How to Make $20k in 2 Weeks: A Step-by-Step Guide
This can really be done.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
This isn’t just some fictional “if I could only…” business plan, such as my good friend Brandon Turner likes to throw at you (and that you eat up!). This was a transaction I did early in my career whereby I was able to leave escrow with a check for $20k, and the whole thing took 2 weeks.
Got Your Attention?
Well, let me tell you — this was the easiest money I’ve ever made in real estate!
This was also the luckiest money I’ve made in real estate — by far. However, everyone needs to get a little lucky from time to time. Furthermore, I believe in power of intention, which is to say that if you tell the universe what you want through your actions, the universe will cooperate in one way or another.
Thus, I will break things down for you into a step by step actionable plan, thereby taking as much “luck” out of the process as possible. The rest is for you to figure out…
If you are a newbie, and you need $20k more than you need oxygen, there is no reason why you can’t run with this and make something happen. Here we go:
I’ve been very vocal on this blog and others about my dislike of SFRs (single family rentals).
As well, I’ve been on record about my dislike of flipping and wholesaling — unless the deal is just brilliant. Well, don’t laugh, but the deal I am about to pen for you is both an SFR and a wholesale.
Actually, it started out as a fix and flip, but ended up being a wholesale, and the reason for this was because the deal was indeed brilliant. There was so much meat on that bone that all kinds of options were on the table.
What I said in the last sentence of the previous paragraph is the first and most important lesson for today — read it again!
Anyhow, this was a single family that I bought thinking it will make an excellent rental, but the price I was able to negotiate made it a fantastic flip. But as things got rolling, I was actually able to exit with profit of $20k by wholesaling it to another investor.
A few details now:
Looking for a Deal
The process of finding distressed property is somewhat different in multifamily and commercial verses SFR, but one rule applies equally to both, and it is this:
If you want to get a deal, you can’t be competing against other buyers!
What does this mean in reality? What it means is that ideally no one but you can be aware that the property is for sale — this is the only way to eliminate competition which inevitably drives up the price. And consequentially, buying off of the MLS is out of the question.
In 2011 it was still possible to get great deals off of the MLS. Now investors are paying over asking price (which is too high for investment purposes to begin with) — NO!
So, since no one can know that the property is for sale, meaning it cannot be publicly advertised, you must look for methods of lead generation that are off-market. Well, some people swear by targeted inbound marketing, others believe in guerrilla marketing, still others like sending out yellow letters. Personally, I’ve bought houses from ads in the paper, and I’ve bought a lot of property using organic inbound.
But, my favorite way to buy fix and flip SFRs, which happens to be one of the most cost-effective, happens to be to simply drive the target neighborhoods — this was how I found the house in question.
While driving one of my target neighborhoods, I came across a house that looked neglected; the grass was tall, there was litter, and when I looked in the windows it became apparent that no one had lived in the house for quite a while. More than that, it looked like someone had started remodeling, but then stopped abruptly, as though they ran out of money.
There was no flooring anywhere that I could see. There were no fixtures in the bathroom. I could see brand new kitchen cabinets, still boxed up, as well as the counter sitting in a room right off of the kitchen.
The house was a brick ranch, and upon checking the county records I found out that it had 3 bedrooms and 2 bathrooms. In this neighborhood, a house like this one would trade for $85,000-$90,000.
Called the Owner
It took a little looking, but I was able to locate a telephone number for the owner. This was the conversation:
Me: I am looking at your house. Would you like to sell it?
Me: How much would you sell it for?
Me: Looks like it needs a lot of work? I don’t know if I can do $50,000 — would you could consider something less?
Me: When can you show it to me?
We set up a time; if my memory is correct (I wasn’t keeping track of the details of my early deals like my friend J Scott), we met the same day.
It is important to note, here, that the reason I pushed for a meeting is because the short telephone conversation revealed to me that the seller was a prospect! Why? because while he wanted too much money, no one sells a $90,000 house for $50,000 unless they are very motivated and out of options.
I couldn’t pay that much; in fact, this wasn’t even close. Just by looking in the windows I knew this was a $20,000-$25,000 rehab, and as such, I knew that I’d need to be under $40,000 on the purchase price. But — and you should pay attention to this — it’s a lot easier to get someone down to $35,000 from $50,000 than it is to get them form $90,000 to $70,000. The difference? Motivation!
The walk-through confirmed all of my assumptions. This was a $25,000 rehab. Figuring an $80,000 retail price, which was extremely conservative, holding costs, and RE commissions, I figured I’d do OK having paid $35,000.
As any proper investor would do, I made an offer — $28,000. He talked it over with his wife and came back with $32,000 — DONE!
A $1,000 earnest money deposit out of my line of credit sealed the deal, and I was in escrow at $32,000. Now, how to finance the thing? The P&S was worded “Ben and/or assigns.” I had every intention of rehabbing this house and either keeping it as a rental or flipping it. But this wording would enable me to assign the contract if need be. The closing was to take place in roughly 2 weeks.
I had set up a line of credit against my primary residence soon after we built our house — it just sat there waiting for an opportunity. The line was enough to either buy the house or to rehab it, but not both. I needed a partner.
