Livin' La Vida Luna y Luca
Currently celebrating Dia in the Bahamas
Happy Mother's Day to all the moms reading this 🤗
Project Willow SOLD!
Let's do a post-mortem on Project Willow by reviewing the timeline, forecast vs. actuals, and key takeaways.
Timeline:
- Purchased on 06/26/2025
- Listed for sale on 1/21/2026
- Sold on 4/29/2026
Total time to complete the work was ~6 months, and total time between closings was 10 months. I'm not mad about either. We budgeted 12 months total, so we came out slightly ahead.
I do think, however, we could have saved ourselves 2 months of fully deployed holding costs towards the end had we avoided the mistake of pricing the home too high. More on this later...
Forecast to Actual Budget:
If you go back and read my initial projections, you'll see we budgeted $450,000 for the cost of construction and another $86,000 for interest.
We ended up spending close to $475,000 on the Cost of Construction and another $90,000 in holding costs. We missed our estimates by ~5% each.
Once we were fully deployed, our interest expense alone was $10,000/mo. Cutting that check on the first of every month while the property collected Dust On Market was pretty painful.
Forecast to Actual Sale:
Our lender's appraiser gave us a hard time with this property's valuation.
I had to fight tooth and nail to get him up to $1.65M. He argued most homes in this section of town are duplexes, and we were making the cardinal sin of converting a duplex into a single-family home.
But I had more information. A friend was under contract to sell a smaller SFR down the street for $1.625M, and there were other similar projects underway.
My sensitivity analysis for outsale was:
- $1.65M - Conservative
- $1.7M - Base Case
- $1.75M - Aggressive
Ultimately, we threw caution to the wind and opened at $2M because a neighboring property listed for $2.2M at the same time, despite having a smaller home with lower-end finishes.
Our rationale was, "if someone was even remotely considering paying $2.2M, they'd feel like ours was a steal at $2M."
The Expected Value (EV) bet I made was pegging the likelihood of achieving $2M (an add'l $350K to appraised value) at 10%. $350K x 10% = $35K. I figured it would take ~90 days to find out if someone would pay the incremental value, which would cost us $30K in additional holding costs. My oldest friends know this about me: I'm a degenerate gambler at heart. Spending $30 to have a 10% chance at winning $350 is a bet I'm making every day of the week, twice on Sunday.
Unfortunately, 10% was way too generous. I should have handicapped it at 1%. We ended up being dead wrong and found ourselves decreasing the price 45 days later to $1.888M.
We planned for another price drop to $1.75M at the 75-day mark, but we received an offer that ultimately closed at $1.7M. It was time to cash out our chips and live to fight another day.
Biggest Takeaways:
- Make data-driven decisions. We were seduced into listing for $2M because our neighbor listed at $2.2M. No one on my team truly believed a $2M sale was a likely outcome, but we did it anyway because we got greedy and hoped a buyer would make an irrational & emotional decision. The comps supported $1.7M, and I can make the argument that if we opened at that price we might have 1) had a bidding war (open house traffic was great) and/or 2) sold much faster (reducing holding costs).
- I'm not built to sit. I don't like bringing a finished product to market. I strongly prefer going under contract mid-construction at a fair price over finishing, staging, and doing a full marketing blast to achieve the highest and best outcome. Am I leaving money & status on the table? Most certainly. But more top-line revenue is only half the profit equation. I'd much rather cap my holding costs by handing over the keys the day we complete than cross my fingers & toes while praying to the real estate gods for incremental revenue. The velocity of money is much more important to me, especially because I'm using 100% financing, and each project costs so much to put together.
- Design matters more than ever. It's not enough to have more bedrooms, more bathrooms, and more square footage than the next property. The home has to make you feel something when you're walking through it. My partner did an excellent job designing the kitchens and bathrooms in this home, and everyone who walked through it complimented our finish selections.
- Location, Location, Location. This home is squished between an apartment building and an older home in dire need of a renovation. The tenants of the apartment building were parked within 3' of our property throughout construction. It wasn't until we installed a fence that they had to respect our property line. The driveway for our home was so narrow you could barely fit a full-sized SUV through it. Additionally, the home was so close to the street corner that there was no street parking in front of it, making parking inconvenient. The lot is also really small, making the "backyard" almost non-existent. It was REALLY hard to overcome these objections at this price point, but thankfully it all worked out. Although we made it out alive with a mediocre profit, I can't say I'd rush into another project with similar external conditions that are impossible to change.
Before/Afer
If you want to read more articles or see more pictures of the finished product, feel free to visit the Project Willow page.
✌️ & ❤️
P.S. Special s/o to the Investor that funded this deal and rolled into Project Hobart. 👊