Have you seen that Geico commercial with the Camel? I love that commercial! Every Wednesday either my wife or I will inevitably send a text message to the other person saying….”Guess Way Day it is?” or “Mike Mike Mike Mike….” If you haven’t seen it here is the video…
Today however is not HUMP DAY, but DEAL DAY!!! That’s right folks, my partner and I closed Deal #5 and got a nice big fat check!
Just like every deal, this one had it’s issues. In the beginning, even though we had an acceptable offer on the table the owner wanted to give their neighbor a chance at the house first. I was sure that he would and he did. However the deal was contingent on whether the neighbor could get financing to do the rehab. Luckily for us he could not and the Contract Was Ours!
This was a probate deal that we had sent a mailer to back over the winter. So the owner saved our letter and called us when she was ready. It typically happens this way for us and our deals. The owner had power of attorney over the property so even though she wasn’t technically the owner, she was able to sell it.
The Deal Details
Purchase Price: $75k
Our estimated after repair value (ARV) came in at 195k, so we were confident that we would be able to sell the house for our asking price.
After Repair Value: $195k
After looking through the house our repair estimate was around 50k. The kitchen and bathrooms needed to be redone. Their was a water leak in the roof and the detached garage needed to be torn down or replaced. It also needed new windows. Everything else was minor in the house.
Estimated Repair Cost: $50k
Houses in this area of the county, my partner and I feel comfortable looking for a $15k profit. It gives us some wiggle room in case we underestimated repairs or over estimated the ARV. On one of our past deals the profit shrank all the way down to $2500. Depending on the area, we will ask for 5k for level 2 areas (all rentals), 10k for level 3 areas (even mix of rentals and owner occupied ) and 15k for level 4 areas (majority Owner Occupied).
Asking Price $90k
Finding a Buyer
We first took the deal to our top buyers because you always want to offer your deals to them first before starting your marketing. This builds great relationships and trust. Unfortunately each of them had repair estimates closer to 75k which put their offer price at around 65k. That was not going to work for us. Now we are getting nervous!
Next step was to start marketing this house on all the major rei boards, craigslist, my blog and anywhere else we could think of. We got some hits, but nothing worth moving forward on.
At this point we were discussing our options…
- Try and renegotiate with the owner. We’ve done this before but you lose credibility and trust with the owner and risk losing the deal.
- purchase the house ourselves and rehab it. This was not something we wanted to do plain and simple.
- Use our inspection clause to get out of the deal.
As we were discussing our options, my partner (who recently got his agent license) was talking to his broker about the deal. The broker had a buyer for us! Whole Crap! But wait…..
The buyer was interested, told us all about is other projects, how he could rehab things for cheaper because he had his own crew. All sounded great to use and he was willing to pay our asking price. So we got our lawyers involved, started the process of getting the deposit and the documents signed. This guy was a Major foot dragger and excuse giver. One day his lawyer had the signed contract and deposit, the next week it was his father who had the contract and deposit. He had already ordered a door for the house. All the time our lawyer did not ever get the signed contract or the deposit. So after 3 weeks of this we started looking for another buyer.
Magic Happens!
This is where the magic happened! The broker agreed we should move on from his original recommended buyer and said he had another guy who might be interested. So he made a phone call and 90 minutes later we had a signed contract and the full 90k wired to our lawyer’s escrow (this guy uses the same lawyer).
WHERE THE HELL HAS THIS GUY BEEN!!?!? I love him!
This was 10 days ago, and we closed yesterday with no problems what so ever. That is what I call a good cash buyer. He didn’t even look at the house and just trusted the brokers opinion on the house. They have done a lot of deals together and apparently have a great trust in each other. Put this guy on our preferred buyers list for sure.
Payday: Subtract 5k
Now because we got our buyer through a referral (from my partner’s broker) we had to pay the broker a fee. We agreed to $5k. This is actually a good deal for us, because the typical agreement is 50% of the profits. So my partner and I will split 10k according to our agreement, which makes for a happy happy day!
Closing Giveaway!
When ever I close a deal I like to give back. How I do that is to give away something to one of my readers. I’m working on what I can give away so stay tuned and look for another post in the near future. I love giving things away and helping people out.
Thanks to everyone who reads, comments on my blog and sends me emails. you keep me motivated and are the reason I am where I am. Thank You!!!