Q&A: Home Run Deal/Project - ~$3mm Profit, ~6.42x EM, ~18 Month Investment Horizon

A lot of members who do these AMA's usually start by saying something like "WSO has been instrumental to my career and I never would have made it without the community. So now I want to give back." I wish I could start with this, but the reality is I didn't learn shit from you monkeys lol, but I do enjoy the community, talking shop with all of you, and genuinely providing any advice/guidance that I can to others here. So in order to "give back," impart some knowledge to the community, and maybe inspire some of you, I've decided to do a very detailed breakdown and an AMA on a home run deal (at least I consider it a home run, this may be peanuts to some of you) that I am working on with my family.


Grew up in a mom & pop real estate development family (Dad's a GC/developer who has been building and selling luxury townhouses for the last 25 years). Graduated from a semi-target with a major in finance. Worked at a Wall Street bank in "middle office" and hated it. I always wanted to end up in real estate eventually so I decided to pursue my MSRE at NYU (a useless degree in of itself, but allowed me to become a student again and take on real estate internships (interned at a LMM REPE shop and a boutique debt/equity placement shop). Upon graduating from NYU, I worked at a MM developer in my city, which btw is a major city (NYC, LA, DC, Boston, SF), for a couple months and was laid off due to covid (best fucking thing to happen to me. In the 6 months that I was at the MM shop, I absorbed every single deal they've ever worked on and learned all of their contacts/network - architects, attorneys, banks, etc..- honestly learned 95% of everything they had to offer in 3 months and was ready to leave anyways). Upon getting laid off, a home run deal appeared...


Didn't actually source anything. A real estate agent that we know reached out to my family about an off-market, 3-unit, ~6,000 LSF (~8500 GSF), property in the nicest area of one of the most expensive neighborhoods in my state...with 8 parking spots (these 8 parking spots are what makes this property worth so much...no one will buy a multi-million dollar condo with no parking. You need at least 1:1 parking to unit ratio to hit the big bucks...and this one has an 8:3 ratio...Right off the bat we know this property is worth $3.5mm-$4mm (we know this market incredibly well..it is our bread and butter market). The asking is $2.8mm. The condition is deplorable btw...but it is a developer's wet dream because I'm going to gut it to the studs anyways. We throw $2.75mm at it, no contingencies (If we offer full price immediately the Seller will think they sold for cheap and get greedy). Seller counters at $2.79mm...we counter at $2.78mm (My dad's a penny pinchers lol). Offer Accepted.


During P&S negotiation we find out that the Seller doesn't actually own the property...turns out that the property is an estate sale (Gotta love estate sales) and the heirs have been suing each other for the past 3 years and the judge has appointed a Commissioner to liquidate the asset. This Commissioner is just some attorney that works closely with the court and doesn't know shit about real estate which explains the incredibly low price. Anyways, the Seller is trying to flip the P&S he has with the Commissioner to me, but according to his P&S with the Commissioner, he is not allowed to assign the P&S without approval from the Commissioner. So we create an LLC with both of us as members and name the LLC as the buyer of the property in the P&S with the Commissioner. We then draft an agreement stating that upon closing of the property, my family will buy out the Seller's ownership in the LLC for $250k (the agreed upon price between the Seller and the Commissioner is $2.53mm and I agreed to buy the property from the seller at $2.78mm). Just as we are about to sign the agreement...


A similar property in the same town, but a less desirable location sells for $3.5mm. Seller realizes his royal fuck up and starts making excuses to get out of the offer he accepted 2 weeks ago and goes MIA. I'm pissed and am determined to lock him into the deal by any means necessary. Start seriously considering suing for breach of contract and specific performance. Even if nothing comes of it, tying him up in court will cause major issues for him. Don't forget that he has a P&S with the Commissioner with a closing date in 60 days. His goal is to flip the P&S and make a few bucks (or hundreds of thousands rather) without coming up with any cash. Tying him up in court throws a wrench in his plans. At 1AM I'm twisting and turning in bed trying to figure out how to salvage this deal. So I decide to do what should have been done at the beginning of this deal...read every damn word in the 50 paged P&S he has with the Commissioner. In the Addendum I discover that one of the terms of the P&S is that at any time before closing, if the Commissioner receives a better offer, then the Commissioner has the right to void the existing P&S and take the better offer. Next day I email my lawyer to tell the seller "If you do not come back to the table, we will go directly to the Commissioner and put an offer in" within 15min his lawyer emails back with "Oh the Seller actually realizes that the offer is binding and still wants to sell..blah blah blah." I review the side agreement between me and the Seller and make sure it is air fucking tight. Seller signs the agreement.


