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Primrose – A go

April 10th, 2006 by Kenric

Ok, I have changed my mind about this one. I know I said that I was gonna pass on this but I revisited the numbers again.

I forgot that there is a $15k discount and $8k towards closing costs on the home. So here are my numbers: $541k + 15k (flooring upgrades, granite) – $15k discount. Add window treatments $1k, $18k pool, $5k landscaping, $2k miscellaneous (staging, painting, knobs, lights, fridge). Total cost is $567k. No closing costs. Holding costs for 6 months = $22k (including HOAs, utilities). TOTAL COST $599k.

Comps are around $200/sf, however I haven’t seen an exact comp for 4100sf from this builder. There are two homes on the market around the 4100-4400sf range for $725k-$750k. List for sale at $725k with 5% realtor fees. Sell at $700k. Realtor fees $35k. $665k-599k = $66k gross profit. I know this doesn’t seem like alot, and it isn’t, but I’m using very conservative numbers.

This is the plan but there is a good chance that I will forego the pool. Also, after the RDPD meeting I’ve become more open to partnering. The upside is that it limits risk but the downside is that profit is diminished. But it’s better to get 33% of something than 100% of nothing.

So I’ve brought in 2 partners into this one. The earnest money required is $13k, so we can split the deposit into $4k, $4k and $5k. This brings the risk down to acceptable levels for us. The conservative upside is only $22k. Not much, but it is 500% return.

What I like to do is to make the homes move-in ready. This helps me compete against other investor flips that are barren inside with no landscaping and all white walls. I really think it helps the house sell faster. I also think that by putting in a pool and pricing at the same price as homes without pools, you get alot more traffic.

Posted in Real Estate | 2 Comments »
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