How I made $64,000 but had to wait 1 year to see it.
So here is my $64,000 story:
December 2013 my phone rang, it was a former co-worker who had fallen on hard times. He called me and asked, “are you still buying houses”? I told him yes I was, if the circumstances were right. He then proceeded to tell me that he had lost his job and he and his girlfriend were about to lose the house because the taxes had not been paid in several years. I told him I might be able to help and I would meet him the following day to look at the house and talk about how I can help.
Once I arrived at the property he told me he had several offers from those “we buy houses” people. I asked him what he was looking for and he said he was looking for a quick sell to pay off the liens and put some cash in his pocket to get back on his feet. He said that the best offer he had gotten so far was $75,000 cash. After a cup of coffee he told me they wanted at least $85,000 for the home. I told him that I would buy the house for $70,000 and he could stay there rent free for a year. How does that work, he said!
Here is how we structured the deal:
There was no mortgage on the house, they owned it free and clear.
I offered $70,000 then leased the house back to them for $1250/mo, but took 12 months’ rent off the $70,000 purchase price, which brought the sales price to $55,000. They got $55,000 – tax liens and got to live in the home for 12 months’ rent free. At closing they hugged me and told me thank you for helping them and for not making them move. They got a nice sum of money in their pocket to help them get back on their feet and I just sold the house this week, 1 year later for $135,000 cash. Final numbers are:
135,000 selling price
-55,000 purchase price
-16,000 rehab costs
Left me with $64,000 in my pocket
There were a few bumps along the way, like them subleasing a room to a guy who turned the room into a meth lab. Then there was the time the police got called because the drug dealer intentionally drowned their dog in the pool. Or when I evicted the drug dealer he screwed the doors shut and blacked out all the windows with spray paint. Not to mention the time they wanted out of the lease and wanted their money back because there was a meth lab in my house.
Here are a few things I learned along the way:
Cash is king.
Be respectful, always treat people the way you want to be treated; the next person who falls on hard times may be you.
Be honest about your intentions with the property.
Be creative, like letting them stay there for a length of time to get their life back in order.
Enforce your contract, I would not let them out of their lease, it’s legal and binding.
Have no mercy with street pharmacists; involve law enforcement as soon as possible.
Tell people what you do, this was a word of mouth deal, I was contacted because he knew I was one of those “we buy houses” people.
Thoughts, comments or questions? I'd really like to hear other peoples creative deals or deal ideas.