ProjectProject2Real Estate

37 East Bend Ave

By 1 December, 2017 No Comments

37 East Bend Ave

Hey guys,

I am super excited to share my latest real estate deal. Unlike most of my purchases which are buy and hold for long term passive income, this deal was a buy, reno and sell.

I had initially planned to buy, reno, rent the place and then refinance, which is a great strategy, however I did have a partner on this deal and when it came time we decided to sell and cash in some profit.

So let me start by taking you on a journey….a journey back  in time….all the way back to October 2015.

Yes yes I know that’s not that far back, but that’s where things got started with this deal. I had seen a post by someone on BiggerPockets (my favorite real estate site btw) that they had a single-family home in a particular Canadian city that I happen to invest in.

For those of you who don’t know I live in Southern California and continue to invest back in Canada.

Over the course of several months I had several conversations with this property owner. Initially he was looking for a partner then realized it was best to just sell the place.  We agreed to have my realtor walk the property and provide me with feedback.

My realtor reported back that the property was a decent size home, had double wide driveway and a deep lot. However, it had an incredible amount of differed maintenance. Apparently, the same tenants lived in the place for 22 years, paying significantly below market rent, and the owner hadn’t spent much money on the place over all those years.

After speaking with the owner that the place had upwards of $80k in expected renovations, and comps for that particular area were around the $250k range we agreed on a price of $140,000, conditioned on the tenants being vacated.

So now that we had a deal, it wasn’t easy getting the tenants out…I partnered up with a friend back in Canada, and we signed docs March 2016…that’s 5 months from my initial contact with the seller. It took until June 2016 to actually close on the deal because the tenants kept delaying their move-out date.

We closed all cash and finally took possession…yeah!

So as I shared, we initially had plans to renovate the property, refi and rent it out. Fast forward several months and renovations are going much slower than anticipated…besides completely gutting the place we had to replace the roof, weeping tiles, repointing exterior bricks, rewire the entire house, redo all the plumping, we even had to regrade the entire property so that water flowed away from the house…a lot of challenges.

Due to me being out of the country and having a great partner, my involvement in the renovations of this project was minimum. We had our Joint Venture agreement in place, clearly stipulating all partners received back all their investment and then profits were to be split 50/50 after that.

We ended up finishing renos early January 2017 and then listed the property. We considered waiting until the spring to list when weather is nicer, however decided competition was less, the market was peaking and we wanted to move on.

We listed the property on a Wednesday for $449,000 holding back offers until completion of open houses over the weekend. However, we still received 2 offers Friday and accepted $445,000 closing in 30 days.

Happy to say we closed and everyone walked happy campers:

Here are the numbers:

Sale               $445,000

Comm               26,700

Purchase        140,000

Reno               120,000

Legal                   4,300

Profit                154,000

Partner              77,000 (before tax)

Thankfully all through the year the market continued to go up…this was our saving grace as in the Spring the provincial government implemented some regulations that seriously affected the market…even if temporarily, but it would have most likely reduced our profits by 20-30%.

So overall this was a great deal for my partner and I.

You can see below the before and after pics, the house was completely transformed. I’m really proud of the final outcome and really feel blessed to have had such a great partner.

As I mentioned, this wasn’t an easy project and didn’t really fall in line with my overall real estate strategy of buying and holding rental properties for passive long-term income. But shows that in real estate there are

I would caution all investors to really consider all the variables and add contingencies to your budget, before purchasing a property to flip.

Onward and Upward…

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