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2-on-a-lot with seller financing

My 2nd 2-On-a-Lot Deal This Year

Back in my seminar organizing & promoting days, which I'm not sure if I miss yet or not, I had Fixer Jay Decima come speak at an event I organized. He operates out of Redding and at one time, managed hundreds of houses. He said his favorite properties to buy were multiple little houses on one lot. After hearing him speak, I searched high and low for similar opportunities here in my local market. I found only one -  4 small houses on a corner lot. I mailed the owner a letter and after a year or so, I heard back from him. That property didn't work out - he bought it vacant and the city had pulled his occupancy permit and rezoned it commercial. {Interesting side note, if they didn't pull the electric meters I'm sure the owner could have rented those properties out without any problems. The city isn't going to turn off the electric on the tenants. But, I digress..}

Back in April, I closed on my first 2 on a lot out in San Bernardino. You can read about that deal here: April D.O.T.M. I purchased that property subject to the existing loan. The property I just closed on, I got very good seller financing terms. The purchase price was $150,000. I put 10% down, and the seller carried the balance at 6% interest only for 10 years. That payment works out to $675 / month. The back house was already rented for $400. I offered the seller an amortizing loan, but stated I expected to collect about $1,300 a month in rents. He said I would never be able to get $900 for the front house. I then informed him I thought I could get at least $700 for the front house and $600 for the back house. We spoke for a while longer and then ended the conversation. The next time we spoke, he said he wanted to do an interest only loan to keep my payment down and that way, the back tenant could stay on at $400 per month.

Here is the interesting point of this deal; I never agreed to keep the back tenant's rent at $400 per month. I own the houses now and can raise rents to whatever price I think the market will bear. I don't intend to raise the back tenant's rent right away. I need to get the front house rent ready and want to maintain the income from the back house while I have this work done. This reduces my monthly debt burden until the front house is leased. I do intend to raise the rent on the back house. I'm not in business to subsidize the lifestyle of others and I'm definitely not a charitable organization.

Back to Fixer Jay - Even though I looked for these types of properties without success, obviously it didn't mean they don't exist. I was looking in the wrong places. I hear investors all the time say they can't do this or can't find that. Reminds me of a quote my self appointed mentor has recited before me several times; If you think you can or think you can't - You're right!

I funded this deal with the $20,000 fee I got on a wholesale deal I closed a week ago. I told escrow to hold onto the money and use it to close this deal. End result - I did some negotiation with 2 sellers (over the phone) and ended up with 2 new rental houses, $135K in seller financed debt and a escrow refund check of about $2,200.

Here's some pics of this new deal;