I approached a client of mine from another enterprise. He was a highly paid professional, and I offered him to loan me the purchase money, which we would collateralize with the subject via a note and mortgage, while I would use my HELOC to rehab the house. I proposed that there would not be any payments on the mortgage during the rehab, but that I would pay him all of the principal and interest either via a refinance or the sale on the back end.
He Took One Day to Think It Over
And then he offered to buy me out. He said that the house would make a perfect rental (yes, it would) and that as a rental it wouldn’t need $25,000 of rehab. So, he offered me $20,000 to walk.
How long do you think I took to make a call on this one?
Two weeks later, we closed via a simultaneous closing. I could have assigned the contract, but I happen to believe that being an owner of record, even if it is for just 3 minutes, is cleaner — legally speaking. As such, my seller was in one room, my buyer was in another, and I went into the third room. My buyer brought $52,000 in cash to closing — the seller got his $32,000, I got $20,000, my buyer got the house, and the seller got rid of the thing that was causing grief in his life.
What Happened Next
My guy decided that instead of keeping this house as a rental, he wanted to flip it. He sold it for $90,000. This was not the best decision he made, but he needed to make it in order to learn. Since then, he’s bought a bunch of rentals, some of which I sold to him using my license.
I used the $20k to pay off my wife's student loan, as well as the car loans. That wasn't smart, and I wrote about it in the BP community book that you should have received when you joined. But it happened, and we moved on to the next deal.
What started out as a fix and rent/flip turned out to be a quick $20k wholesale deal. It’s important to understand that a lot of this was sheer luck.
I don’t think that wholesaling is a prolific model for most people, specifically because of the luck component. This seller, as I mentioned, had a level of motivation which was highly uncommon. It was driven by fiscal realities in his life, as well as deep personal trauma. This is rare indeed, but it is the only reason I was able to get the price I did.
Also, had the kitchen cabinets and countertop not been sitting there, it would have been necessary to spend much more on the rehab, which may have killed the deal. Finally, my friend taking me out the way he did was certainly pure luck!
Bottom line — a lot of stars lined up to make this deal come together the way it did.
Having said this, I bought the thing right, and that was huge! Had I paid too much, none of the options would have worked. I took the universe by the neck, and with my actions told it what I wanted. The universe cooperated, and there is a lesson in that!
Can You Do This?
Can this be duplicated? Absolutely. Will it kill you if it takes longer than 2 weeks? No. If you don’t have a line of credit, could you use private money? Yes. Who are your friends? Could you use hard money if you had to? Yes; for a really good deal, there is always money!
No excuses! And now, as promised…
Step-by-Step Action Plan
Step #1: Take real action.
This is an absolutely crucial step. Reading this article is nice, but nothing will happen unless you make it happen.
Also crucial is to figure out how you are going to finance this thing. True, owner financing is the best game in town, but if that’s the only game you’ve got, your market will be cripplingly limited. Partner up with people, and set up a line of credit or even credit cards.
Bottom line is that it makes very little sense to take action before you have some type of access to capital.
Step #2: Study your town and isolate your target area.
I could write 50 pages on what to look for demographically, economically, and otherwise in a marketplace. But since Josh doesn’t pay me enough, I’ll let Brandon do that…
Bottom line, you’ve got to know what stuff is worth — period!
Step #3: Get in your car and drive your target areas.
Look for stuff out of place — stuff that looks neglected or “strange.” During a 2-hour drive through your target neighborhoods, you should be able to jot down at least 20 addresses.
Step 4: Use county records.
Once you identify a house, look it up in the county auditor/assessor records to find out several things:
- Who is the owner of record
- How long they’ve owned the house (this is hugely valuable and drives presence or lack of equity)
Step #5: Find a number for the owner.
Sometimes this is as easy as putting it into a search engine or looking in the white pages; other times, you’ll have to dig deeper.
Step #6: Make the call — don’t be a chicken.
Some people advise sending out letters. While it’s true that in terms of building rapport, there are sellers for whom letters would work best — but not for vacant, run-down SFRs. Make the call!
Step #7: Pre-qualify.
Ask the right questions to lead you to determine:
- How motivated the seller is
- How reasonable and logical the seller is
Step #8: If the house is a prospect, meet the seller on the premises.
While there, you are doing several things:
- You are conducting a surface-level property inspection to determine the magnitude of the required rehab.
- You are also there to pick up on signs as to what drives the seller’s thinking. Negotiation is not done at the table, unlike what most people believe. By the time you are at the table, the negotiation is over. Negotiation is about being able to shut up and listen — that’s what you are doing here.
Step #9: Agree on a price and sign a purchase and sale.
Notice — I did not say “make an offer.” Come to an agreement on a price — extrapolate this!
Make sure that you are getting a great deal, not just a good deal!
Step #10: Market the crap out of this deal to get it sold!
If it’s good enough, you’ll get it sold.
Step #11: Get a little lucky.
Have fun and good luck. Yes, luck will have something to do with it, as my case study showcases. There’s nothing wrong with luck. But remember, luck doesn’t come to those who don’t take action. Luck is the result of unwavering commitment to making something happen!
Go make something happen and tell us about it in the comments!
Be sure to leave your comments below!