Gut renovate and sell each unit as luxury condos. And during construction, we will seek a variance to convert the basement space as a 4th unit (Fast forward to present day, our Zoning Board hearing is actually in 2 weeks and I've been working on this for the last 8 months (8 months for 1 extra unit...and yet the city still wonders why housing is so unaffordable...idiots)). Now when we get to the "sell out" section which will go over the figures, some annoying monkeys are going to nitpick and say "Well Fred...you don't have the variance yet so you can't count the proceeds from the 4th unit." The ZB is going to approve my variance. They've approved similar variances for basically every 3-unit, building as long as you have at least a 1:1 parking to unit ratio. The town's Planning & Development Committee has already approved it and has recommended it to the ZB and it is incredibly rare for the ZB to vote differently from the Planning Board or else the town just looks stupid and not unified. Even my building inspector is already assuming that this will be 4 units because they approve it all the time. My property is also in an "overlay zone," where the town is trying to increase unit count. I will go over the variance process later.


Unit 1: Garden Level i.e. the basement unit. 1800 LSF, 3BR/2BA

Unit 2: First Floor, 1800 LSF, 4BR/2.5BA

Unit 3: Second Floor, 1950 LSF, 4BR/3BA

Unit 4: Pent House, 2000 LSF, 4BR/3BA, 200 SF Private Roof Deck

Each Unit has 2 Parking Spaces


Acquisition Price: $2.78mm (Seller didn't deliver the property clear of all debris or install smoke alarms per the P&S, so we escrowed $10k and took the full amount. This basically breaks even with my closing costs)

Hard Cost: $1.2mm (already adjusted for inflation of raw materials, keep in mind that we are also the GC)

Soft Cost: $120k (architect, zoning attorney, engineers, permit, builder's risk, RE taxes etc...)

Interest Expense: (80% LTV, 100% Hard & Soft, 4% interest only): ~$150k (bank forgot(?) to charge me the origination fee that we originally agreed on lol)

Sales Cost: 5% (Sales commission and closing costs)


Here's the part you've all probably have been waiting for...

Best Case:

Unit 1: $1,400,000

Unit 2: $2,100,000

Unit 3: $2,200,000

Unit 4: $2,300,000

Total Sell Out: $8,000,000

Profit: $3,350,000, EM: 7.02x

Expected Case:

Unit 1: $1.3mm

Unit 2: $2,050,000

Unit 3: $2,100,000

Unit 4: $2,200,000

Total Sell Out: $7,650,000

Profit: $3,017,500, EM: 6.42x

Worst Case:

Unit 1: $1.2mm

Unit 2: $2,000,000

Unit 3: $2,050,000

Unit 4: $2,100,000

Total Sell Out: $7,350,000

Profit: $2,732,500, EM: 5.92x

IRR analysis doesn't even make sense lol


When we initially acquired this property, we projected each unit (except for the Garden level) to sell between $1.85mm to $2mm, which is still a hell of a project. However, recently sold comps boosted our expectations. A very similar condo conversion project, in a less desirable neighborhood sold out at $1.7mm - $1.8mm and their Garden level unit sold out at $1.2mm. These condos are about 100 SF smaller than mine and have only 1 parking each...my extra parking space alone is probably worth $50-$100k. But the most compelling evidence revealed itself recently. A 1800 SF, 3BR/3.5BA condo, renovated 6 years ago with only 1 parking space that is literally next to my building came on market for sale asking $1.675mm...it just sold above asking at $1.85mm. This comp gives me full confidence that each of my units will sell for at least $2mm (excluding the Garden level). If an older condo with only 1 parking space can sell for $1.85mm...my extra parking spot alone should bring my units to $2mm let alone the fact that my units are bigger, brand new, and 1 of them has a private roof deck (and subjectively speaking, my kitchens are MUCH nicer than the comp's. The comp's kitchen is honestly quite pathetic for a $1.85mm condo. It's tiny and not impressive at all. Kitchens and bathrooms are the major selling points.)


