Category Archives: cash flow

case study on 6104 Walnut Hills Small Group Investment / Syndication

A case study on 6104 Walnut Hills Small Group Investment / Syndication

This was a small group investment also known as a syndication that I completed in 2004/2005.   It was a duplex needed major repairs so I put together a small group to participate with me in the completion of the purchase, rehab and ultimate selling of the property.   Despite several surprises we ultimately sold the property and made a tidy profit for both the money investors and for myself.   

Please see the attached PDF’s the first of which was my prospectus to the Investors some of whom are members in the REICA group and I hope they felt good about the returns they received ((at least I think that they did))   Maybe one of them will come out and testify about this investment opportunity for the good of the group.   (You know who you are!))  

The final outcome came to a 46% return on investment for the money investors and a pretty good return for me as well!   Check out my budget and how the money was spent to see some of the details of what it should look like when you get started in one of these rehab/syndication deals.

To summarize this one I bought it for 33K and got my money partners to put up 40K and went to the bank and got another 40K to rehab it and we sold it for 140K.   We had some budget overruns (small ones) and almost got sued over it ((that’s another story)), but it turned out great for everyone involved! 

This was the last of my small group investments / syndications!   Now I will only do bigger syndications for bigger properties but it was a great stepping stone in my learning and growth as an investor.   If you want to know why I am against small group investments please send me a private email or post it to the REICA group and I will respond to you.  

I hope that this inspires some of you to go out and begin to put together small groups to help you further your investment goals.

 

Post your questions to the REICA board and I will answer some of them if any or send me a private email at Ron@theseaygroup.com.

GDE Error: Unable to load profile settings
GDE Error: Unable to load profile settings

case study on 4800 Spring Meadow Cove, Austin TX 78744

A case study on 4800 Spring Meadow Cove, Austin TX 78744

                        The Spring Meadow Cove property was purchased on April 22, 2003 from HUD for $54,603.   The property was built in 1984.   The house was a 3 bedroom, 2 bathroom, 2 living areas, a dining area, and a 2 car garage.   The house was immediately rehabbed and listed for sale at $115,000.   It was sold for sale for $116,000.   The repairs were complete by Remar Ministries.   It required approximately $7,500 in repairs.   The list of repairs included:  

  Drywall repair, Paint entire interior of house, Carpet, Rebuilding the kitchen countertops, rebuilding the master bathroom tub surround, new window screens, new ceiling fans, new garage door, new door knobs, and new rain gutters.

 The repairs took approximately 2.5 weeks to complete.   The tax appraisal on the home before the repairs was approximately $94,748.   The after repair value per the appraisal dated April 19, 2003 was $113,000.   The initial loan to value, based upon the appraisal value, was 56% (65K/113K).   Below is a financial break down of the transaction.   There were $2,612 in closing costs associated with the purchase of this property.   Also there were holding costs of $975 per month for 5 months.   The  house was purchased using a “hard money” loan.   The interest rate was 18% the total amount borrowed was $65,000

 

.The Maximum purchase price was determined by using the formula previously outlined   The contingency factor should be added to the profit for this transaction because it is for emergencies or unforeseen repairs.  

                                   

            $Maximum Retail Value $                     $115,000

            (subtract the following) 

                       

            – Purchase Costs                      -$1,000

            – Rehab Costs                          -$7,500

            – Holding Costs                        -$5,000

            – Sales Costs                            -$6,500

            – Contingency Factor                -$5,000

            – Profit                                     -$35,000

            $Maximum Purchase Price   =  $55,000

 

 

If the house was going to be held as a rental then it would need to be refinanced.   If an 80% loan to value loan was used after closing costs and escrows TSG would have received a check for approximately $20,000 after paying off the hard money loan and closing costs.   This property would probably be held for 5 – 7 years and then sold.   If the market appreciates 3% – 5% per year (very reasonable appreciation rates) then this property will be worth between 132,000 to 144,000.

 

If this house were put on the Fast Sell Strategy track instead of the Rehab Strategy track it could have been sold to a rehab investor for $5,000 to $10,000 and the rehab investor would have used a similar formula to determine their profit potential.

