Deal #1: Indirect Mentorship

Having our attention focused on breaking through the action barrier, we were determined to take action.  Fall of 2014 we dove in and Zillowed our way into a list of 10-12 properties to look at as potential deals.  Initial analysis yielded positive cashflow so we were intrigued.  We lacked access without an agent.  Without affinity nor allegiance to any agent we selected one with positive reviews who was the listing agent identified on more than one of the properties that interested us.  It was a late Friday night, we were set to have a normal weekend of relaxing, having taken this "major" step in the direction by contacting someone.  Action was upon them, the ball in their court, we'd give them until Monday and then re-attack.  Much to our surprise the agent texted us back in about the time it took you to read this far.  She didn't have time over the weekend, but had a representative who would help us on a Sunday.  We agreed and ditched our (my) plans of watching NFL and met up.

We walked 7 properties taking pictures along the way, walking briskly through ones we knew we couldn't handle right away.  We were in this for cashflow, not rehab work and delayed gratification.  Now we understood why those properties were listed at $30K.  The final property we saw was a rehabbed, previously listed cheaply, property.  The flipper wanted $107K for this 3/1.5 with parking and no HOA.  Granite, stainless, even a kicker of $1K for a washer/dryer if we bought.  It seemed too good to be true.  We knew it was clearly the best property we'd seen that day.  The owner had even taken the time to handwrite 3x5 index cards at each turn what his team had done in that particular room to draw our attention to the key things buyers want.  I thought it novel, but in hindsight there may have been emotion involved.  It wasn't the best neighborhood, "C" for sure now knowing what we're talking about, but the commute and local offerings were good.  This is where we'd make our stand.  This was now our good idea.

Everyone thinks they're going to get a deal and that the sellers have artificially inflated their figures so we aimed where we thought we should.  Conventional wisdom, at least as far as I knew, stated to start 15% below list.  Figuring that might be insulting, we offered $100K.  He dropped by $1K, again hand-written, and offered a page of detailed reasoning why he was priced to move.  We agreed at $106K focusing on the quality of the unit making it a desirable place to live.  Thankfully in the few days negotiating we had found a property manager to help us and stumbled upon BP indirectly to more clearly understand proper calculations.  Thankfully, our fiscal prudence yielded some fruit here and we entered into a good deal, not as good as we initially thought, but we were cashflow positive ($190) with nearly 9% CoC ROI.  Not exactly crushing the market, but that wasn't our strategy.  Our strategy was to compliment the market by diversifying into passive income.

A few weeks after closing we had coordinated to get our $1K in seller appliances credit.  We were focused on selection, delivery, and ultimately collection of his check before heading back to DC.  Upon meeting him face-to-face and describing what we were up to with the property, we struck his intrigue.  The next hour plus yielded a treasure trove of information.  He had self-managed over 25 properties for more than 2 decades in the area and transitioned to flipping to "slow down a bit."  He was intrigued at our nascent business idea and offered local insights along with management techniques we'd never thought possible in this transaction.  In the end, with his business card in-hand, we knew we'd found a mentor to bounce ideas off.  We knew this seemingly transactional meeting turned into chance and has helped us along the way to where we are now.  We spent the ride home debating what sales price to sell at and thankful we'd conducted business professionally to foster this relationship.