“Real estate investing is easy. You simply purchase an unwanted property for cheap and resell it for a higher price.”
This is what a young me thought 12 years ago, before I ever invested in a single property.
Now with more than 100 deals under my belt I can safely say this is the biggest over simplification for profitably investing in real estate.
In fact, often times you can buy and resell a property for the same exact price and still make a significant profit in the middle. However in most cases buying low and selling high is the structure we tend to follow. Along this “buy low and sell high” path there are literally hundreds of important steps and to-do’s along the way.
One of the single, biggest “Ah-Ha” moments I’ve experienced was when I realized I had the ability to turn a profit investing in real estate while simultaneously helping others that I was working with. Occasionally, as an investor, you come across a seller who is experiencing some sort of issue. Often times, a seller’s problem does not seem extremely difficult to us, but to the seller it can feel like an insurmountable hurdle. All of us who are actively investing have likely closed a no-brainer deal that simply fell in our laps and went smoothly.
The below article focuses on 3 past experiences when I had to go further than other investors would go to make a profitable deal happen.
My Brother’s Keeper
A mobile home attached to a small lot of private land was being advertised for sale. The home and land were both in a good area of town and I knew that if I could structure seller financing with the seller I would be able to make significant cash-flow monthly on this property.
Approaching the seller I learned that I was not the first investor to look at the home and want it. An investor recently turned down the opportunity to purchase this home for 30% under FMV (fair market value) because the owner’s brother was in the home and screaming that he would not leave the premises. While the owner’s brother was out one day the owner and I walked through the 3/2 mobile home and found it to be clean and in good shape for an 1985.
I understood that once I purchased the home I would have to evict the brother. The seller did not want to do this himself because his brother was family. I purchased the home with zero down and 100% owner financing with 0% interest.
Three weeks later the seller’s brother was out and a few weeks later the home was rented for a $400 net cash-flow.
Beware of Dogs
A few years ago I purchased a mobile home from a seller that owned 3 large dogs. The family was moving into an apartment and could not take all 3 of their dogs to the new home. They did not want the third dog to go to the pound and they were unsure of what to do.
After I talked with the sellers a handful of times, played with the dogs, and understood that their main concern for selling was the 3rd dog, I posed the possibility of moving/giving the third dog to a current tenant-buyer of mine that was living in a nice mobile home in the country. The dog’s new home would have 2 acres of fenced yard to play in and fresh air.
I quickly lined up a time to go out to the country property with the sellers. My tenant-buyer fell in love with the dog at first sight and, thusly, the tenant-buyer, sellers, and the 3rd dog all agreed that the situation would work well for all parties.
Soon after I closed the deal for a very good price and terms. Realize, again, that I was not the first buyer to come along and want the house. However, I worked hard to discover a solution in a difficult situation and my diligence paid off. Win-win-win.
Hospital Bills Versus Equity
Did you know that hospitals will likely settle on defaulted hospital bills for 20% or less of the face value owed?
I was approached by a seller who got my information from my advertising and we began to talk. The seller told me about her plan to leave the state and move to a home she already owned, but she needed to sell her 2 unwanted mobile homes.
The seller was asking $40,000 for both mobile homes, one home was on private land and the other was in a rented mobile home park. After she was done explaining I inquired further: “$40,000 is a lot of cash. What do you plan to do with all that money?” The seller quickly replied that she wanted to be able to take care of her hospital bills.
Knowing already that hospitals would heavily discount medical bills that were in default, as these bills were, I knew I could likely purchase this home and solve the seller’s problems with less than $40,000. We wrote up a purchase and sale agreement with the understanding that once the hospital bills were paid in full the homes would be sold to me for the amount needed to cover the bills.
After 3 weeks I had a written agreement with the hospital to accept $6,000 for the immediate payoff of the $40,000 medical bill debt. We closed shortly after.
The above examples are written to help you think outside the box. Listen to a seller’s wants and needs. I make it a point to let each seller know that I may be asking some personal and unorthodox questions for the purpose of getting to know them and their situation better.
As you can imagine this helps to negotiate great deals and helps to solve any problems the seller is facing.
Thank you for reading and please comment below with your thoughts. If you have had a similar experience of solving a seller’s unorthodox problem please comment it below so we can all learn and grow together.
Love what you do daily,
Photo Credit: Thomas Hawk