How I Profited $63,000 on a Property—Sight Unseen

by | BiggerPockets.com

Investing in property out of state is trending big time on the BiggerPockets forums, with tons of people discussing and looking for information on the topic. So, my company and I are here to share one of our most recent remote deals with you.

This deal has resulted in a $63,000 profit—so far! That figure may actually increase in time.

We became aware of this property through a Realtor referral, and we put it under contract on lease purchase without ever setting eyes on it. How’s that possible, you might wonder?

We’ve spent time building relationships with people on the ground in this area. Without doing that, this deal would have never happened.

We received the referral, and then had some of our boots on the ground go take a look at the property, write up a report, and send that information back to us. Once we decided we wanted to purchase the property, we were able to tap into our local contacts to put up signs and do the marketing, too.

Even today, no one in our home office has seen the property—we may never see it. But thanks to the trust we’ve established with our contacts on the ground, we were able to make a quick decision on this property.

We simply ran ads in the area and attracted appraisers and builders looking for side work. We handled everything via phone, sent in the workers we hired, and then they reported back to us.

Related: 4 Must-Haves When Investing in Out-of-State Rental Deals

Finding a Buyer

We tied up the property sight-unseen for $283,784. There was existing financing on it, and our monthly cost was $1,818 over a 36-month term. Our system to find buyers is intentionally simple, streamlined, and fairly quick, so it didn’t take long.

We sold the property for $329,900 on a 24-month lease. Our buyer agreed to pay $2,345/month for 24 months.

It’s important to stage the buyer term earlier than the seller term in case more time is needed. With most of our properties, we create three paydays (cash now, cash monthly, and big backend cash-outs when sold). This property followed that same formula.

Structure of the Deal

Payday No. 1 came in the form of a non-refundable $24,000 payment scheduled throughout the lease term of the tenant buyer. We did, however, receive about $11,000 of this payment up front at the time of sale.

Payday No. 2 comes from the spread between what we’re paying to the bank on our loan for the property and what we collect each month. This spread works out to $527 per month for 24 months, which brings the total to $12,648.

We always like to be prepared for potential changes, so we ran the numbers to show what would happen if we needed to extend the lease to 36 months. If this were to happen, the total spread we’ll bring in will be $18,972.

Finally, we have payday No. 3. This includes the principal pay down each month, as well as the backend profit of the premium that we set.

Let’s take a closer look at this one.

We bought the property on a lease purchase, which means we took over all responsibilities including the mortgage. We have the benefit of principal pay down, and at this time, that equates to $444 per month. However, it will continue to grow, as with most conventional mortgages.

That $444 per month over 24 months works out to a total of $10,656. Of course, it’s important to consider the possibility of extending the lease to 36 months, as well. If the lease were to be extended, this would work out to $15,984.

In order to calculate the backend revenue of the premium we set, we need to take the sale price ($329,900) minus our purchase price ($298,783) minus the $24,000 we’ve already collected in payday No. 1. This amounts to a remaining premium of $22,116.

If we take all of these paydays into account, the total profit of the 24-month term lease works out to $69,420. Should we need to extend the lease to a 36-month term, the total revenue will be $81,072.

map with red location markers

Related: 3 Reasons Beginners Don’t Invest Out-of-State (& How to Overcome Them!)

Other Fees/Expenses

We agreed to pay the Realtor involved a referral fee of 25 percent of payday No. 1—or $6,000. We’ll pass this along to them when we receive the deposits.

It’s your choice how to handle referrals, but a relationship with a Realtor who “gets it,” as well as finding trustworthy rehabbers and wholesalers, can mean 12 or so extra deals per year per referral source for a company like ours.

The costs incurred from having boots on the ground in the area totaled roughly $300.

The buyer is responsible for paying the property tax, and the buyer and seller split the closing costs, so we don’t have to worry about those.

Not bad for a property that someone brought to us and we never had to physically visit!

Working remotely is so common these days. And as you can see here, it can even be done in the realm of real estate!

But if you like the option of traveling for work, the industry is fantastic for that, too! You can visit other markets and do the “boots on the ground” part yourself.

