John rakes in his dough

Congrats, John...

clearly the buyers in this instance did little or no due diligence. The first thing a buyer should do in this market is find out the last sale price on a property. Any flip should be ruled out as a purchase candidate 100%. Clearly there are plenty of clueless buyers out there. We have the current crisis as evidence.

Now that everything is a done deal, what was the address of the property, so that we can verify the legitimacy of the story and numbers?

Wow. Glad to hear you were successful, but simply amazed that it worked.

Hung: Why do you say flips should be ruled out 100% as purchase candidates? I agree "investors" who are trying to flip properties in this market are more likely to be delusional, but you never know... You might find one who's ready to throw in the towel.

John: Congratulations on your success... You got out very close to the top. Well done! But I would caution you to be very careful on your next project-- you will almost certainly be selling into a very tough market these next few years. Invest wisely and best of luck.

Hung,

I think you're wrong, as our original purchase was a condo that was an uninhabitable, half-gutted unit. The project was a lot more than "putting lipstick on a pig".

Anon,

I don't wish to post that sort of info here. Email me if you want further info.

Hmmm, I can only find what I assume are the pre-reno photos online. $280,000 or so? Well, there's a damn good burrito place down the street anyway.
Which car outside's John's, the S-class, or the 3-series?

Additionally, I have to say I'd appreciate John's discretion if I were the buyer...

I understand John's wish for discretion... but since Devlin has done some good sleuthing now, a few important points jump out...

The property is essentially in Dorchester, one of the neighborhoods that has seen the brunt of the correction (so far). It would be utterly foolish to extrapolate from this experiment and assume that the it's safe to buy now in an arbitrary neighborhood like the Back Bay or one of the "immune" towns. Many neighborhoods have seen disproportionately small declines thus far and are still dangerously overpriced. I applaud John for finding somewhere where this wasn't the case and bringing actual value to the table.

Oh, wait... I forget this place was originally a foreclosure. I should have mentioned that in my last post since it is just as pertinent as picking a neighborhood where this would actually work. The moral apparently is: flipping worked in a neighborhood where prices have fallen somewhere around 50% (I'm guessing) and where the purchase was a foreclosure. The moral is not that real estate is a good investment again.

Without details, hard numbers, and some form of verification, even small, I don't believe this is worth our time.

i think it was 39 cedrus in rosi.... only reason being - when I looked at the place a few months back, the developer stated he was doing some blog thing online about the property.

Congratulations John. I am amused to see that the doom and gloom crowd still can't bring themselves to congratulate John. This isn't an isolated story. This is happening all over the state. Why do you think that some bank-owned properties are receiving a dozen offers in a day or two after hitting the market?

It's not easy. It's hard work. Smart people who work hard can still succeed in real estate. Congrats again John and good luck with the next project.

Hung - The profit is made with the purchase . We have bought foreclosures for under 50 K that have a market value of 200 - 225K with no renovations. If a buyer doesn't think that they are worth the asking price , they can buy something else.
Past sale prices sometimes have nothing to do with current value.
John - You got lucky. Always remember that luck is the biggest factor in RE development . I was concerned when I read that the bank owned the other units in the building . That could have prevented financing.Don't get too cocky , it will eventually bite you. You left out multiple details on the transaction . Where did you get the construction funds ?

I should clarify, once I knew what the original purchase price was, based on "improvements" which I feel I can surmise fairly accurately, I would to refuse pay a premium for any "value-added" in this market. Sure there are plenty of flopped flips out there that present relative value. My point is that there is no need to give up any upside in this environment. via a profitable flip. I should have qualified my statement to say that I would not consider a purchase of a profitable flip in this market. It is a zero sume game...

remaven, if you paid 50k for a foreclosure, that IS the market. The clearing price IS the market. In many markets, the foreclosures are the market, many buyers perceive value when they are truly getting a "market deal". If one buys a house in Fort Myers at 70% off 05 pricing, they are getting a market deal. Price and value are two very different things...

this is worth posting for obvious reasons...

May 2 (Bloomberg) -- Billionaire investor Warren Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., said he’s seen no indication of recovery from the real estate slump that helped cause the U.S. recession.

“There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting today.

Mr` Wang- re #16 -We have since sold 14 of the twenty units we bought for an average price of $214K. So I guess the market value is $214 K. We did get one offer for $45 K for a unit. Was that you?.
Price and value are two very different things . The clearing price is not the market value.
Believe it or not, there are good deals out there. Get out from under that black cloud and you may see some gold in the daylight.

RE MAVEN:

joe blow and I financed the construction ourselves. I think we got lucky in many ways, but in the few projects we've done we have had a very short market time and have a very good asking price to sale price ratio. we put out a good product.

I am still shocked at people paying $300,000 for a 1,350 square foot condos in Dorchester. This is a nice neighborhood and close to the Andrew T stop but really? Like another flipper told me. It only takes one sucker. Show a unit to 100 people, have 99 of them tell you that you are crazy and then one person loves it.

If someone is happy with the condo and is comfortable with the comps, then it becomes their decision. We are all big boys here. I know there is another unit on the same street on the market at $400,000. It is larger, nicer and has parking.

Still who is paying $400,000 for Dorchester?

An even larger question. Who is paying $550,000 for DNA lofts?

This developer stated at the end of the story that he wants to take the next one to the "next level," whatever that is. In my opinion, that is a very dangerous statement to make at this point in a crap market. Trying to do a bigger unit or one in a less desirable neighborhood could very well be the tripping point, costing the entire profit on this project and more. My advice: don't swing for the fences... ever! There are a lot of ex-developers who said the same thing as you. "This one was easy, so I'll go bigger and better next time." In reality, this market is in constant flux, and what is true today may or may not be true in six months or even in six weeks. Beware.....

I'm not under "black cloud" at all. I 've made a fair amount of money shorting financials and anything centered in real estate over the last 18 months, and I don't see ANY reason whatsover to be optimistic about real estate (residential or commercial) in any market at this point. I'm not in the market to acquire any more properties, but if I was I would wait as there is much more downside to come.
If the clearing price is not the market, then what is? Clearing plus X, clearing minus X? How can you assign any factor to the clearing price to determine market
value?