My rehab + flip of house with a new partner in Philadelphia

I purchased a property on Newtown Ave in the northeast section of Philadelphia in August 2004 with Jake Komar's National Properties Group.

Jake located and recommended the property. The deal was that I put up the cash, and we split the ownership 50/50. Upon sale, I would receive all of my capital outlay back, and we would split the profit evenly. Jake gave me a description of the property, its purchase price, estimated repair work, and target sale price. He provided comps. These numbers were: Purchase price: 42,000. Comps on the block $70-75K. Optional rehab 5-8K

According to Jake, we were able to buy it so cheap because the owner had moved away (and perhaps died). It had been vacant for two years. We were buying below market because we had located a motivated seller in a distressed situation. Most of the houses in the area and on the street look exactly the same. It is a populated, mixed race area, and mostly owner-occupied.

Jake told me that the house would probably sell for 65-70 as is, or we could put 5-8K into it to clean it up and rehab the inside, and sell it for 75-85. The house is a row house in the middle of a row of similar houses (see photo) It needed to be cleaned out, and the large backyard needed clearing. This was done by the seller. The house is structurally fine, and great looking from outside. Inside it was pretty worn and old looking inside cosmetically, with old and outdated fixtures, toilet, kitchen, wall coverings, flooring.

We took possession and put it onto the market with very little work. Jake marketed the property through his network of buyers, and advertised it in newspaper. He held an open house. We received several offers in the $55K range - not what wanted and not enough. (though it was a validation that this property is a money maker not a money loser) We decided to do the repair work inside the house (mostly cosmetic) and install new kitchen, bathroom, paint the inside, fix up the roof, repair floors, etc. Jake and his crew do all the rehab work. Estimated costs 5-8 grand. We are in the process of doing that now (as of October 2004) and hope to have it back on the market by end of month, with target sale price in the 80s. I will update this post as we attempt to sell again. If the deal works as planned, we will split a 30-35,000 profit after a 3-4 month hold period.

UPDATED May 2005: This property was sold! We had a slow Christmas season. We were unable to sell the property ourselves, so put it on MLS. This would cut into our profit, but make it much easier to sell. Relatively quickly we received a full price offer of $89,000. It was put under contract in March, and I had the funds in my account in April. My final numbers were: Cash laid out: $57K Cash received: $69K My Profit: $12K My Return = 21% Time frame: 8 months During the whole process I was very happy with Jake’s work, and felt comfortable the whole time that I was getting enough information from him about what was going on. I have subsequently done several more deals with Jake.