Sorry for the digression...back to talking about the process. Once we closed on the property, I apply for a demolition permit which required a lot of bullshit documents like a demolition plan, contract with a contractor, GC license, worker's comp, and approvals from different departments such as water & sewer department, fire department, department of health etc...Once that's pulled, then my subs begin demolition while I work on pulling the building permit which required a lot of bullshit documents like architectural plans, engineering plans (civil, structural, if you're a big enough project then MEP's), worker's comp of all my subs, construction safety plans. Between the demo permit and building permit, it took me about 6 months to permit this project (once again...the city still wonders why housing is so unaffordable). The reason it takes so long to get a building permit is because when coordinating with so many parties (architect, engineers, multiple city departments, building inspector etc...) every "turn"/edit takes 2-4 weeks to get back to you and you can't get the feedback all at once. For example, after my architect and engineers complete and submit the building permit package, the building inspector takes 2 weeks to get back to me with feedback (the city has a general policy that it will need a bare minimum of 10 days to review anything), then my architect sends those comments to the engineers which takes another 2-4 weeks for them to make their round of edits and then they send it to my architect which takes another 2-4 weeks to make his edits. On this particular project I ran into 2 issues that significantly delayed my building permit. The first issue is that my idiot inspector (he's young and new) threw the book at me and told me that I needed full structural and MEP plans. I told him that we were hardly doing any structural work...just putting in 2 LVL beams in order to demo a bearing wall. A full structural set of the entire building would cost me $10k-15k, but all it would need to show is the calculation for 2 beams...I told him that it's ridiculous that I would need a full structural set for such minor structural work, so we went back and forth on this for 2 weeks until he finally agreed that calculations from a structural engineer showing that the LVL's are enough to support the structure is enough. My lumber supplier does this for free for customers..so i saved myself $10-$15k. Then MEP's...he was insistent that I needed full MEP plans...something that we have never needed before in previous projects. I told him that we have never needed MEP's before and that we design-build our projects..my plumber, HVAC guy, and electrician will figure out how to run the plumbing, duct work, and wires as we go. He tells me to call the plumbing and electrical inspector to see if I need MEP's...after another 2 weeks of trying to get a response from these 2, they tell me it's not needed for such a small project...you don't need MEP's unless you're doing like 10+ units, so I go back to my building inspector and tell him. He then asks the deputy building inspector who says that I do not need them...another $10-15k saved. The other issue was regarding Fire Alarm and Sprinkler systems. Since I was gut renovating a 3+ unit property, I triggered the building code for needing a Fire Alarm/Sprinkler system and the building inspector needed the FA/Sprinkler plans to be in my building permit set before issuing a building permit, but my FA/Sprinkler plans need to be approved by a 3rd party company and then approved again by the fire department. So my Fire Protection Engineer takes a month to draw up the fire protection plans, then I submit it to the 3rd party reviewer who gets back to me 2 weeks after submission to tell me he is now reviewing it (it's 1 motherfucking guy who reviews all the fire protection plans for this company). After another 2 weeks he gets back to me with a laundry list of comments that my Fire Protection Engineer needs to edit. After another 2-3 weeks my Fire Protection Engineer sends me the final drawings with all the edits. I resubmit it to the 3rd party reviewer and luckily it only takes him a week to review/approve it. Then I submit it to the fire department for their approval. Once again takes them 2 weeks to get back to me to tell me that the submission is incomplete because I didn't have a signed affidavit from my Fire Protection Engineering (the affidavit basically states that the engineer is responsible for this project). Within 24hrs I get my engineer to sign the affidavit and send the affidavit to the fire department...no response for 3 days...so I call the fire department and ask them if they've reviewed my fire protection plans...the motherfucker on the phone says to me "oh because you didn't submit the affidavit with the plans, the submission was incomplete so we haven't even looked at it yet." I lost my shit. Went off at him...I specifically remember yelling "Are you fucking kidding me?! I submitted these plans 2.5 weeks ago and you didn't review them because of a stupid affidavit that takes less than a day to get to you and you waited 2 weeks to tell me about the affidavit? This project costs me $500 a day in carrying cost...it's been 17 days since I submitted these plans and in those 17 days you've cost me $8,500 and now it's going to take you another 2 weeks just to review the plans, which will cost me another $7k. Is this normal? Does this sound right to you? I'm not some big time developer working on main street with a $10mm profit margin. I'm a small time general contractor trying to make a living." Fire protections drawings get approved within 2 hrs. Submit full building permit package to building department and get the building permit by end of the week.

4th Unit Variance Process:

