Found out today that the MSJ was successful and now I'm just waiting on the writ. Looks like my buyer gets to save a few hundred bucks on an eviction and I get a judgement against the squatters. Nice!
Sometimes you have to change exit strategies
This lead came from a mailing of 2,280 post cards. The total cost of that was $921.21. I actually got very few calls from this mailing. I believe it was about 5! These were sent out in a total of 2 drops to a target market, one on July 2nd, and the other on July 30th. However, as a seasoned marketer, I didn't let it bother me. I tweaked the next marketing piece and just kept on mailing.
The seller called me on Sept 3rd. She asked me if I was still looking to buy a house. I asked her my usual questions and comped the house figuring it is worth about $275K. I noticed the house has a pool so I asked what condition it was in and she said "Excellent, the tenants swim in it all the time." After crunching the numbers, I told her I could pay her $175K cash. She replied that she needed to talk to her son about it and we hung up. I didn't hear from her for a week. I called back on 9/11 and the phone was busy all day. I told my wife and she reminded me it was 9/11 so maybe she unplugged her phone and was watching TV all day. Sounded valid to me so I let it go!
The next day the seller called. I asked if she was willing to accept my offer. She said I needed to go walk through the house. I don't do walk-thrus without an accepted offer and I let her know. She asked again if my offer was still good. I said 'yes.' She again insisted that I needed to go see the house. She gave me the tenant's phone number, her daughter, and we hung up.
I called her daughter and she told me to come over on Friday at 6PM. I got to the neighborhood about ½ hour early and did some driving for dollars. I found about 10 houses whose addresses I wrote down for research later.
The house was a mess. There were holes punched in the walls, the flooring was just disgusting, the roof was leaking, but the best part was the pool. It is a vinyl liner pool and it was ripped to shreds. There were weeds 3’ high growing in the bottom! I thanked the tenants and left.
I was originally thinking I wanted to keep the house as a rental, but the pool canceled that idea. Then, I thought I might fill in the pool and keep it anyway. At $175K though, it just didn’t make sense and I didn’t even really want the house any longer.
The next day I called the seller. I asked her if she remembered what she said about the pool. When she said yes, I told her that the tenant told me the liner ripped about 1.5 years ago and there were weeds growing in the bottom. I then let her know about the leaking roof, the dozens of holes in the walls her angry grandson had punched, and just the general mess of the place. I went so far as to say that I wasn’t so interested any longer - one of my favorite closes! I then asked her if I were to still buy it for cash, and close within 10 days, what’s the least she would accept. I was so hoping to get it for $150K. When she said $145K, I about dropped the phone. What I should have said was "I wish I could pay you $145K, but I’d be more interested at $140K," but she caught me so off guard, I was silent for about 30 seconds and then said, "I guess I can do that."
I emailed the info over to escrow and asked that docs be Fedex ASAP to the seller. Because I didn’t have my buyer lined up just yet and I wasn’t even sure I was going to wholesale it, I let escrow know that they should just put the buyer down as a trust and write up an assignment agreement.
I then called my usual buyer and asked what he might pay. He came back at $180K. A $35K wholesale fee is pretty hard to say ‘no’ to. However, I recently purchased a very nice $225K triplex for $179K including a $5K wholesale fee to the wholesaler that sold it to me. He let me negotiate the deal and I was able to get $125K of seller financing. I had a private lender put up $45K and I really wanted to pay that back. This deal needed to give me my full $45K in a wholesale fee or I would have to flip it. Since my buyer wasn’t able to get to that number, I decided to go ahead and flip the property.
My numbers: ARV: $275, but I will list it at $290K
Purchase price: $145K
1st HML: $145K, 2 pts, 12% interest, no other fees. (I have a great hard money lender – this business is all about relationships!)
Rehab: $50K – It has a pool and needs a new roof. The inside will be gutted and redone 100%. I'm hoping to get it done for $50K, but may need to go as high as $60K.
Holding fees based on 6 months (I need to get rid of the tenants and I’m expecting that to be a not so easy task): $10,614.25
Loan Fees: $2,900
Sales Costs (2.5% - I'll only pay the selling agent fee, no listing agent needed): $8,650
Net at $275K = $67K
At $290 = $71K – All speculation and I will be extremely happy with anything over $50K.
I grew tired of the eviction process and just wholesaled the house for $195K. If I had done this earlier, I would have netted $50K. However, I closed with a hard money lender, held it for just over 30 days, then wholesaled it. My net was less than the $50K after paying loan costs of 2 points and interest, eviction filing fees, plus escrow fees. Still, not a bad day in the office.