Livin' La Vida Luna y Luca
While the cat's away, the mice will get pizza and ice cream 😄
Introducing Project Mackenzie
Project Mackenzie marks many firsts for me.
- It's my first deal in this town
- It's my first time buying a project mid-construction
- It's my first time partnering with the guy who taught me the game
- It's my first time hiring a General Contractor on a GMP contract (Gauranteed Maximum Price)
How did we get here...?
A few weeks ago, I was doing a routine check-in with one of my colleagues. I was asking how his projects were going, specifically Mackenzie.
He reluctantly shared his partners ran out of money, and the project was crawling at a snail's pace. What you see above is the progress made after ~2 years of ownership.
In my eyes, this is injustice at the highest level. My friend is a highly skilled contractor, and unbeknownst to him, his equity partner was severely underfunded.
Enter my ego... I can fix this.
I saw an opportunity, underwrote it, made 2 phone calls, and ultimately did a hospitable takeover earlier this week.
The Numbers:
Let's quickly run through the numbers.
We'll start with three buckets of expenses and end with our expected After Repair Value.
Acquisition Costs:
We agreed to buy the property for 999,999, which is slightly below the former ownership's basis.
Cost to Build & Carry:
The carrying costs ($135,000) are calculated for 1 year of hold, but we believe we can go close to close in as little as 8 months given framing is almost complete.
My contractor friend is going to finish the job for a Guaranteed Maximum Price (GMP) of $750,000.
That may sound like a lot of money, until you see how freaking big this house is: 8,000sf. 😅
Cost to Sell:
Hopefully, we can sell this pre-construction and save the staging money. Every cent counts when the cost of sale is upwards of a quarter million dollars.
After Repair Value:
The Hard Money Lender's appraisal came in at $2,480,000.
My friend originally underwrote his ARV to $2.25M ~2 years ago, but our agent believes recently sold comps make $2.5M a possible outcome.
I split the difference and underwrote to $2.375M. I'm obviously glad our appraisal came in $100K higher.
What's Next?
We purchased the property on July 15th. New material is on its way to the site as we speak.
It's possible to deliver this home by the end of 2026, but it just might take a Christmas miracle.
Check it out:
