Hey yall!
Richard here from Dallas (Grapevine). Just want to share a quick story for some encouragement and maybe get the wheels spinning for you on some out of the box real estate thinking. A few years ago I traded homes with a gentleman named Claud and landed big equity, a new banking relationship, a remodel job and two new friendships. Here is how I did it.
It started with a single family rental I owned in Denton that was ready to be filled. I received a phone call from Claud inquiring about the property because he liked the 20x20 shop in the back (I got lucky on that one!) and he was very brash at first so wanted to get to know him better. I asked where he lived, and it happened to be a mile away from me in Grapevine, TX. After a quick phone convo, we set up an in person meeting.
I went to his house and learned that he was ready to settle down with his wife in Denton where she is from (they were each over 70 years old at the time) and they wanted to rent a home then eventually purchase. I asked questions about what he was doing with his home, and he said he suppose he was going to sell it. BAM! A lead was generated from a vacant SHF rental property. That was a first for me.
His home was worth 320k as-is and mine was worth 200k, but his was paid off and my mortgage was 115k. After building a relationship, we agreed to sell each other our homes for a discount. He sold his to me for 250k and I sold mine to him for 160k. An instant equity growth of $30,000!!! Not only this, but the sale of my home first gave me the cash position to purchase his home after so essentially NO MONEY OUT OF POCKET.
While this was going on, I had to get creative with financing as my debt-to-income ratio wasn't going to work with a traditional Fannie Mae or Freddie Mac product. I started calling banks. I called 45 banks, 5 said they do commercial lending and 2 offered to finance the deal. Knowing there was so much equity in the deal, I negotiated a 10% down commercial loan with one of the banks, the other refused to budge (typically they are around 20% down even being better than 75% LTV).
After we closed the deal, two things happened. First, Claud wanted to convert his new Denton home from a 3/2 into a 2/2 and make the master bedroom bigger among other items. He hired my company and I made some pretty good margin on the job of around 10k. Secondly, an additional bedroom and bath were added to the Grapevine home (enclosing a workshop from a 3 car garage and pulling the garage half bath into the main house and making it a full bath- $15,000 expense). The Grapevine home was then sold for $350,000!
So many benefits came from this deal beyond the numbers and the most important gains were the relationships. I built a friendship with Claud and his wife over the next few years until he recently passed away a month ago. He was a great guy and respectable in every way imaginable. I built a banking relationship from this first deal that lead to an additional 10 or so more deals which eventually led to 30 year amortizations on a commercial lending product for my buy and hold properties. Try finding that anywhere! (typically, portfolio loans are 20 year amortizations) The banker I worked with eventually switched banks and is now a capital partner in a SFH deal we have going on in McKinney. All of this came from a single phone call about someone wanting to rent a home in Denton.
Total out of pocket: $0
Total net proceeds of all sales related to deal: $120,000
My biggest take away from all of this is that it is all about the relationships you build. Hope this crazy story can be an encouragement to someone!
