Kim Hubbard, Executive Vice President at Merchants Mortgage, joined us to discuss two recent projects that she financed. We like to focus on recent deals, not things that happened five years ago! Below are the recording and breakdown of the numbers.
Topics discussed:
- Fix and flip trends around Denver
- Case Study #1: A fix and flip
- Case Study #2: A fix and hold
Special guest Kim Hubbard will cover all the details and numbers for these projects.
Host: Chris Lopez, Realtor at Your Castle Real Estate
Presenters: Kim Hubbard, Executive Vice President ant Merchants Mortgage
Charles Roberts, President at Your Castle Real Estate
YouTube Webinar Recording
Deal #1: Fix and Flip in Denver – Summer 2018
- Client Experienced Flipper w/ Real Estate License Purchased June 2018
- Park Hill Neighborhood Near Park Hill Golf Course
- $370,500 Purchase Price. Purchased from wholesaler.
- Brick bungalow built in 1947 but had some updating already with new hardwoods and all major mechanicals and roof in good condition. 830 Square feet above grade plus full finished basement and one car garage. 2 bedrooms and 1 bathroom before remodel and 3 bedrooms and 2 bathrooms after.
- $45,000 Repair Budget (May have been $60,000 for less experienced flipper).
- Sold September 27, 2018 (approximately 4 Months After Acquisition) for $520,000 (our estimated ARV appraisal was $511,000).
- MMTC Lent 90% of Purchase Price Plus 90% of Repairs (subject to LTV on ARV Appraisal of No More than 75%). 10% Fixed
- Interest Rate, 2% Origination Fee; No Minimum Interest, No Prepayment Penalty, 6 Month Loan (with Automatic 6 Month Extension with Applicable Extension Fees)
- Actual Net Profit of $64,860 in 4 months, prior to income taxes. Estimated Profit for less experienced flipper with $60k repairs and full real estate commission = $25,000 to $33,000.
Before and After Photos
Exterior:
- ¨New Porch, New Door, New Windows, Paint, Landscaping, New Concrete
Kitchen
- Kitchen completely gutted and redone.
- Opened up to living and dining area.
- New Granite Countertops, New Cabinets,
- New Canned Lighting, New Appliances,
- New Sink. Paint.
The Living and Dining Rooms
- Already had new hardwoods.
- Opened up walls between kitchen and dining/living area, and made breakfast counter/island.
- Added exposed brick accent wall.
- New lighting.
- New paint.
- Took out coat closet in entry to give additional space
Master Bedroom
Put Master Suite in Basement to Allow for On Suite Bathroom and Walk-in Closet While Maintaining Upstairs Bedroom Count
The Basement
- Finished with New Carpet.
- New Paint, Recessed Ceiling
- Canned Lights, Wall FirePlace
The Profit
SALES PRICE $520,000
COSTS:
Purchase Price $370,500
Repairs $45,000
Loan Origination Fee $ 7,605(2% on $380,250 Loan Amount)
Closing Costs $1,800
Interest Costs (4 months) $12,675(10% Interest Only)
Real Estate Commission $14,560 (2.8% on $520,000 Sales Price)
Miscellaneous Sales Costs $3,000 (Title insurance, Property Tax)
Total Costs $455,140
ACTUAL Net Profit w/2.8% commission = $ 64,860
What if scenarios….
Net Profit if Full 6% RE commission= $48,220
Net Profit if repairs were $60k v $45k = $33k
Deal #2: A Fix-And-Hold Project
- Purchased June 2018 in Swansea Neighborhood (about 5 miles from popular River North area.) Purchase price $186,000.
- Built in 1888. Ranch with 934 square feet above grade and 112 square feet. 2 bedrooms, 1 bathroom. Storage shed in back and driveway to park.
- Repairs $26,000 to bring to good rentable condition. Needed updates to roof, electrical, furnace, plumbing as well as overall remodel.
- After Repair Value Appraisal $280,000. Loan-To-Value = 68%
- MMTC Lent 90% of Purchase Price Plus 90% of Repairs for Loan amount of $190,800.
- Refinanced into long-term financing September 2018 (about 3.5 months after purchase).
- Monthly Rent = $1,800 PITI payment on $190,800 loan at 4.625% rate =$1,148.
- Net monthly cash flow = $653.
Before and After Photos
Exterior
- ¨New Windows, Paint, Landscaping Cleanup
Kitchen
- New Countertops, New Cabinets,
- New Appliances, New Sink. Paint.
- Artsy back wall. Refinish hardwoods.
The Living/Dining Area
- Refinish hardwoods under carpet.
- Remove paneling
- New light fixtures.
- Paint.
- Put in island/divider to the kitchen.
- Put on barn doors to bedrooms.
The Bathroom
- Complete remodel with nice marble tile and new vanity
- Expand shower
- Moved laundry to the basement
Contact Kim Hubbard
- Kim Hubbard, EVP
- 303-770-6801 (Direct); 303-898-1366 (Cell)
- khubbard@merchantsmtg.com
- www.merchantsmtg.com
- 7400 E. Crestline Cir. Ste. #250, Greenwood Village, CO 80111
- NMLSR #180712; CO License #100007309
- Kim was interviewed on podcast #54: Hard Money Lending with Kim Hubbard
