About a month or so ago, I was wasting time on Facebook and I just casually mentioned that we were looking for homes that are run down and in need of repair. I just posted that if anyone was interested, they could message me directly.
Unfortunately nobody responded.
But two days later, a real estate investor I’ve never met before saw our post and messaged me and my acquisition manager Bill that he had a property for us, but it wasn’t exactly what we were looking for.
He simply had a property near us he was looking to rehab, but was having trouble financing it. Two days after we got the lead, we had the contract wrapped up from the investor for a $10,000 wholesale fee.
Use any ethical means available to find deals – including your social networks. Just do it casually on Facebook.
When you get a deal – be flexible and open to any and all ways to get it done – even if it’s not exactly what you’re initially looking for.
In the following days, we couldn’t quite work out the details of when the seller was going to vacate the house.
The issue was the seller had so much stuff in the house (think “Hoarders” from TV) that they were just completely overwhelmed and were starting to get cold feet. The deal was starting to fall apart if we didn’t do something.
Bill and I met briefly and we decided we’d “buy” our way out of the problem. Bill called the wholesaler back and told them: “Listen, don’t worry about all the stuff – just knock $10,000 off the price of the house, we’ll take care of all the stuff on our own”.
He then stopped talking.
After what seemed like an eternity of dead air, the wholesaler said, “OK, let me see what I can do”.
He called us back 15 minutes later and agreed to our proposal. We closed the next week.
The day after the closing, we had a team of high school kids from my wholesaler John’s football team in there hauling out two dumpsters full of junk. We filled up two entire dumpsters and $1200 later (plus labor), we had a clean house.
An immediate $8,800 profit for us…
When negotiating, don’t over talk. State your proposal, then shut up. The first person to talk next loses. (In this case though, we both won!)
When confronted with a roadblock, be creative – money often times solves all problems. EVERYTHING in real estate is negotiable.
As soon as we had all the junk cleared out of the house, we immediately realized we had yet another issue. As much as I’d like to think that I am pretty good that visualizing floor plans that sell, on this one I was stumped. Both Bill and I were scratching our heads trying to figure out how we could arrange the floor plan so that it flowed well, but also we had an extremely vexing issue in that the house was a two bedroom and in our experience, two-bedroom homes take a long time to sell.
Somehow, we had to figure out how to change this two-bedroom house into a three-bedroom house. We also had to figure out a way to open up the main living area and expand the kitchen. The home had an extremely challenging floor plan with two bedrooms, a weird kind of living room and a large workroom that was way too large to make into a third bedroom. Here is a picture of the floor plan here:
For the first time a really long time, I was stumped as to what to do.
What would YOU do with this floor plan?
Then Bill thought of an idea. Why not invite our architect, realtor, designer and contractor all together in an on-site “meeting of the minds” to solve the issue all at once? That way, we would have input from all parties who would have a vested interest in the property in one room and resolve the whole thing.
So we did just that.
Don’t think you always have the answers. When you need help, ask for it. In this case, we had no clue – so why not get the experts to help decide instead?
Learn from your mistakes. We knew two bedrooms don’t sell in our market, so we didn’t repeat those same mistakes. Learn from them, don’t repeat them and move on.
We realize that if we got all parties involved in the project in the same room, trying to figure out a singular problem – each would elicit input based on their own vested interest. But by having everyone in the room at once, they would balance and counter each other out.
For example, the contractor suggested that we should expand the kitchen with an island and bar stools. He said it would cost an extra $10,000.
Fair enough, I said.
I then turned to the realtor and asked her if that kitchen would help the home sell faster. She said it probably would. If I didn’t have the realtor there, Id be taking a guess on that.
Everyone was there helping to make the right decision.
At another point, the architect suggested moving the bathroom over to a corner of the house, claiming that would open up the space more. But the contractor countered and estimated the costs of doing that in structural and plumbing cost would raise the project another $15,000. The realtor then interjected and said that additional cost may get us $5,000 or so in ARV.
Use the collective brains of your real estate investing team – even before a project starts and at all points along the way. Their input is invaluable.
If you are going to spend additional money on a rehab, make sure you get at least a multiple on your money for that improvement.
As you can see from the photo, there was a workroom behind the garage which was too big for a single bedroom. What could we do with that?
It was isolated from the master bedroom, so would that detract from the house?
We hashed out all these issues in our hour-long meeting and we finally decide on three basic floor plans. The designer and architect agreed to draw up the three plans by that Friday. We would then pick one that day and then start the rehab.
If you cannot solve your problems on the spot, make a specific plan to narrow down your choices with deadlines for completion. Time is money in real estate, so don’t dawdle…
We met with the designer and architect on that Tuesday and they showed us the three plans and we picked one.
We called our contractor on the design decision. He was thrilled as some of his ideas were added in.
We then called the realtor. She too was thrilled as some of her design ideas were added in as well.
Bottom line: we eliminated the need for structural changes, kept within our projected rehab budget of $50-70,000 (we were now on the high-end of the range, but still OK) and came up with a kick-ass design that will SELL!
Furthermore, I have no doubt my builder, my architect and my broker will work even harder than they have before on this house to get it done and get it sold because THEY had a part of the decision-making process.
Later in the day, I got a call from the realtor. She was so excited to talk to me because she had done a little more research on our plans and was convinced that we could sell the house for $20,000 OVER our original ARV.
THAT is good news to hear on a Friday…
Take everyone’s advice, but at the end of the day – the decision is yours – so make the decision
When you include everyone in on the decision-making process, they all become extremely vested in that project…and take ownership.
Share good news. People love good news…especially on a Friday.
If you’ve made it this far, what do you think? What would you do with this floor plan if it was your flip? How do you manage your team to get the best out of them? Please leave a comment below and let me know what you think!