2017 - The year I started investing! Second Deal!

15 Replies

So after I got my first deal under my belt I got super excited and started searching more rapidly!

One thing I absolutely love about REI over any other form of investing is that you are helping people solve problems they have and this story is a prime example of just that.

So the story starts with me hearing this tragic story about a man being accused and taken away on charges. The house was in a pre-foreclosure status because of this. I found the name of the attorney defending the man and contacted him to inquire about the property. The attorney is adamant his client is innocent and will be released, but the property would probably be foreclosed by then. This has been the man's home for over 12 years!

I said I would love to help the man not lose his house and good credit rating due to a foreclosure, so I asked for more details.

After investigation of the property there was quite of bit of neglected maintenance so the house was not suitable for rent and would not sell for what he still owed on the property. They had tried listing it on the MLS and it sat for 3 months.

We worked up an Option to Purchase (I've heard it called a lease option, a subject to, etc) where essentially I took over the man's payments on the house so it didn't go into foreclosure in exchange for 'ownership' of the property.

I have the right to rent it and the right to sell it.

I paid $0 up front to the home owner because the property needed quite a bit of work to be suitable for rent or for sale.

We have terms and agreements to protect both parties for insurance and liability and such.

In the instance that the property sells, then both parties get a split of the profits!

So without further ado the details about the property and the numbers I expect to see!

3 BR 1 BA SFH in Waukesha WI near Milwaukee Wi.

1200 sq ft with a small yard and a 1 car detached garage.

The main thing this property needed was the plumbing.

The 1 BA is in the upstairs and there was evidence on the main floor of water damage.

If you flushed the toilet or ran the water in the bathroom you could watch water run down the plumbing stack in the basement! 

Here are some pictures of the before. 

The during

And the after!

The contractor obviously laid trim and put up the fan etc. I just didn't have the final final pics available **

So anyway! As of 1/12/2018 (paperwork signed and rent/security deposit received) the property is rented!

$1200 per month

Tenants pay all utilities. 

I pay trash/recycle service. 

Expected return 27% CASH ON CASH if I continue to rent it

If I sell the property, and it sells for $130 (comps in the area have it around 130-140) then I will cash out another $20,000 after being repaid for my capital investment! 

Needless to say I've had a rather fruitful 2017 and I will continue to invest in real estate! 

I don't always expect things to be this good, but one can always hope! lol

Originally posted by @Cody Evans :

Congrats! How complicated was the contract "Option to Purchase" and was it expensive to get drawn up?

Hey Cody,

Quite the opposite actually, I found a free to use WB-11 form which is the Wisconsin option to purchase form and sort of filled it out. 

In the addenda I simply added that the "option_to_purchase_provisions.PDF" was part of the agreement. The "option_to_purchase_provisions.PDF" was simply a word document of statements I made relating to "buyer shall do this and seller shall do this" and saved it as a pdf...

Sounds cool, but it is really simple. 

Hope this helps. 

Alex

Originally posted by @Michael Henry :

@Alex Witte   I'm glad to see everything is working out. Did you get it rented yet? 

 Yeah man! Tenants just moved in yesterday. Really nice couple. They signed for 1 year, but already have admitted that the last house they lived in they didn't leave for 10 years! I hope they are good tenants and do stay for 10 years! 

And @Dawn Anastasi yes the home was built in 1943. 

Originally posted by @Alex Witte :
Originally posted by @Kanwar Sodhi:

Congrats, how were you able to confirm the ARV?

I simply look up recently sold properties with similar stuff (br, ba, sq ft, etc) in the same area. 

What source do you use to look up the sold properties? I wanted to know if you were going to say either a realtor or a website liked Zillow. If you had used a realtor, what type of symbiotic relationship do you have and whats the exchange?

Originally posted by @Kanwar Sodhi :
Originally posted by @Alex Witte:
Originally posted by @Kanwar Sodhi:

Congrats, how were you able to confirm the ARV?

I simply look up recently sold properties with similar stuff (br, ba, sq ft, etc) in the same area. 

What source do you use to look up the sold properties? I wanted to know if you were going to say either a realtor or a website liked Zillow. If you had used a realtor, what type of symbiotic relationship do you have and whats the exchange?

For this deal I just used Zillow, realtor.com, etc. 

I do have good relations with a few realtors and brokers who could do this for me as well, but I don't like to ask much from people without having done a deal with them. 

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