Real Estate Investing Case Study | Major Renovation in Fauntleroy

This deal was sourced on market, secured with combo of private and hard money, then resold on the market. 

Real Estate Investing | Major Renovation in Fauntleroy

Deal Overview

  • Sagareus Advisor purchased from listing
  • Initial underwriting demonstrated potential for $180,000 profit in 6 months.
  • Due to property condition, conventional financing was not an option. 

Deal Source

  • Market Listing
  • Purchased for $775,000

Initial Analysis

  • ARV - $1,250,000
  • Purchase Price - $775,000
  • Construction - $180,000
  • Financing Costs - $50,000
    6 month hold time at 2 pts + 12%
  • Selling Costs - $60,000
  • Profit - $185,000

Due Diligence

  • Inspection with General Contractor
  • Confirmed construction costs

before side view

 

before kitchenbefore living room

 

 

 

 

 

 

 

 

 

before master bed 2

Financing - How did you fund this deal?

  • Private Loan + Hard Money Loan

Construction

  • Went over budget by $40,000.
  • Took 6 months instead of 4

IMG_3300

IMG_3294

Outcome

  • ARV - $1,202,500
  • Purchase Price - $775,000
  • Construction - $220,000
  • Financing Costs - $70,000
    9 month hold time at 2 pts + 12%
  • Selling Costs - $60,000
  • Profit - $77,500

after exterior

Lesson(s) Learned

  • You need a permit to remove a tree.

We started this project with a Stop Work from the city because we removed a tree without the proper permit.  (OOPS!)  After completing the necessary paperwork, we were able to get back to work.  This put us 2 weeks behind right from the beginning. 

  • Work is Slower in winter months

Cold, shorter days result in a slower work pace for laborers. They have to be more careful / slower in the rain and dark, more call outs due to sickness, longer set up / take down each day with heaters and lighting, all these factors added together result in another 2-3 weeks added to our estimate. 

  • High End Construction is much different 

High end finishes are much different.  Every detail matters and everything costs more!  We knew this, but did not calculate correctly, our estimates were too low. 

  • Comps Matter

This property lacked solid comparable sales from the  beginning.  We estimated what the view was worth ($~50k) to justify our ARV, which was used against us by the Selling Agent on the back end. 

after living room

after kitchen

after master bath

 

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