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How I Finally Landed my White Whale (Screaming Good Real Estate Deal)

by Michael Zuber on November 22, 2012 · 20 comments

  
White Whale of real estate investing

Recently I secured what many investors would consider the “White Whale” of real estate investing; I secured a true zero down deal on an 18 unit apartment building.  

I have secured many tremendous deals over the years via creative negotiations and focusing on what was good for the seller.  Truth be told I don’t know if I will ever find another deal like this one but I will continue to look for and create win-win transactions.

This article will focus on finding properties or apartments that could qualify for zero down deals.  This is without a doubt the hardest part.  

Why Seek Out Properties That Could Qualify as Zero Down Deals

First and foremost these deals are not listed in the MLS for every investor to fight over.  Second, these deals need to be created out of unique situations, as very few sellers will gladly accept a zero down offer.

Let me set the stage for this opportunity:

The building was sold at the peak of the market in 2005 for $1.25M.  The previous owner carried back an 800K 1st Mortgage since they owned it free and clear at the time of selling.  The deal was on solid footing for 5 years but then payments started showing up late, taxes were not paid and the building started to deteriorate from lack of maintenance.  

The original seller didn’t want the building back but after 18 months of trying to make a bad situation better it became clear they needed to foreclose and take the building back. This is where my network in my buying market kicked in.  

Let me be clear — I owe a huge thank you to the network I have created over the last 10+ years.

While trying to get comps and secure possible property managers – the owner contacted an agent with whom I had past dealings.  Through several phone calls it became clear the owner knew they had a problem and they didn’t want to own rentals any more, let alone turn a problem building around.  The agent indicated that they had a buyer(me) who frequently bought distressed assets and turned them around and, if they were interested, the agent would pass on the property details to see if I was interested in purchasing the building and saving the original owner a bunch of hassle.

The property was an 18 unit building in an older but nice part of town.  It is located near some freeway expansions that will make the location more valuable as time goes by.  The building was in very bad shape: the units that were occupied needed a lot of work, 8 units were vacant and there were a least 2 tenants that needed to go immediately.

During my review of the property, I let it be known that I was interested but we had to be creative in structuring the deal as the property needed 50-75K in repair work immediately.  Also it was clear that the owner wanted a deal that gave them close to the original loan balance and a significant down payment, as they were burned by the past experience.  When I spoke to them they had not seen $1 in payment for almost 12 months and now they were on the hook for back taxes and all of the repair issues.  

This deal had a lot of possibilities for creative deal structure but I will leave that for Part Two of our series.  The key to this initial post is the importance of building a network.  My network knows I like to buy distressed properties.  The owner of this building knew they had a big problem and that I could be the solution if we structured a deal to make everyone happy. We’ll continue to explore how the deal went down over the next posts.

Part 2 will be about negotiations.

Good Investing

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{ 20 comments… read them below or add one }

frank r November 22, 2012 at 7:41 am

Mike,

You have my attention. I really enjoy insperational stories.

Frank

Reply

Geoff November 22, 2012 at 1:05 pm

I agree Frank,

Reply

Mike Z November 25, 2012 at 1:05 pm

Frank

As you will see Step 2 is where creativity and honest discussions happen

Good Investing

Reply

Sharon Vornholt November 22, 2012 at 7:47 am

Looking forward to part 2 Mike.

Reply

Mike Z November 25, 2012 at 1:06 pm

Sharon

I had the most fun in Step 2. It is where the creative juices flow and I look forward to telling the story

Good Investing

Reply

Josh Stevens November 22, 2012 at 9:36 am

awesome, sounds like a win-win for everybody!

Reply

Mike Z November 25, 2012 at 1:07 pm

Josh

I firmly believe that the only way deals like this happen is through win-win and that will become crystal clear in phase 2 “negotiations”

Good Investing

Reply

Brad Friesen November 22, 2012 at 11:15 am

Now this sounds like an interesting story! Hurry up and write part two :)

Reply

Al Williamson November 23, 2012 at 1:30 pm

Wow, what a cliff hanger! On on the edge of my seat.

Reply

Mike Z November 25, 2012 at 1:08 pm

Brad

It is coming as my post for next week. But as this article says I couldn’t have even got to step two without my network bringing me the opportunity

Good Investing

Reply

Shanequa Jones November 22, 2012 at 1:17 pm

Don’t wait too long to write part 2. I can’t wait.

Reply

Mike Z November 25, 2012 at 1:09 pm

Shanequa,

You won’t have to wait to long as it will be my post for next week

Good Investing

Reply

Tracey November 22, 2012 at 8:01 pm

Interesting story! !!
Hurry with part 2!
Tracey

Reply

Mike Z November 25, 2012 at 1:10 pm

Tracey

Good News it will be my post for next week so you won’t have to wait to long

Good Investing

Reply

Tanya G November 22, 2012 at 11:21 pm

Great info!

Ditto…..I agree with other posters….please provide part 2!

Reply

Mike Z November 25, 2012 at 1:11 pm

Tanya

Part two is coming in next weeks post but as the article says I never get to step two without my network of relationships

Good Investing

Reply

Glenn Espinosa November 23, 2012 at 3:23 am

Wow, you totally have my attention. This definitely showcases the importance of building that strong network of people who can potentially be future lead generators!

Ps. Don’t limit yourself, look at this deal as a way to increase your White Whale standard!!

Reply

Mike Z November 25, 2012 at 1:12 pm

Glenn

I won’t limit myself I was just trying to be a little modest as I really liked this deal and I look forward to finding the next one that beats this one

Glad to see you picked up on the key to my network being the real reason I even got an opportunity at this deal

Good Investing

Reply

Ben Koshkin November 25, 2012 at 8:18 pm

Excellent post Michael. I really realized you and your post. Thanks a lot for your well written post. Thanks you again. Keep up doing.

Ben Koshkin
Land development

Reply

Andy Bankston November 27, 2012 at 4:07 am

Great post. I look forward to reading the conclusion.

Reply

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