A $12K wholesale deal 6 months in the making.
This deal started in July 2016 and required a lot of moving parts. Here is the back story on the property in question. The previous owner purchased the property for $132K in 2005. He had some financial problems during the housing crisis and walked away from the property. He then filed for bankruptcy whiles in foreclosure, and that stopped the foreclosure for a while. The 1st mortgage lien holder decide to release their lien instead of waiting on the bankruptcy. The 2nd mortgage lien remained on the property. The property sat vacant for a while and accrued back taxes. The back taxes were then sold as tax liens. The tax lien holder decided to foreclose on the property after buying the delinquent taxes for 3 years and not receiving any payments. The tax lien foreclosure had a winning judgement against the previous owner but had not yet filed the documents for the sheriff sale request. This is where I came into the story.
I was collecting rent from one of my rentals when I noticed the vacant property across the street. I decide to do some digging and found the backstory listed above. Knowing that the sheriff sale date had not yet been set, I decided to pursue the property. I skipped traced the owner and sent a yellow letter stating that I wanted to buy his house. After not hearing from him, I called the numbers listed on the skip trace report. I hit the jackpot when he answered one of the numbers. We spoke about the property and agreed to a sales price of $3K net to seller. I would assume all the delinquent back taxes of $33K and the delinquent 2nd mortgage of $27K. I got a title search on the property and owner and there were no other liens or judgements other than the above mentioned items.
Once I got the title transferred to my company name I contacted my lawyer so we could pursue a quiet title action against the 2nd mortgage holder to release the lien. We won the quiet title action and had the 2nd mortgage released via court order. This process took 8 weeks. Once the 2nd mortgage was released I started marketing the property to my buyers for $54K sales price with the potential for a $36K gross profit after repairs. Here are the numbers for my buyers:
ARV = $120-$130K,
Repairs = $30K
Purchase price = $54K
Gross profits = $36K+
One of my buyers put the property under contract for $50K and we finally closed today 01/24/2017 from a deal that started in July. My total investment into this property was around $4500 plus closing costs. The delinquent back taxes were paid at closing as part of the closing costs so I did not have to come up with the money before closing. I walked away from the closing table with a net profit shy of $12K. Not bad for a couple of hours worth of work.
This deal would not have happened if I did not have the knowledge of quiet title actions and an understanding of how the foreclosure process works in Ohio. A little more to the story, I just started wholesaling in June 2016 and prior to that I did not pay much attention to vacant properties. I purchase all my previous properties off the MLS. I had an underlying assumption that all vacant properties were owned by the bank (Very stupid assumption). Once I started wholesaling and driving for dollars I started looking at vacant properties in a different light. I hope my story inspires others to go after their real estate goals and always continue learning. The more tools you have in your tool chest the better a transaction engineer you would become. Thanks for reading my story.
