The Power of Foreclosure - Posted by Hugh James
Posted by Hugh James on February 21, 2000 at 14:00:52:
Thought some of you folks would appreciate this deal. This one is a good lesson for me. This deal was right in my own backyard and I was asleep at the wheel. No excuses. The numbers are awesome. Here’s the story:
Chicago frame three unit taken back by a national lender. In an area beginning to gentrify, but the building is a mess. Structurally probably OK, but a TOTAL rehab. Was listed on MLS last August at $98K. Was purchased by another real estate agent in one day at $91.5K. He got a 3% commission, so his net cost is $88,755.
The building sits on the north side of a lot 50’ wide by 125’ deep. A standard Chicago lot is 25’ by 125’ so after closing in August, 1999 he applied to the county to subdivide the parcel and get a separate PIN for his new vacant lot.
Last week he listed the house “as is” at $189K and the new vacant lot parcel at $110K. Both sold in under a week.
Now at this point I’m just guessing, because these sales have not closed yet. But knowing the area I think I’m close in saying he probably got about $95K for the lot and about $170K for the building. That’s $265K less his cost of $88,755 for a gross profit of $176,245. He did NOTHING to the house. It’s in the same bad shape it was when he bought it last August. He did have to pay taxes, insurance, attorney fees and some closing costs.
$176,000+ profit for knowing value and moving quickly and being able to wait 6 months for his profit. What’s the yield on this investment. Yes, “Good enough.”
You’ve got to hand it to an investor who had all his ducks in a row and then went for the gold.