We continue to follow the journey that Nhan Nguyen started 4 weeks ago where he is attempting to flip a property in 30 days and turn over a tidy profit. It has not been smooth sailing but boy, are we learning some lessons from his experience. Hear what progress has been made in the last week.
Kevin: Here we are in what is now week four, probably, in fairness, jumping over to week five, as well – a bit of a combination over the last couple of weeks – of our journey with Nhan Ngyuen, where we’re looking at the flipping exercise where he’s secured a property and is looking at flipping it and making it profit in a 30-day period.
Nhan, welcome to the show once again.
Nhan: Good day, Kevin. How are you doing?
Kevin: Good, mate. Just a very quick summary for those who are probably needing to catch up: Nhan found a property on the Southside a few weeks ago, he put it under contract for $320,000, and in no time at all secured a contract for $410,000. That crashed on a termite inspection.
Last time we spoke, you had another offer in your in-tray for $405,000 – a bit less, $5000 less – that came with a building and pest inspection and a finance clause, as well. I think last time we spoke, Nhan, you told me that you were going to go ahead and do the pest treatment. Is that right?
Nhan: Yes, absolutely. We ended up doing the pest treatment just to cover our backsides, and we supplied the building and pest report to the buyer, as well, just to let them know that this is where we at and there are some termites on the property – not a lot, but there are – and we’ve treated the termites, as well.
Kevin: So have you now gone through that building and pest and those finance clauses on that contract?
Nhan: Yes, we have. With the building and pest, they didn’t even do their own building and pest report, they just used ours, the one that we supplied, and I was really happy with that. He rang up the building and pest inspector just to verify the report, what the concerns and the issues were, and they were all cosmetic.
Especially with the property being 50 or 60 years old, as a lot of properties are in Brisbane and Queensland, it’s not uncommon to have some dry rot and issues there. But yes, they’re not structural issues, just cosmetic issues. And in the meantime, the finance has been approved with the Commonwealth Bank. They did the valuation, and yes, they’ve gone unconditional, which is really exciting.
Kevin: That’s good. I’ll ask you about settlement in just a moment, but I just want to stay on that building and pest report, because there’s a big lesson in that. I think last time we spoke, I asked you if you were going to share that report, and you said you didn’t really have to, but obviously, you made that decision that that’s what you’d do, and that probably helped you get this across the line a bit quicker.
Nhan: Yes, I think so. With the buyer there, I just did an open-book, transparent situation where I said, “You know what, this is our building and pest situation, and if you have any questions or concerns, please tell me now, because I don’t want you crashing the contract two weeks or one week into the process. Just let me know now and we can put it back on the market.”
That’s one of the risks you take when you’re selling a property. You sign a contract, most of the time you take the property off the market for a week, two weeks, three weeks.
Kevin: Last time we spoke, you were about to settle on the property yourself, which meant that you’d have to use your own funds to get you through to when it settles with this now purchaser we know about, who we didn’t fully know about last time we spoke. So you have settled on the property, that’s correct, isn’t it?
Nhan: Yes, that’s right. We settled on the property recently, and I just used my own funds; I actually didn’t use any bank funding. The reason for that was this contract was coming through thick and fast, and I just settled with cash. The bank funding has been in the background and ready to go, however, now that we know definitely that the buyer is going to go ahead, we’re not going to require that bank financing any longer.
Kevin: Very good. Okay, let’s look at a couple of dates now. As we said, you have settled; you now know this is an unconditional contract. How long will your finance have to be in the property? What period of weeks?
Nhan: Originally, the contract of sale was 60 days, and that was going to be about seven weeks that my funds were going to be in there. However, I’ve negotiated with the buyer now to give him a small discount to cover him with one month’s interest.
The situation there was he’s going on holiday for a few weeks, and the property was going to be vacant with him being away, so he definitely wanted a 60-day settlement. I’ve been able to negotiate with him to get a shorter settlement and me subsidizing, let’s say, $1500 of the purchase price so that he can cover that interest, and he’s really happy with that.
Kevin: That’s a win-win all around, isn’t it? You’re going to get a quicker settlement, which means you can pull your funds out, and you’re going to pay the additional funds he would have cost in that period of time. So that’s a win-win; that’s a great negotiation.
Nhan: Yes, it’s really a win-win. He’s really happy with that. From settlement to settlement, with my funds in to my funds back out, we’re looking at actually 21 days. I know that this 30-day challenge is something that’s artificial, from settlement to settlement was my original parameters, but if I can do it within 21 days, I’m really happy with that.
I know it’s not the full $410,000 that we originally sold at, but you know what? We bought it for $320,000. I say to people that you make your money when you buy, not when you sell, and that’s where I created the equity and gave me a whole stack of room to be able to negotiate and turn the property around in a really short period of time.
Kevin: You’ve had a few extra costs here that you didn’t budget for. One was fixing up the termites, and then paying the purchaser $1500 or whatever it was to cover his interest payments. Have you done the calculations now? Do you know what you’ll end up with at the end of it?
Nhan: I haven’t done the final calculations, but we’re looking at roughly $70,000 net. A purchase price of $320,000, plus tax duty, legals, advertising. I think we spent originally $200-300 on advertising. We bumped that up when the first contract crashed to I think $1000 on RealEstate.com.au.
It’s going to be somewhere between $68,000 and $70,000 – because we didn’t sell via an agent, as well; we sold privately – from that $405,000, and there are going to be some legal costs on the other end. Luckily, we don’t have any bank fees to pay, so I would say we’re looking at somewhere between $68,000 and $70,000 net before tax.
Kevin: And you’d calculate putting your own money in there too; you’re taking that out, as well?
Nhan: Yes, the cost of that money will come out to about $1000 or so with interest, maybe $1500. Look, I’m not too concerned about that; it’s just not having that access to those funds.
Kevin: A cost of business, isn’t it? Yes.
Nhan, on with the next deal, I guess. I might just touch base with you when this all does finalize, just to see what the final wash-up was once it settles, and then we might talk about your next deal.
Thank you for sharing this journey with us over the last three or four weeks, and we’ll catch up with you as soon as the property does actually settle.
Nhan: Yes, I’m really excited about it. I know when I originally launched the challenge to the public and the people in my circle, I thought “You know what? This could fly or this could fail,” and I’m really pleased that it has come together. I am looking at putting together a $100,000 challenge in maybe a 30 or 60-day period. We’ll see if that comes along, and then we can float it and see what people can do.
Kevin: Good. I look forward to talking to you about that as it comes up. I’ve been talking to Nhan Nguyen from Advanced Property Strategies. Nhan, we’ll talk to you in the next week or two. Thanks, mate.
Nhan: Thanks so much, Kevin.