Similar process to pulling the building permit. Same rules apply that generally it will take 2-4 weeks for edits to get back to you. Once my family and I decided that we want to try for zoning relief for a 4th unit, I went to the Zoning Board's hearing decisions page on the city's website to find the best zoning attorney. Turns out there's only 1 zoning attorney that everyone uses in this town. Call him up and tell him what I want to do. He is quite optimistic that we can achieve the variance. Sign his proposal and send him a retainer. The process for a variance in my city is 1.) Architect draws plans 2.) Attorney shops it to neighborhood and city officials 3.) Make edits based on feedback 4.) Shop it again 5.) If good, then schedule Zoning Board hearing. My architect wasn't able to work on the 4 unit plans until after he completed the plans for the 3 unit as of right building permit that I pulled in the "Building Permit" section (we pulled an as of right building permit for a 3 unit gut renovation so that we could begin construction while we worked on getting a variance for the 4th unit). Once we pulled the 3-unit building permit, my architect works on the 4 unit plans and sends them to the zoning attorney, the zoning attorney provides feedback before even shopping it around, another 2 weeks go by to make those edits, zoning attorney meets with the Planning & Development Committee to shop the plans around for feedback, the Committee comes back with a bunch of stupid comments (now keep in mind, these city officials are a bunch of power hungry fucks...according to my zoning attorney, you need to approach them with the mentality that you are seeking their sage and wise advice and that you need their help...they can truly wreck all your plans if they are having a bad day) such as these drawings need dimensions, can they make this building more green/sustainable?, we're afraid there isn't enough sunlight in the basement unit (bitch...the basement level unit is being sold at half the price of the other units...you know why? Because it is a fucking basement level unit with less sunlight...no one is going to die because of a little less sunlight...let the damn market price my basement condo you power hungry socialist.) I ask my attorney if I can tell them "no" to all their requests and he tells me I can. Zoning Board hearing is in 2 weeks and I send 70 letters to notify all the neighbors and ask them for their support. Also, if the variance is granted I will need to make a donation to the town's affordable housing fund. Not sure how much it will be but I think $10kish?

I will update this as the project progresses if people are interested, esp with actual sell out figures, but that wont be for another year. I will try to be as open as I can in regards to this project. AMA

Real Estate Modeling Course

  • Real-life RE Modeling Tests from actual Interviews
  • Various asset classes including multi-family, commercial and more
  • Huge discount - until more tests and cases added

Comments (16)

Jun 10, 2021 - 11:10pm

Sick way to start starting off with the family. Bumping for visibility, interested in the results. 

I'm assuming since your pops works in the industry that he already has significant connections to whatever political market you're in for the ZB and local DOB. Great example of how development is not only an execution and finance game, but also shows a huge need for political capital and ability to schmooze to an extent. 

Jun 11, 2021 - 9:07am

Thanks for the question! Actually, my dad has no political connections at all. He doesn't play well with others and hates rubbing elbows. I used to think development was about knowing the right people and it certainly helps, but actually capital is the most important, not just for obvious items such as construction cost, down payment, etc… but to hire the people with those connections (zoning attorneys/lobbyists). Each town has a different zoning attorney that specializes in that town and knows the city officials. The attorney I'm using for this project hired someone who used to work on the Planning and Development department for this town. In another town that I work in, the zoning attorney I use knows the mayor and eats lunch regularly with the district councilor. If a developer is trying to pursue large scale developments like 50,000+ SF, then there are 2 or 3 consulting/lobbyist firms you can hire. These lobbyist firms employ former senators, former house reps, former chief of xyz department etc… In terms of pricing, these attorneys and lobbyist firms are not as expensive as you might think (obviously this is subjective), but the attorney im using on this project will only cost me ~$5k, but that extra unit will be an extra $1mm profit. The other zoning attorney charges $2k/unit he is able to get you so if he is able to achieve a variance for 20 units, it'll cost $40k…but a 20 unit building is like a $5mm profit margin in that town. The lobbyist firms run about $500k per project, but they can help you achieve high rises in the hundreds of units. Obviously you also need to have the right project for them to help you. If you own a single family in a single family area and are seeking to build a skyscraper, no amount of political connections will help you

  • Analyst 2 in ER
Jun 13, 2021 - 12:54am

Mfers out here just tryna find a place to live and then you have Real Estate Dealboi here absolutely juicing housing prices

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
Jun 13, 2021 - 12:30am

who is your capital partner (equity) on this deal? how did you source this capital partner (or are you just using family money)? what are you going to target for your next project, or are you going to find a new salaried job after this project is over?

Jun 13, 2021 - 5:40pm

No capital partners, all family equity. I have no plans of returning back to the corporate world and have a pretty sustainable strategy going forward. This project was a one off deal that really comes down to luck to find. My larger plan for my family's business is to grow our real estate portfolio and generate fixed income (basically transitioning to more of a capital allocator than an operator). The goal is to make sure all our capital is working for us passively and then take on condo conversion/development projects actively 

Jun 13, 2021 - 6:24pm

do you have any feelings of leeching or maybe leeching isn't the right word but since you wouldn't be able to do this unless you were doing it with your family do you have any feelings of being seen as just a family money guy? do you have a chip on your shoulder because of the family money setup?

Start Discussion

Total Avg Compensation

June 2021 Investment Banking

  • Director/MD (9) $911
  • Vice President (35) $364
  • Associates (204) $233
  • 2nd Year Analyst (115) $151
  • Intern/Summer Associate (97) $145
  • 3rd+ Year Analyst (27) $145
  • 1st Year Analyst (420) $131
  • Intern/Summer Analyst (339) $82