In Episode 4 from my video series “Real Estate Deal Talk,” I discuss two options for a real estate deal from last year that will help other real estate investors understand a few ways to think through a deal.
The property, at 361 Kendrick in Atlanta, was under contract and set to close at the end of July.
There were two potential plays for this property. One was to purchase it and rehab it. And within that scenario, there were two options. I categorized them as Opportunity A (rehab) and Opportunity B (wholesale).
Opportunity A presented two options of its own. We didn’t really want to completely demolish it, so the first option was to work with the city’s Urban Design Commission on gutting it and taking it to two levels. The second option was to gut it, but rather than making it two levels, we would extend it more off the back.
Now, the only profit potential difference in those two options was $5,000 and we would still be netting right around $100,000 with this particular house under either of those options.
If we opted for Opportunity B—wholesaling it—we would probably make about $30,000 on the deal, because there was a lot of profit potential on the back end for an investor who might decide to pick this one out.
We were only considering wholesaling the property for a couple reasons. First, we were looking at a some other opportunities that seemed to offer higher profit potential. Second, by wholesaling, we might be able to bypass working with the UDC so we wouldn’t have to spend the extra time required to sell this property, get it rehabbed and to get all the necessary permits and approvals to do what we wanted to do with this property.
So that’s a quick look at our thought process as we considered what to do with the property we were about to acquire.
You can see Episode 4 here: https://www.youtube.com/watch?v=vVc95HvKvbs&feature=youtu.be