Chicopee talk ss

Copyright - Reilly Real Estate, LLC

619 Broadway St.Chicopee, MA

The Good, the Bad and the Ugly of a First Rehab Project

Shaun M. [email protected]


Alternate Title

“Wait, where the F@*% is Chicopee???”


Who am I?

Raised in Dracut, MA Graduated from Boston University 2000

– Bachelors in Math and Chemistry and Physics Minor Graduated from Boston College 2007

– MBA with focus on Operations and Finance– MSF (Master of Finance)

Started in real estate March 2007 Full time since Jan 2010


My Start in Real Estate

Converted primary residence to rental in 2007 Quickly purchased 2 similar properties to use as

rentals (Just the like they say in the books!)– Liked people mailing us money every month– Cashflow was not great

Overestimated rents, underestimated expenses

Got in a holding pattern for a few years


How do you buy a house?MAKE OFFERS!

In May 2011 something “clicked” and I started making tons of offers.

Conservative ARVs and High Rehab Budgets – MAO = 65% ARV – Rehab (Including 6 months of

holding costs) First offer 90% of this

Be embarrassed by your offers!


How do you buy a house?MAKE OFFERS!

619 Broadway listed at $63,000– Originally listed for $90,000– 138 DOM when accepted

Plus 20 more unlisted days in middle

Made 2 offers (the ONLY 2 offers)– Accepted offer of $34,535

Purchased for 54.8% of list (38.4% of original)


First Wholesale Deal???

Chicopee is really far away! I’ve never done a project!

– Something that far away isn’t a good one to start with! Don’t know any contractors out there. Don’t have a network out that way.

– Who can I hire? How can I find them? No way to utilize the network I had built out here.

I should just wholesale it!!!!!


First Wholesale Deal???

MARKET IT!!!! Bring it to the REIAs!

– MA REIA – Springfield shut done a couple months before

– MA REIA – Worcester shut done that month Craigslist – A few responses but nobody serious Call the “We Buy Houses” investors out there

– No call backs! Referrals

– One serious buyer!


Wholesale Gone Bad…

Buyer signed P&S and put down deposit Met with a Realtor and Contractor to get

opinions on ARV and Rehab costs Lined up hard money and was going to double

close on my contract date HML got cold feet and pulled out 2 days before Tried to salvage deal but nothing panned out


Can I Rehab It?

Had the money to close Was able to get the money for the rehab work

– Nobody I knew wanted to lend that far away

Convinced a contractor I was working with evaluating properties to go there from Lowell!

Had a couple of Realtor contacts that worked out there.


BEFORE


Quick Scope

New Electrical New plumbing

– Including new boiler and hot water heater

Full Kitchen remodel with layout change Full Bathroom remodel with layout change New roof over back addition All new flooring, paint and fixtures throughout


AFTER


You Make Your Money When You BUY!

Purchased just over 50% of list price Other Profit Centers

– 3% closing cost credit– Buyer agent commission

Purchased for ~10% less than MAO Cheapest sale of the year in the city (On MLS)

– Last sale for less was 7/21/10– No sale for less since


Financials

Expense:Buy Price $34,535.00Settlement Fees (BUY) $231.95Construction $41,286.84Taxes $582.68Insurance $1,196.79Utilities $573.48Miscellaneous $249.55Commissions $6,627.50Settlement Fees (SELL) $4,060.88TOTAL EXPENSES: $89,344.67

Income:Buyer Agent Commission $828.84Forfeited Deposit $500.00Sale Price $123,000.00TOTAL INCOME: $124,328.84

Gross Profit: $34,984.17

Had a $1,036.05 concession on purchase

Buyer had a $2,500 credit

5.5% Commission on Net $120,500


Mistakes I Made

Didn’t have a great exit strategy– Wanted to wholesale when I didn’t know how to

wholesale!

Overestimated ARV– Ran MLS comps that looked good– Local Realtors thought I was on the high side

Didn’t get this information until after purchase Still thought I was in right range

– Sold for over $15K less than the low end of my range


What I Did Right

Bought really well Had a backup strategy when initial exit strategy

didn’t work Overestimated Rehab costs

– Everything is broken until someone tells me it isn’t Built strong relationships so contractor traveled

for my job Was not dumb enough to think I should save

~3% by listing myself


Postscript to the Story

Since then I have bought, rehabbed and sold 3 other houses

Have 1 under contract for resale Have 2 on the market for resale 2 projects under renovation 0 under contract for purchase

– Closed on one yesterday


Postscript to the Story

Have now wholesaled a property Have added 2 units to rental portfolio

– Should add 2 more by end of the year

Have made over 1,300 offers on over 300 unique properties in 2012– Over 2,000 and 400 since May 2011

A current investor recently said they want to invest an additional $100K or more by January


Two Kinds of Real Estate Investors

1. Those that make a ton of money

2. Those that give up too soon