$150k wholesale margin! 1st Wholesale- Contract for $525k, Wholesale $675k Athens Georgia Multifamily

[Jack Tucker]

Our career 1st wholesale will probably be our most lucrative for at least a few deals.

This was a big lesson in flexibility with STRATEGIES.

Headlines never give the full story, but that was the end result.

Local pro flipper I met through BP was doing an extensive rehab on an 8-duplex cul-de-sac.

All brick on slab with New Roof/HVAC/floor/kitchen/baths/paint/you name it!

3bed/2bath per door. $650/door, 50% completed, 50% occupied. Units would get rented immediately as rehab was completed. The flipper had this thing on a seriously slow pace, using the growing cash flow to fund the 2 guys and his holding costs. He's a flipper and getting tired of the working-class property management headache. He knows I'm a by and hold Multifam guy. He approaches me and offers to sell it to me close to where he's at on cost, including all materials already purchased to finish - $525,000.

For me, at 19% cap rate once completed, I'm thrilled.

Flipper wants to move his resources and money elsewhere - immediately... So here's where we get creative.

STRATEGY #1 - In the special stips, I agreed to take on ALL PROJECT COSTS of rehab, property management, legal (non-paying tenants needing evictions). We agree to split the collected rental income so he can cover his debt service.

Awesome... until my bank, with whom I have done multiple deals, tells me how much they love me but they just can't do this deal. And then my next bank says the same, and the next... Guys that have funded every deal I've ever done and know my successful track record and free-and-clear list of properties.

STRATEGY #2 - Strategy change! - Time to find a cash buyer! The highest and best price would be from a turnkey sale. Extended contract 60 days. Doubled down on the rehab. Hired multiple contractors to work on multiple units in parallel. Raised rents to $700 and still getting snapped up as soon as done.

Put the property up on Loopnet at $675k. ProForma shows legit 13% cap for our market typically bearing 9%. Cash buyer was a savvy investor from Utah who flew in with his entourage of very smart guys. Offered full price cash as soon as rehab was complete.

Finished the rehab for $30k. Assigned the contract. Paid his realtor 3% at $20k. Legal & Transaction 5k

Walked from closing with 150-30-20-5= $95k net from the deal.

STRATEGY #3 - PLUS I ran this deal through my ROTH IRA. All proceeds will be tax free forever… Nice ammo for the next deal.

STRATEGY #4 – Buyer only agreed to buy if we property managed for him at 12% of the monthly plus 50% tenant placement fees. Although we don’t typically manage anything but our own portfolio, this opened a door much more valuable than this $1250+/month income stream.

STRATEGY #5 – Building a great relationship with this savvy buyer. He sees that I’m dead serious about taking good care of his money. We are already doing other flips and deals where he provides 100% funding and we split 50/50. The guy offers a wealth of experience.

STRATEGY #6 – Built major respect from the Seller because he was amazed that I made that much money off of HIM. I already had huge respect for what he has done in his career since he has been doing successful deals for decades. Now, we bounce ideas and opportunities off each other.

People keep asking how we made so much money with such experienced folks at the table.

1. Recognizing value, often in the face of the naysayers (in this case, the banks).

2. It's staying focused on that value and adapting to what the market gives on the BUY and SALE side.

3. Most important... It's having the right people around you at the right time. My wife was and remains KEY in the PM side to clean up the problems and place new quality families. My step father was clutch in supervising the contractors and his project management wisdom. Even the buyer and seller were both accomplished experts and stayed focused on the deal. I have never had so much fun pulling this deal together. Can’t wait for what the next 60 days will bring!!! Already finding some fun projects.

Jack and Rosy Tucker