The Purchase Frank said he spent $200,000 on seven units. For
An LLC, Frank’s investment vehicle, paid run out of money, and the partners said, “NO
$775,000 for the property. (He thought he “stole” MORE”?)
some reason, one unit was not done. (Did Frank
it since the perunit cost was quite low in this
particular market. Actually, counting the On second glance, not so great. Three years on,
deferredmaintenance, Frank had overpaid!) the cheap/thin laminate floors are peeling. Frank
With the loan from the dentists, Frank’s partners replaced three gorgeous stainedglass windows
put in $310,000 plus closing costs. They had a with cheap imports. (Fig. 2 is one that survived.)
little under $300,000 left for rehab and holding The stoves and refrigerators are “discounted /
costs. blemished” with some of the blemishes obvious.
(The national trainer probably taught Frank this
The “Rehab” “moneysaver”.) The exterior was pressure
At first glance, the rehab was fairly thorough. not scraped or caulked at openings, so it’s looking
New composition roof, laminate and vinyl floors, ragged now.
washed before spraying on the cheap paint, but
tile kitchens and showers, new kitchen cabinets
and vanities, new vinyl windows, new stoves
and refrigerators, new interior and exterior paint.
Selling the “Flip”
All of the tenants were either helped to vacate or
offered a rehabilitated unit at about 40% more
rent. (That’s how apartment “turnarounds” are
done!) Frank listed the apartments for sale for
$1.5 million. There were a few showings, but only
after the price was reduced below $1.4 million did
it go under contract. Even then, two parties
backed out based on discouraging inspection
reports.
Some Real
Estate Lessons
Fig. 2
54