in there, start bird-dogging, and start doing some deals. You just got to get started. The earlier you do it, the better. It doesn't have to be any harder than it needs to be, but you do want to go out and do it. For us, I had spent time doing it when I felt I didn't have the knowledge, and by the time I did, I felt confident in doing it. Then, like I said, we needed to get our first one done and out of the way. So even though it was a struggle, and sometimes you have doubts, you'll work through it, you'll get there, and then that's on to the next one. We can't wait to see what the future holds. That's awesome, thank you so much, a Thanksgiving, hey, appreciate it, yeah.
So basically, because he had gotten his license and started bird-dogging, or finding deals for investors, he ended up finding one that he just decided, you know what, I'm going to do this one myself.
Now let's do the budget. We know that Jeffrey bought this for $385,000. What absolutely blew my mind is what they listed it for after they fixed it up. It goes to show that I was really, really conservative on my math, which, if you take my courses, you'll find that I'm all about minimizing risk. The lower my top end is, the less risk I face when I'm doing my math. I said my top end would be $600,000. Well, they listed it for $665,000, over ten percent more than what I would have listed for. Granted, they did have eight months of real estate appreciation and the minimized odds of a market recession on their side. Good news for them, really good, that the market started picking up.
Now we know they were on the market from July 31st to October 4th, when they closed. That's sixty-four days, which is not that bad. But keep in mind, it took them over 246 days from purchase to sale. Since they got a hard money loan on this property, they probably paid at least seven percent interest on about $550,000 of money, if not more, plus taxes and insurance. That means their holding costs on this deal were hands down no less than $125 per day. Now I don't have the exact details of what they spent, so I'm doing a little reconstructing here. But at $125 per day times 246 days from purchase to sale, that's $30,750 in basically doing-nothing money alone. This is why I teach you in the real estate investing course that time kills you. It's totally unproductive.
All right, now let's get to the profit part. Here's what the public sees: they bought this place for $385,000, and here's the surprising part, they ended up... yay, market's going up, sign of the times, good for them. Super happy for them. Now a lot of people look at this and go, wow, $640,000 minus $385,000, that's like $255,000. Oh my gosh, that's crazy. Well, hate to burst the bubble, but let's be real, you've got to do some subtracting. $640,000 minus selling costs, because the flipper's a realtor, so he didn't have to pay himself money. Let's just say he had to pay 3.5 percent for fees to sell the place. That's $22,400 off the profit. Now let's subtract those holding costs. Now let's subtract my guess on fix-up. I know they spent more than a hundred thousand dollars, but you broke six, right, six figures? Oh yeah, yeah. Based on his reaction, I'm guessing they spent closer to $150,000. Let's go with $145,000 to be safe. Then we've got some acquisition costs to actually buy the deal, about $5,000, and then we have to subtract what they actually paid for the property.
This means net net net, on this deal they probably profited just under $52,000. That's actually not bad for a side hustle, even if it took you 246 days to do it.
Now, had they gone rental grade on this property, let me show you how I would have wedged this deal. If they bought it for $385,000, I would have had the renovation done within eight weeks. I would have probably spent only $70,000 on this deal with holding costs, if not less. I would not have spent so much money on this deal, because rental grade, you don't have to. At a $380,000 purchase price plus $70,000 in rental-grade fix-up, I would have been into the deal for $455,000. If the place, rental grade, was worth $600,000, I would have had $145,000 in a wedge deal, and that would have hands-down been my best wedge deal of 2019.
I ended up finding three other really good wedge deals, and I didn't have to pay cash for them, which would have been another stinker. There is an opportunity cost factor of paying cash for a deal like this, and for getting hard money financing. But all in all, Jeffrey, cheers to you, man. Excellent flip, profit well deserved, congratulations. It's a beautiful property, and you know what the best part is? You did it right. You didn't cut corners, you're not slime-balling the buyer, you're a true professional. Thank you so much for the excellent work you're doing for the community.
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