November 2018

A Tenant Swap Success

Moving a Tenant Out of a Rehab and Into an Expensive Rental

It has been said that if you want to make money, find a need and fill it. If you want to make money in real estate, take a vacant house and fill it. That is exactly what this deal is all about.

Back in October I received a call from a real estate agent. I do not buy listed houses. Not ever, but not often. The last one I bought was back in 2009. It was a deal brought to me by an agent I met in my Chiropractor's waiting room. This time I received a call from an agent about a listed two on a lot deal. I took a look at the listing price, $350K, and wasn't really interested. I offered her $240K. She insisted there was no way the seller would take it. I insisted she present it and see what he countered with. When I received the counter it was for $340K. A counter means my original is no longer in play. I emailed her that I was not going to accept the offer, but instead keep my original offer in play. Essentially, I slid my offer back across the table. He countered again with $250K. Again, I slid my offer across the table. He countered again at my price, but using his escrow, and indicated that any further changes were a deal breaker. I accepted.

I then put out the word that I was looking to wholesale the property. I posted it on Instagram. Life works in strange and mysterious ways. A few weeks earlier I was at an escrow office, a place that I do not like doing business with, and met two guys who were building a property management company. The owner of the escrow company asked me if I would like to join him in the conference room and hear their presentation. I did not want to do that. But, I sometimes have a hard time saying 'No,' not often, just sometimes. I joined them, and I am glad I did. It was actually quite interesting. One of the guys was quite personable and he was already following me on Instagram, so that definitely helped with rapport. 

He saw the post and said he thought he had someone who might be willing to put up the rehab money, he would manage the whole project, and we split the deal 50/50. I thought that sounded pretty sweet to me. I called up a private lender, got him to fund $225K on a straight note. That means no payments until the property sells. We did the same on the 2nd we recorded for the $70K rehab money my new partner's investor put up. At close of escrow, I got a check for around $50K. Nothing wrong with that and I definitely prefer controlling the rehab funds over letting an unknown investor have control and me not knowing if he would actually fund when the funds are needed.

At close of escrow I went to the property and handed the tenant the appropriate 60 day notice. I was informed by the listing agent that he was the sole tenant of both houses. When I asked him why, he said he worked for a church and they were running a sober living facility out of it. If you could look at my email account, you would see an email chain started by me, sent to my private investor group inquiring about leasing to sober living operators. These emails are still in my inbox. Why? Because I recently acquired a 5 bedroom historical Victorian house in Riverside and I don't want to restore the property just yet. It is livable, but definitely needs work. I thought a sober living operator would be a great fit. And now, I have one right in front of me, who is being asked to vacate two houses with a 5 bedrooms total. Ask and you shall receive. I'm telling you, the Universe is listening!!!

I met the SL operator at my vacant Victorian. He loved the place. He even offered to have some of his people help fix the place up. I leased him the house for $3,000/month. Not a bad deal in my book. Plus, since he now has a place to move to, I won't have to worry about an eviction when the 60 day expires.

When thinking about goals, even small ones, put them in writing. I always put down on paper what I want to accomplish. I look at those goals day after day. It is my way of asking the Universe to provide. It works. Do you think so too?

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