Chicopee talk ss

619 Broadway St.
Chicopee, MA

The Good, the Bad
and the Ugly of a
First Rehab Project

Shaun M. Reilly
Shaun@rre-homes.com

Copyright - Reilly Real Estate, LLC

Alternate Title

“Wait, where the F@*%
is Chicopee???”


Who am I?
 Raisedin Dracut, MA
 Graduated from Boston University 2000
– Bachelors in Math and Chemistry and Physics Minor
 Graduated from Boston College 2007
– MBA with focus on Operations and Finance
– MSF (Master of Finance)
 Started in real estate March 2007
 Full time since Jan 2010


My Start in Real Estate

 Converted primary residence to rental in 2007
 Quickly purchased 2 similar properties to use as
rentals (Just the like they say in the books!)
– Liked people mailing us money every month
– Cashflow was not great
 Overestimated rents, underestimated expenses
 Got in a holding pattern for a few years


How do you buy a house?
MAKE OFFERS!

 InMay 2011 something “clicked” and I started
making tons of offers.
 Conservative ARVs and High Rehab Budgets
– MAO = 65% ARV – Rehab (Including 6 months of
holding costs)
 First offer 90% of this
 Be embarrassed by your offers!


How do you buy a house?
MAKE OFFERS!

 619 Broadway listed at $63,000
– Originally listed for $90,000
– 138 DOM when accepted
 Plus 20 more unlisted days in middle
 Made 2 offers (the ONLY 2 offers)
– Accepted offer of $34,535
 Purchased for 54.8% of list (38.4% of original)


First Wholesale Deal???
 Chicopee is really far away!
 I’ve never done a project!
– Something that far away isn’t a good one to start with!
 Don’t know any contractors out there.
 Don’t have a network out that way.
– Who can I hire? How can I find them? No way to
utilize the network I had built out here.

I should just wholesale it!!!!!

First Wholesale Deal???
 MARKET IT!!!!
 Bring it to the REIAs!
– MA REIA – Springfield shut done a couple months
before
– MA REIA – Worcester shut done that month
 Craigslist– A few responses but nobody serious
 Call the “We Buy Houses” investors out there
– No call backs!
 Referrals
– One serious buyer!

Wholesale Gone Bad…

 Buyer signed P&S and put down deposit
 Met with a Realtor and Contractor to get
opinions on ARV and Rehab costs
 Lined up hard money and was going to double
close on my contract date
 HML got cold feet and pulled out 2 days before
 Tried to salvage deal but nothing panned out


Can I Rehab It?

 Had the money to close
 Was able to get the money for the rehab work
– Nobody I knew wanted to lend that far away
 Convinced a contractor I was working with
evaluating properties to go there from Lowell!
 Had a couple of Realtor contacts that worked
out there.


BEFORE


Quick Scope

 New Electrical
 New plumbing
– Including new boiler and hot water heater
 Full Kitchen remodel with layout change
 Full Bathroom remodel with layout change
 New roof over back addition
 All new flooring, paint and fixtures throughout


AFTER


You Make Your Money When You BUY!

 Purchased just over 50% of list price
 Other Profit Centers
– 3% closing cost credit
– Buyer agent commission
 Purchased for ~10% less than MAO
 Cheapest sale of the year in the city (On MLS)
– Last sale for less was 7/21/10
– No sale for less since


Financials
Expense: Income:
Buy Price $34,535.00 Buyer Agent Commission $828.84
Settlement Fees (BUY) $231.95 Forfeited Deposit $500.00
Construction $41,286.84 Sale Price $123,000.00
Taxes $582.68 TOTAL INCOME: $124,328.84
Insurance $1,196.79
Utilities $573.48
Miscellaneous $249.55 Had a $1,036.05 concession on purchase
Buyer had a $2,500 credit
Commissions $6,627.50
Settlement Fees (SELL) $4,060.88 5.5% Commission on Net $120,500

TOTAL EXPENSES: $89,344.67

Gross Profit: $34,984.17

Mistakes I Made

 Didn’t have a great exit strategy
– Wanted to wholesale when I didn’t know how to
wholesale!
 Overestimated ARV
– Ran MLS comps that looked good
– Local Realtors thought I was on the high side
 Didn’t get this information until after purchase
 Still thought I was in right range
– Sold for over $15K less than the low end of my range


What I Did Right
 Bought really well
 Had a backup strategy when initial exit strategy
didn’t work
 Overestimated Rehab costs
– Everything is broken until someone tells me it isn’t
 Builtstrong relationships so contractor traveled
for my job
 Was not dumb enough to think I should save
~3% by listing myself

Postscript to the Story

 Since then I have bought, rehabbed and sold 3
other houses
 Have 1 under contract for resale
 Have 2 on the market for resale
 2 projects under renovation
 0 under contract for purchase
– Closed on one yesterday


Postscript to the Story

 Have now wholesaled a property
 Have added 2 units to rental portfolio
– Should add 2 more by end of the year
 Have made over 1,300 offers on over 300
unique properties in 2012
– Over 2,000 and 400 since May 2011
A current investor recently said they want to
invest an additional $100K or more by January

Two Kinds of Real Estate Investors

1. Those that make a ton of money

2. Those that give up too soon


Chicopee talk ss

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