Category Archives: Deals

A Formula Doesn’t Always Work

I got word yesterday that a buyer is ready to move forward with a property I have under contract.  Always great news!!  But if I’d followed the typical wholesaler formula that is plastered all over the internet, I probably wouldn’t have this deal.

Here’s why.

The typical formula a savvy beginning investor would find out there for wholesaling looks like this:
ARV (After Repair Value) x .60-.70 – Repairs – Your Assignment Fee = MAO (Max Allowable Offer)

Take the neighborhood below, for a typical 3/2/2, following the typical formula:
$110k x .70 – $20k – $5k = $52k MAO

But look closely  at the properties that have sold in this neighborhood:
Screen Shot 2014-06-23 at 8.40.17 AM

First notice that I didn’t cross a major street for comps.  I also stuck to recent comps, no older than a year, putting more emphasis on the most recent ones.  So the average ARV is about $110k, and the average investor purchase price is in the $70’s.

Most of these sold comps had pictures or good descriptions of the condition.  The ARVs usually had replacement windows, but only basic upgrades; all had new paint and were fresh and clean. Most of the investor comps  were in decent condition, only outdated and possibly needing a couple major repairs like a new roof or heating and air units.

Based on this information, an end buyer could pay up to $75-77k for the house.  That’s over $20k MORE than my formula told me.  So in this case, you could get it under contract for $70k and still flip it for $5k. (Get it under contract for less and make  more! But $5k is a good average wholesaler’s fee.)

I’ve been outbid 3 times in the last two weeks and that’s frustrating!  But it reminds me to pay closer attention to the comps and hold loosely to my formula – the market determines what we can pay and nothing else.

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Deal Breakdown: Quick $1k in OKC

Hi all, I thought I’d check in to tell you about our first deal of 2014!  It was a thin deal (hence the $1k), but it’s pretty great it worked out, especially as I was a helpless sicky in bed during half the process.

The seller was part of a small probate campaign,  which was actually over a year old (something I know my friend Sharon would like to hear, since she often talks about perpetual marketing). I’d sent him only one letter, in January of 2013.  But last month I was going through old leads and decided to resend to my probates – and it was worth it! That campaign only cost me about $60.

Once he emailed me, things went quickly – I made an offer (by email) of $44k and he accepted. I used my free version of HelloSign to email him a contract that I uploaded, which he electronically signed on January 30. Due to (another!) snow storm, we had to delay the inspection a few days, but when my inspector-friend did go, boy howdy, it was worse than I thought.

It had been vacant for 3 years and there was more deferred maintenance than I realized.  I had to go back and re-negotiate the purchase price, and we almost came to an impasse.  I offered $29k, but he wouldn’t do less than $40k. I explained that I didn’t think it would sell for that, and that he had a much better shot at finding a buyer if he would at least go down to $35k.  He agreed to $37k, and I told him I wasn’t sure it would sell, but that I would try. That was February 6, and the next day I caught the worst stomach flu I’ve ever experienced – I was in bed for 5 days. 5 days! With a property under contract!

Thankfully, my husband was willing to try out dealing with buyers (something I don’t like anyway). I moaned out instructions about which buyers to call, what to say, and the selling parameters. That same day he got an acceptable offer from a buyer we knew, and it was under contract the next day!  I was so grateful for his help – and pleased to discover he has a knack for doing the job that I dislike.  🙂

We had a few hiccups with the contract, but the title company opened escrow on February 14th and we closed on the 24th – one of the fastest I’ve found so far in Oklahoma (one of the few remaining abstract states).

It was good to get some quick cash to help with marketing, confirm the value of follow-ups, and to see that the probate timeline can often be years.  Plus, I ended up with this testimonial, which not only helps my business, but is very rewarding personally:

“I want to also thank you and your group for working with me on the sale of the house in OKC. It was a pleasurable experience in a not so pleasurable time for me. The electronic filing was seamless and really helped to expedite the sale as well as the title group being on top of everything helping me to meet the close date. I wish all transactions were that easy. I would be glad to recommend you anytime for your future customers if you would like.”

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Filed under Deals, Inspections, Marketing, Probate

Live and Learn Lesson: When to Submit your Contract to the Title Company

I’ve closed several deals and have intensively researched and followed many other investors’ transactions to avoid those hard lessons that are learned by experience.  They’re inevitable; but I’d like them to be as few and as minimally damaging as possible.

Here’s one for you that I never really processed before now: Do not submit your wholesale contract to the title company before you have your buyer.  Maybe it’s obvious to everyone. And there are exceptions; but mine wasn’t one of them.

