Selling our Slow to Move Rehab and Holding a Note

[Julia Breheny]

Rehabbing can be profitable, fun, stressful, costly and so many other things. We purchased a rehab property from a wholesaler and after close the "fun" began. This was our 8th rehab, but our first in a new town near us.

A 6 week rehab turned into 3 months. We went over budget, over time, had permit delays and ultimately fired our crew. We finally listed the house on the market, had an open house with over 30 people through and then it sat and sat. We dropped the price several times even though we were getting positive feedback from showings. 

We were at the house one day when a lady riding her bike with a parrot on the handlebars stopped by. We invited her to take a look. She offered us $150k cash. We told her it was too low. We knew our break even was $160k. She said how about $160k. We told her we would have to think about it. We went home ran some numbers. We needed to get our investment back to move on.

So here was our plan to move this house, pay off our lender, recoup our investment and make some money.

We offered to sell her the house for $175k. She pays $160k cash and we would hold a mortgage for $15k payable over 5 years at 7%. Her response was YES, can we meet tomorrow to sign the contract and give you the EMD check.

This was a win, win for all. She is getting a house she loves, we recoup our investment and created a passive income stream for the next 5 years. The $15k note will be $18k when paid in full and if she defaults, we foreclose on our profit amount that is secured by a property worth $200k.

Lesson learned, never shut any door, but challenge your mind to think differently to make deals happen!