Best Little Condo Deal Ever

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About a week ago I closed a small deal in which I used many of the things I have learned over this past year. I am not a new investor, but I do not consider myself an expert yet. You will see why in a minute.

Working with a realtor, I found a 1 bedroom condo REO, in San Pablo, CA, for which the bank was asking $35,000. I made an offer for $34,000 and it was accepted. The condo needed work in the kitchen and bathroom.

I put down $1,000 and borrowed $40,000 from a private lender at a rate of 12% with no payments until the condo sold.

I spent a total of $6,200 of rehab costs, which included new appliances for the condo, and a kitchen and bathroom makeover. The complete rehab took just over 3 weeks.

During the closing process, I discovered the city of San Pablo must inspect all properties exchanging hands. It is during this inspection I discovered I needed permits, to change sinks, and cabinets. The inspections and permits added another $400 to my expenses.

I put the condo up for sale for $62,000, with financing available. Note: there were 3 one-bedroom condo REOs for sale for $35,000 as well as 2 two-bedroom condos for $40,000. All of them needing work.

It took two months, but I sold the condo for $60,000, with another private lender financing the deal at 10% interest only for 5 years. I received $1,200 from the buyer for placing the loan.

After deducting my carrying costs, HOA dues, realtor commission and title company fees, my net profit was $14,000 (rounded to nearest 100) on $1,200 investment of my own money ($1000 down payment and $200 not covered by the extra money I borrowed).

One thing I did learn is not to use large contractors or specialty companies. The lowest bid to redo the kitchen was $5,800, this was just to reface the cabinets. Replacement would have cost $8,000. The small bathroom bid was for $2,200.

I used a handy man that had contacts all over the place and I was able to get new cabinets and granite top for the kitchen for $1,200 complete. I paid him $25 per hour. I think I made a good deal.

Rafael Siero
San Pablo, CA

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Best Little Condo Deal Ever

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