04 Sep Nhan strikes a set back with his flip – Nhan Nguyen
We check in with Nhan Nguyen to find out how he is going on week 3 of his 30 day flipping exercise. Buying and selling a property in 30 days to make a big profit with little or no outlay. He strikes a snag this week.
Kevin: Let’s continue our journey and our story with Nhan Nguyen from Advanced Property Strategies. You might recall over the last couple of weeks, I’ve been telling you about Nhan’s journey where he was going to secure a property – he has done that; it’s on the south side of Brisbane – and with very little work, he was then going to flip it over.
I’ll just quickly summarize this, Nhan, before we jump into the chat. Your purchase price was $320,000. You then achieved a contract. Last week, you told us about it at $410,000. Reviewing last week’s chat, I also understand that you’re not going to be doing much work to it.
Nhan, welcome to the show once again.
Nhan: Thanks, Kevin. Thanks for having me.
Kevin: That’s a quick summary of where we are. This is week three. How are we progressing with that contract?
Nhan: Gee, the rollercoaster ride continues with the 30 day challenge. In the last 24 hours or so, the contract has actually crashed. The building and pest was done earlier in the week, and the contract has recently been terminated. Here I was, counting the money, but they did a building and pest report, and it turns out that some of the termites, which we did find on our original building and pest report, we didn’t treat. Oops! The new buyer had has a building and pest report done and has got spooked off and within a couple of days, has terminated the contract.
Kevin: Was there any way to salvage it? Could you have gone back to the buyer and said, “We will treat it?”
Nhan: At this point in time, my initial conversation with the original seller to me was that that seller wouldn’t negotiate with me based on a building and pest report. Maybe arrogantly, I said that I’d set those same lines to this new buyer. He’s just determined to basically not go ahead with any negotiations and just wanted to walk away because I think he was just a bit scared.
Kevin: I’m just remembering from last week, too. That purchaser actually had missed out on a property on the same street for $440,000. Where to from here, Nhan?
Nhan: The other good news that we had literally today is that we’ve secured another contract – another offer has come in. I have it in my inbox that we have had another offer come in at $405,000. It’s about $5000 less than the other contract. It has a building and pest and 14 days for finance. I think in this instance, we’re going to have to go and treat those termites, which is only going to be a couple of hundred bucks.
We’ll probably disclose with the buyer the building and pest report and see what they’re comfortable with because I don’t want to spend another week or so waiting to see if they’re going to crash it again on the building and pest.
Kevin: Are you able to give them the previous building and pest inspection report?
Nhan: Yes, that’s what I plan to do. I have it on a PDF, and there are no rules to say that I can’t do that. It’s up to them if they choose to read it and respect it or not, or if they choose to do their own. This is a journey, and my challenge is to do as little as I can to the property. I’m thinking that I might have to clean it up, remove some of the termite damage, get a bit of spraying done, and we’ll see after this contract whether I have to renovate it or not.
Kevin: Admittedly, even if it’s $5000 less, you’re still well and truly in front. It’s not quite as big of a profit as you thought, and you’re going to have to dip into your pocket to get that treated. What would be your advice to people in terms of disclosure? Will you say to that buyer now, “This is what’s happened?”
Nhan: In my personal view, I don’t need to disclose that. All they need to know is that there are termites on the property. I believe that the fact that the previous contract has fallen out is none of their business. It’s another person’s choice based on the same information. What I’ll do is I’ll just say to them, “We’ve had a contract that came through. It didn’t proceed as we thought it would, and we’re putting it back on the market.”
This particular buyer, he’ll make his own decisions based upon doing the building and pest himself or on our building and pest report, whatever he chooses to do. We’ll go from there.
Kevin: It’s still good buying. If a similar property on the same street sold recently for $440,000, and yours looks like it’s going on the contract of $405,000 or even $410,000, it’s still very good buying.
Nhan: Yes. I think it’s just managing expectations. Originally with the $410,000, counting the money at $65,000 or $70,000 profit, it’s just $5000 under. Look, we bought it for $320,000, so there’s a lot of margin in there. I think that part of when you buy right, it allows you to negotiate more fully, whereas if I had bought it for $400,000 and sold it $410,000 or $405,000, I’d definitely be losing money after stamp duty and legals and things like that.
Kevin: Have you settled on the property yet for your purchase?
Nhan: No, not yet.
Kevin: When does that happen?
Nhan: That happens very soon – I think in about a week or so.
Kevin: So it will be a small period of time when you do actually own the property?
Nhan: That’s right. If this contract is a 30-day contract, it’ll be only for three weeks. If the contract is 60-day settlement, it’ll be probably seven weeks. We want to get that gap as small as possible to minimize my holding costs, but I think anything from 30 to 60 days from settlement to settlement is pretty cool.
Kevin: Do you have any of your own funding in this? Did you have to put a deposit in, or is it 100% funded?
Nhan: In this particular project, because the project is quite small, I’ll just fund it myself. What I mean by that is it’s small in terms of quantity, but also if we profit share it, let’s say there’s a $60,000 profit in it, I can’t really justify giving away 30%, 40%, or 50% profit share for a profit that small, and I can settle it myself.
That’s what I’ll be doing: just settling it myself, probably cash initially for about a week or so while the bank refinances my cash out if necessary. Otherwise, I’ll just leave my cash in there for a month and have the subsequent buyer pay me back, and we’ll just roll again.
Kevin: I guess you just assess it as you go along. You just look at each week as it comes along and make a decision about what direction you’re going to take with it.
Nhan: Yes, exactly. I do find because we are scrutinizing it on a daily basis, on a weekly basis, it just seems like 30 days is such a long time between contracts. But we’re fortunate to know that the property is in high demand. It’s zoned for units and townhouses, 700 odd square meters with 18 meter frontage, so it’s in high demand and we’re getting a lot of leads from our marketing. It’s working really well.
Kevin: Are you on the lookout for the next one now?
Nhan: Yes, we are. Now that we know that this kind of marketing works – we’re doing door knocking, we’re doing letters, we’re doing flyers – we’re definitely ramping it up, and we’ve picked another couple of suburbs. We’re just ramping up to spend on the marketing to be able to find out our next deal. Our next deal might be a flip, it might be a buy, hold, and renovate or a buy, hold, and develop. It just depends on the project. [6:31 inaudible]
Kevin: We’ll check in with you again next week. Hopefully, this new contract might then be in place. You might also have some good news for us about the building and pest, as well.
Nhan: Yes, that’s right. Let’s see there. I’m not going to count my chickens before they’ve hatched. We are looking for another backup contract, and we’ll see how it goes.
Kevin: Good on you. We’re at week three of the 30 day challenge with Nhan Nguyen from Advanced Property Strategies. We’ll be back next week, and we’ll give you another update then.
Thanks for your time, Nhan.
Nhan: Thanks, Kevin. Thanks for having me.