 

Pictures before repairs:

 

            

 

          

 

          

 

          

 

          

 

          

 

          

 Pictures after the repairs

 

          

 

          

 We sold the house for 115K to an owner occupant with a 1st and a 2nd to us for 20K.   They ended up losing the house in foreclosure on the 1st and my 20K second was wiped out!   ((That SUCKS)).   We made good profit and learned a good lesson about taking a 2nd behind an institutional 1st.   Don't do it unless the profit that you get from the payoff of the 1st is good and you dont care about the 2nd.   We could have reinstated the 1st but after they were 3k behind then it was not worth our while any longer so we just passed on it and moved on to bigger and better deals.

This was the only deal (1st and last deal) that I ever used hard money on and it was a learning experience as well.   There was a tremendous lesson on who hard money really works in doing the transaction!    For those interested please send me an email and I will lay it out for you.

As an aside the agent who I had worked with to buy the house ended up buying the house from the bank and went out and did the same type of transaction as I did!  Funny how we even recycle houses in Austin!

Post your questions to the REICA board and I will answer some of them if any or send me a private email at Ron@theseaygroup.com.

Case Study on 4-plexes

A case study on three 4-plexes on Wooten Park Dr is a big file so it is a PDF that you need to download to read.   Please click the link above named "4-plexes" and the file will open on your computer using adode.

GDE Error: Unable to load profile settings

10502 Cherry Hollow Xing – SOLD

Picture of the front of property

Sale Price $30,000

 More Pictures of the property

Property description

 This property is a major fixer upper.   It needs everything!   Well just about everything.    A/C work, Doors, Electrical, Flooring, Landscaping, painting Plumbing roof patching, trash removal, tree trimming, Windows.   I am talking A-Z on the list of repairs.    Lots of the jobs appear to be small jobs that someone who has moderate rehab skills could tackle.   But make no mistake about it this is not for the faint at heart!   This is a rehab!!

 The value is in the lot.     The property has the lowest list price in the neighborhood.   Take a look at some of the other properties on the market.   This property could easily be cleaned up and turned into a small rent house or replaced with a home in better condition.    It is on a culdesac so there is no thru traffic and sits at the top of the hill with good views of the surrounding area.   There are beautiful houses going in just off 1431 and the growth is moving toward this property.   The area has been growing tremendously over the past few years.   Please click the following link for a demographics study.

 If the property was closer to my other investments I would consider turning it into a small rent house and renting it out for $500 per month to $650 per month and holding it for a couple of years while the growth continues then selling it for $75K or so.

 

Property History

 The property was purchased as a foreclosure by the current owner and has been sold and repo’d several times and has never received the property attention that it needed to make it a wonderful home.   Now the owners have bigger and better projects to work on and want to find the right person who can love this property back to health and productivity.  

 In the past it has gotten people who have occupied it but never loved it the way it needs and consequently the lack of love has shown!

 If you are the right person and want to make a cash offer the owners are willing to consider taking a discount on the property in order for you to be able to make it work.   Just submit your cash offer and it can be considered!   We are investors and will not be offended by a low offer.

 If you need owner financing we are looking for someone who can put down at least about 10% and who can afford payments of at least $250 per month with a 10% interest loan.   That sounds easy enough but doing the 10% down and 250 a month is the easy part it is the fixing of the property that will require hard work and money to get it done.

 

Repair Analysis

 Our back of the envelope analysis included:

A/C work

1000

 

Doors

500

 

Electrical

1000

 

Flooring

1000

 

Landscaping

1000

 

Painting

500

 

Plumbing

1000

 

roof patching

500

 

trash removal

1000

 

tree trimming

500

 

Windows

500

 

Misc

4000

 

Total

 

$12,500

 

 

 

 

 

 

These figures are only estimates and you should hire a professional to fully investigate.

 

Many of the figures are very rough and include paying professionals to do some if not all of the work.   It may be possible to get the numbers lower but you would need to investigate that possibility on your own.

 

 

Rental Analysis

 

If the property were purchased and repaired and turned into a rental my analysis indicates that the property would generate a 21% average annual cash on cash return and a 30% total return if held for 5 years and sold for $75K.   The rental rate that was used was on $650 per month.   For a three bedroom two bath house that is cheap, but the property is far out and that has to be taken into consideration when factoring the rental amount.   If the sales price could be achieved before the 5 year term the return would rocket skyward!

