ABOUT THE DEAL

The featured property was a 3-bedroom, 2-bathroom property in Cape Coral that was recently seized by the bank following a foreclosure. The property was purchased for $200,900 and required a light cosmetic rehab of $42,450. The conservatively estimated after-repair value was $325,000, with an exit market rent of $2,400. The project showed a clear path to a profitable exit in both fix & flip and fix & refinance scenarios. We wanted to share this bread-and-butter deal to show that there are still many good opportunities to buy MLS-listed properties.

WHAT MADE THE DEAL SPECIAL

FIX AND FLIP PROFIT ANALYSIS

At Ridge Street, our lending philosophy is “Finance Successful Projects.” As a firm, this means we will only lend on a project if we expect that the real estate investor borrowing from us will make a profit. Here’s how we analyze profit for fix and flip investment properties:

1. Estimate The ARV. By looking at comps of similar properties in the area, we estimate a conservative after-repair value of the property.
2. Account For Purchase and Renovation Costs. With the purchase price outlined in the purchase contract and an estimated scope of work, we added these costs to our model.
3. Account For Interest. Most of our fix and flip loans are for 12 Months. So, we conservatively consider the interest carry cost plus loan origination fees for a full 12 Months.
4. Property Tax, Maintenance, and Other Costs. While investors hold these fix and flip projects there are additional costs we consider such as taxes as well as realtor and legal fees for both the purchase and sale of the property.

In this case, the deal showed a healthy profit margin even with these conservative deal assumptions.

THE RESULT

The successful fix and flip loan provided the client with the following Loan Terms:

1. Loan Amount $203,700 for 12 Months.
2. Initial Advance $165,825 and Rehab Holdback $37,875.
3. Leverage: 82.5% of Purchase + 90% of Rehab.
4. Rate 11.25% (As Drawn).

More About Ridge Street Capital

Ridge Street Capital specifically focuses on providing investors with access to capital to acquire, renovate, build, and hold real estate. Partnered with local real estate investors across 35 US States, we’re changing the way real estate investors finance their projects.

If you’re interested in lowering your cost of borrowing or improving your borrowing experience, we’d love to work with you.

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