We can’t emphasize the importance of having high-quality people in place if you are going to buy remotely, though. You absolutely need people you trust in the area to be your eyes and ears.

And as a forewarning, buying out of state isn’t the best idea if you’re just starting out. But it’s a great option for seasoned investors. We encourage you to take advantage of it!

Have you ever purchased a property remotely? How did it go?

Comment below.

About Author

Chris Prefontaine

Chris Prefontaine is the best-selling author of Real Estate On Your Terms. A real estate investor with over 27 years experience in the field, Chris is the founder of Smart Real Estate Coach and host of the Smart Real Estate Coach Podcast. He lives in Newport, Rhode Island with his wife Kim and their family. Chris is a big advocate of constant education. He and his family mentor, coach, consult, and actually partner with students around the country, teaching them to do exactly what their company does. Between their existing associates nationwide and their own deals, Chris and his family are still acquiring 5-10 properties every month and control between $20 to $30 million dollars worth of real estate deals, all done on terms without using their own cash, credit, or signing for loans.

12 Comments

  1. Katie Rogers

    To be accurate, this was not really a sight-unseen deal. You had people you trust look at it, and you relied on their analysis. I, on the other hand, did once buy a property well and truly sight unseen. I was lucky to get out of it with a $2000 profit after all costs.

    • Chris Prefontaine

      Hi Katie – not sure how or what it is you do so hard to comment on your comment that you had a dismal deal. It’s next to impossible to make only $2000 on one of our TERMS deals. After 500 or so that’s super clear. Sounds like you may want to visit some of our free resources and then spend time seeking answers not comments like this but just my two cents.

  2. Katie Rogers

    Also this is not first time you have considered principal pay down as part of your profit. Since principal is cost basis that you subtract from your final sales price to help calculate profit, please explain how you construe principal pay down as profit.

    You are very lucky that your total outlay to a realtor was only 2% of your purchase price. Very few realtors would accept less than 5-6%. I am not sure what you mean by the realtor “getting it.”

    • Chris Prefontaine

      Katie it appears you’re looking for holes in our posts and deals. Wishing you the best. Study the deal structure a bit more and seek out a niche that you love and can profit from . So far I see you’re just critiquing. I love mentors and critiques from someone doing deals so if you’re doing 2+ deals monthly and showing minimum 1/2 million or more profits yearly, we should chat and perhaps you can add some good nuggets. I have several mentors though and not seeking another right now unless you can show some huge success.

      You are very lucky that your total outlay to a realtor was only 2% of your purchase price. Very few realtors would accept less than 5-6%. I am not sure what you mean by the realtor “getting it.” 98% (I’m being conservative) don’t understand our TERMS deals but as a past broker/owner I am 100% certain they’d benefit from it by learning it and “getting it”.

      • Katie Rogers

        That was a very nice ad hominem (disqualifying the commenter rather than addressing the point of the comment itself). The question still stands. Since principal is cost basis that you subtract from your final sales price to help calculate profit, please explain how you construe principal pay down as profit.

  3. Alex Hamilton

    Katie, the Realtor “got it” in the you know what with a kick if he was paid only 2% of the deal here. Out of State investing is impossible without boots on the ground with some kind of vested interest in the success of the project. So, joint ventures be provide needed protection

  4. Jerry Maze

    Well presented… great approach… this is exactly what I want to do… I have no mecchanical or handy-man skills and I don’t like the time frame involved in flips… unless the profits are huge and the “risks” are low… great floor plan, great area, accurate and plenty of comps selling quickly, etc…. but, doing this in this way is smart, efficient and can be done sipping cocktails on a beach… $300 for eyes and 2% to the realtor who “gets” …hello… “gets” that you are repeat business and she does not have to split fees with any brokerage or other realtor… in effect, she is a private investor service provider during this process… not acting as an agent but, is an independent contractor… she has her own LLC if she is smart… she can also, continue to work as a licensed agent for the brokerage… apples and oranges from his or her’s perspective…. Thanks for sharing your experience!

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