 

To see the analysis please click for link for the property analysis.

 

Flip Analysis

 

If the property was flipped quickly without doing any repairs just remarketing the property the price could probably be bumped up by $15K for a total of $45K.   If the new seller owner financed the property for $1K and payments of $350 per month and a 15% interest rate then the return on investment would be $1,200/$1,000 = 120% per year!  

 

 

But for analysis purposes lets assume that the initial investment is $3K and then the underlying payment on the first note is $250.   The cash flow generated would be $100 per month or $1,200 per year.   The return on investment would equal $1,200/$3,000 = 40% return per year!

 

 

If the property was given a cleaning and trash removal then the flip price could easily be pushed upward as the property would appeal to a wider range of potential buyers.  

 

 

Owner Financing

If you would like to purchase the property with owner financing I have attached the following documents for you to fill out to submit your information to us as part of the contract.   

Application

I have also attached some examples of the note and deed of trust and other documents that will be a part of the financing package.    If you have any questions about them please don't hesitate to ask, but note that in no way, form, or fashion should any information be construed as legal advise.   If you need legal advise please consult your attorney.

Please click the link for a copy of the sellers disclosure notice

Please click the link for a copy of the Survey

 

If you have any questions about the property please email me at Ron@theseaygroup.com.

 

  Please join our linkedin Network at Linkedin.com www.linkedin.com/in/ronseay

property tax protests in austin tx travis county

Every year I protest my property tax valuations and almost every year it is time well spent. It allows me to learn something new about how my property is valued and what other property is valued at surrounding my property and is a general adventure in dealing with people.    Continue reading property tax protests in austin tx travis county

Calpers finally gets it..

The wall street journal has an article about CALPERS changing thier real estate strategy.   From real estate private equity to CASHFLOW.

http://online.wsj.com/article/SB10001424052748704013604576104470130722678.html

Do you have some cashflow in your portfolio?   There certainly is a place for some flips, rehabs, etc but cashflow is where you make money long term in real estate.   Do you need to discuss your real estate goals with a professional real estate investor?   Call me…(512) 782-8982 or email me.

7910 Rosenberry for sale $175,000 or trade or something creative!

What can a real estate trade look like.    I purposed a trade for a 4-plex on a street where I own several other properties.

The house shown above is for sale or trade.    What is a real estate trade?   Most people can only think in terms of cash from a lender to a seller for real estate transactions but in fact Trading something of value for real estate happens all the time just not as frequent as a cash sale does.   Continue reading 7910 Rosenberry for sale $175,000 or trade or something creative!

Offer on a foreclosure in Austin

This week I made an offer on a foreclosed property this week.  It was listed for 69K but I only wanted to offer 45 to 50K.  Why such a low offer on an already reduced priced house?    The house originally had a loan on it for over 133K and I only wanted to offer 45 to 50K b/c of the foundation issues that will require a foundation repair and will forever impair the salability of the house.   In addition the plumbing will most likely require some repair if not today sometime in the near future b/c of the foundation work that is needed.    Can this house be financed today?    Continue reading Offer on a foreclosure in Austin

Austins Affordable Housing needs

I recently read an interesting article in Realty Line Newspaper (www.realtylineonline.com)   The article was analyzing austins affordable housing needs.   It was written by David Tandy of Gracy Title.   The article was highlights one of Austins Austins affordable housing not-for-profit organizations “Foundation Communities (http://www.foundcom.org/)” and their efforts to assist those who need affordable housing.   

Please check out the article attached to this post as a pdf and go to foundations communities website and support a not-forprofit organizaiton by giving back to those less fortunate this christmas season!   Follow the link: austin affordable housing

Owner Financing in Texas

From the Texas Association of Realtors:

“Many of us have been very concerned about the implementation of federal legislation known as the SAFE Act that would severely limit an individual’s ability to seller finance their property in Texas.

We are working on numerous regulatory and legislative solutions to this affront to private-property owners, and have some good news to report. At our urging, the chief regulator over the SAFE Act in Texas, the commissioner of the Texas Department of Savings and Mortgage Lending, has taken significant steps to allow Texas property owners to continue to seller finance up to five transactions in a 12-month period.    Continue reading Owner Financing in Texas