Longwood Rehab Flip
by Tom Rumph, Vice President, CFRI
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Ron Smith has been an active member of CFRI for over 25 years and has a Lifetime Membership. Ron has been doing new construction, restoration and project management for over 35 years. He began his career in Philadelphia where he worked on commercial, industrial and multifamily projects. Ron estimates he’s done 300 – 400 projects to date. Ron and his wife Leslie have three children and 13 grandchildren. One of their sons is currently working in Afghanistan as a military contractor.
Ron found a 2078 sq. ft. six-bedroom, three-bank owned (REO) as a referral from one of the tenants. The property had been mortgaged for $225,000 and had the better part of a year remaining on a lease when it was foreclosed. The property needed a roof, electrical, HVAC, paint and updates in order to sell it on the retail market. The bank and the property records show the house as a 910 sq. ft. three bedroom one bath but the property inspection revealed otherwise. The after repair value (ARV) was estimated at $125,000. Ron and Rob Arnold, Sand Dollar Realty Group, joint ventured on the deal. They offered the bank $45,000, submitted a repair estimate of $25,000 and agreed to keep the tenants. Their offer was accepted in three days.
Working with the tenant to create a win-win situation, Ron and his team completed all the repairs and updates within three months. The tenant continued to live in and pay rent for eight months which reduced the holding costs by $5,100. Once the repairs were completed the property was immediately listed on the MLS for $125,000. They had a buyer almost immediately but the deal fell through when the banks appraisal came in at $24,000 below the contract price. That seller dropped out, but Ron and Rob decided to keep it listed at the original asking price.
Eventually another buyer came forward who was able to close the deal at $124,000. The property sold and closed in 75 days. Ron attributes the success of this deal to partnering with other CFRI members; being flexible enough to take the tenant off the bank’s hands; having good tenant relations; and, using his extensive construction and project management skills to reduce restoration costs and the timeline.
6 Bed, 2 Bath 1 Car Garage 2,078 Square Feet ¼ Acre Lot
Purchase Price $ 45,000
Rehab Cost $ 18,000
Holding Cost $ 2,500
Finance Cost $ 8,800
Closing Cost $ 6,000
Other Costs $ 5,000
Total Costs $ 85,300 Rental Income During Rehab – $ 5,100
Sales Price: $124,900
Net Profit $44,700
Reprinted Courtesy of the Central Florida Realty Investors. Visit www.CFRI.net From the July 2014 issue of the CFRI Newsletter.