Turning Challenges into Profit: Beki and Kelly’s Transformative Real Estate Deal

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Beki and Kelly Cassels’ journey in the real estate investment world is both inspiring and educational. Within a short span of two and a half years, they have gone from being brand-new investors to successfully executing significant deals.

Jay Conner, their mentor, plays an instrumental role in their success by providing them with the knowledge and financial resources required to thrive in the competitive market of real estate.

In the latest episode of Raising Private Money, Beki and Kelly shared the details of their latest deal, providing in-depth insights about their journey, the acquisition process, repairs, and the unexpected challenges they faced.

Here is a breakdown of how they transformed a problematic property into a profitable investment.

Identifying and Securing the Deal
Finding the Property
Beki and Kelly's latest project, located at 2332 East 10th in New Mexico, was identified through a referral from a neighbor. The property was notorious in the area for being the “problem house.” The landlord, tired of dealing with tenant issues, was looking to sell. This was a classic case of a “tired landlord” and represented a perfect opportunity for the Cassels.

Understanding the Market Value
The after-repair value (ARV) of the property was initially assessed at $230,000 by their knowledgeable realtor. This valuation was crucial as it provided a baseline for determining the potential profitability of the deal. However, due to market dynamics, they planned to list the property at a higher value of $280,000, significantly increasing their potential return on investment.

Repairs and Unexpected Challenges
Estimating and Executing Repairs
The initial repair estimate for the house was $110,000, but they wisely set aside an additional $10,000 for unforeseen issues, following the well-known Murphy’s Law. True to form, challenges did arise, particularly with the gas lines and HVAC system, necessitating a complete overhaul. This thorough rehabilitation included gutting the house down to the studs and installing new electrical wiring, plumbing, and insulation.

Detailed Repair Budget
Their strategy involved getting a contractor's rough estimate before making an offer on the property. While the detailed estimate came in after the property was purchased, it closely matched their projections. By diligently working with professionals and being prepared for surprises, Beki and Kelly ensured the project stayed within budget.

Financing and Profit Calculation
Securing Funding
One of the standout aspects of this deal was the financing structure. Beki and Kelly borrowed $172,500 through multiple private lenders at an interest rate of 10%. The funds were wired directly to the closing agent's trust account, covering the $43,000 purchase price and leaving them with $130,000 upfront for repairs and other costs.

Calculating Net Profit
After accounting for the $120,000 spent on repairs, realtor fees, carrying costs, and other expenses, Beki and Kelly calculated a net profit of $88,200 from this deal. They also paid a 6% realtor fee amounting to $16,800 and anticipated their private lender interest to be around $9,000 over six months. Such meticulous financial planning ensured that they could maximize their returns even with significant upfront and carrying costs.

Timestamps:
00:01 The Problem house owner is ready to sell the property.
05:40 Listing for 280, confident about the budget now.
08:23 Extra $10,000 covers carrying cost, 8% interest.
10:09 Net profit: $88,200 after all deductions.

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Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal.

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