We at Hermit Haus Redevelopment focus on finding situations where everybody wins. I’m often asked how that can work. “Doesn’t somebody have to lose out?”
The answer is that not everybody measures their success in financial terms. When my mom died, Dad just wanted out of a house with too many memories. When he sold it for 70% of what it was worth in its as-is state, he was ecstatic to be free of it. He could put money in his pocket and start living life on his own terms.
Here’s how a group of people can work together to improve a neighborhood, create wealth, and build a situation where everybody benefits:
- I will admit that I wasn’t involved in the original transaction. So I don’t know what the original seller’s motivation was, but I’m going to assume their best interest was served by selling a house that was too much for them to renovate for sale. Maybe, like my dad, they were happy to sell the house for more than they paid for it, even if it wasn’t what it would have been worth if they worked to rehabilitate it.
- Another redeveloper Larry met at the Houston Summit last month is financing the project in return for two points (2% of the money he’s lending) plus 12% APR on the note.
- I put the project together, will manage the finances and be responsible for the mortgage, and will front most of the renovation budget not covered in the initial mortgage. In return, Hermit Haus will retain half of the profit at sale.
- Larry’s contractor friend will do most, if not all, of the work—or rather, his company will. He will retain a fair profit on what currently stands at a $70K redevelopment budget while his employees benefit from a living wage.
- Larry’s company is responsible for managing the day-to-day operations of the redevelopment project. It keeps the other half of the profits at sale.
- The neighborhood where the house is located gets a nice home where there is currently an eyesore that isn’t currently habitable. Everyone’s property values should increase as a result of this project.
It’s a win for everybody involved!