How I Combined Direct Mail, Creative Finance, Partnerships in One

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The first week of September I sent out 43 pieces of hand signed direct mail (more on that process later) to properties that I had identified by driving for dollars. I am in Panama City FL, where the local area is still feeling the effect of a category 5 hurricane from last October. So it is'nt hard to indentify distressed, vacant, bad looking properties just by driving around. It's the easiest and cheapest way to build a list of properties to target motivated sellers with direct mail, though it does require you to get in the car and go look for properties. I try to stick to distressed properties in good neighborhoods that will support strong ARV. I follow the strategy some have spoken on BP about finding the worst house in the best neighborhood - and it holds up! The seller called me back and due to an injury couldn't repair the property themselves like they had planned (they don't live there). A perfect highly motivated seller to get a response from with direct mail!

The house is a SFR with 3 beds and 1 bath and about 1200 sqft. It needs a new roof and semi light rehab on the inside.

After speaking with her she just wanted out, and for good reason since her injury prevented her from following through on her plans with the property. She purchased the property seller financed and that contract had a due on sale clause so she couldn't seller finance. I tried taking the property subject to the existing financing, she was okay with that but the mortgage holder didn't like it. So we landed on a lease-option where I would pay her monthly payments equal to the mortgage payment for my right to fix the property up. She was about $2k in credit card debt so I offered a $4k option fee with the lease option. This worked for her because she canceled her debt and came away with a little money and I got in for a lower amount than using any down payment. The option to purchase was then set at the amount she owed, which is about 50% of the ARV. This was a good way to get the property at a good price and she was happy because she made about $2k and got out from under a property that was beginning to drain her.

Once I got the lease option signed, my partners that are working with me on another BRRRR project in town came in and began the rehab. They provided the money for the option fee and the rehab costs while we split various management (mostly them) and the profit on the back end. This was another great no money down way to get a deal done!

Overall the rehab is pretty light, it should be done in less than a month. And in this hot market it should sell quickly and leave us with at least $15k at the end. For a rehab that is projected to be done this quick that is a nice profit for our amount of work on the deal. And it was a creative way to find, structure and finance the deal. 

What other ways are you all using to find your deals? Structure them creatively? Fund them creatively? 

I am trying to piece your numbers together. You purchased a property for 50% of the ARV. The property has light rehab that will take 30 days and your profit is only $15k??? What is the ARV?

I won't risk my time and money for a $15k profit that has to be split with someone. Too many things can go wrong and before you know it you spent hundreds of hours and walk away with less than $5k for each partner. Minimum wage in Seattle for wiping tables is $15 per hour and less risky.

Having a track record and experience is also valuable. The deal the OP described may be a little thin to some but may be mechanically the same as another one down the road that nets him a couple hundred grand. Thereby, making the experience from this one a part of the profit. Nice work!

Clint