Two weeks ago I put a house under contract.  The ARV was $105-115k. The as-is value was about $80k. And I had it under contract for $53k.  A great deal, right?

The unique facet of this deal was that it was currently rented to long-term tenants for slightly below market rent, and the sale of the property was absolutely contingent upon the tenants being able to stay for 3 more years.

So yeah.  I had a difficult time finding a buyer.  And in the end, the seller was so nervous about the quality of the buyer that she backed out.  (I’m sure there are negotiating and deal-structuring lessons in there for me as well, but I just haven’t realized them yet.)

But as soon as I got it under contract, I submitted the paperwork to my closing agent.  It was a great deal…it would close quickly, and I wanted to have the title work ready, since in my experience title companies can get backed up around the holidays.

My mistake.  I’ve always waited until I had a buyer under contract (or an assignment contract signed) before submitting the paperwork, and I should have done that this time too.  Now I have no deal, and a $350 invoice for the title examination.

Boo. But, hey, now this doesn’t have to happen to you!

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Breakdown of Closed Deals in the Past Year

I’m one of those dorky people obsessed with detective novels.  I love a great mystery and all that.  (My absolute favorite is the Lord Peter Wimsey series, by Dorothy Sayers.  If you like mystery, read this!)

I look at my marketing as a mystery to be solved.  I’m constantly trying to figure out the perfect marketing strategy, and I’ve learned that you never know when a piece of information that initially seems irrelevant turns out to be critical in discovering the truth.  So I try to collect as much data about my campaigns as possible.

In that spirit, I’ve come up with a breakdown of the 5 deals I’ve closed in the last year.  You can take a closer look below.

My Impressions:

  • Follow Ups Matter: 4 deals out of 5  received 2+ letters from me before they called.
  • Are spring and fall busier times than winter and summer?
  • Are older sellers (50+) more motivated than younger ones?
  • Free and clears might be a better criteria for my absentee owners, rather than out of state with equity.
  • Are Absentees better than Probates? 4/5 deals closed were absentee owners
  • Vacant houses are gold.
  • I wish there was a way to know about problem tenants before the eviction process.

What do you think?  Am I missing any key pieces of information that could be important?  Which information do you pay attention to?  What have you noticed when you’ve looked at trends in deals that you close?

#1 Barclay House
3/1/1 in solid middle class neighborhood
ARV 100k
Repair level: moderate cosmetic
Seller demographic: single, female, age 50+
Seller motivation: desperate
Seller circumstances: moved out of state for job 5 years ago
Seller financial situation: not in default, but close to it, mortgage of 60k
House situation: occupied by “squatting” tenant buyer
Exit Strategy: Executed L/O then executed option and sold to investor
Mailing List: out-of-state absentee owners with equity
# of Mailings before calling: 2
Date called: 3/23
Date of closing: 4/25

#2 Elmview House
3/1.5/2 in lower middle class neighborhood
ARV: 75k
Repair level: full cosmetic
Seller demographic: son of owner, a widow
Seller motivation: motivated (difficult to tell)
Seller circumstances: father passed, mother moved out of state to live with son
Seller financial situation: owned free and clear, some city code violations
House situation: vacant and vandalized
Exit Strategy: Wholesale (double closing)
Mailing List: probate
# of Mailings before calling: 2
Date called: 8/1
Date of closing: 9/24

#3 Beech House
3/2/2 in middle class/upper middle class neighborhood
ARV: 115k
Repair level: none, completely remodeled
Seller demographic: married, mother of previous owner
Seller motivation: Very motivated
Seller circumstances: Bought house for son, who was injured and unable to make payments
Seller financial situation: owned free and clear
House situation: Currently occupied with long term tenants
Exit Strategy: Cash offer rejected, owner finance offer accepted
Mailing List: Out-of-state absentee owners with equity
# of Mailings before emailing: 1
Date emailed: 6/4 then 7/25
Date of closing: 9/25

#4 Toledo House
2/1/1 in middle class neighborhood
ARV: 110k
Repair level: moderate cosmetic
Seller demographic: widowed, age 80+
Seller motivation: Very motivated
Seller circumstances: Long term absentee owner, unable to take care of house, with bad property manager
Seller financial situation: owned free and clear
House situation: occupied by non-paying tenants (grandsons of “property manager”)
Exit Strategy: Cash offer rejected, owner finance offer accepted
Mailing List: Out-of-state absentee owners with equity
# of Mailings before calling: 5
Date called: 10/1
Date of closing: 11/4

#5 NW 17th House
3/1/1 in middle class neighborhood in transition
ARV: 100k
Repair level: full gut rehab
Seller demographic: married, age 60+
Seller motivation: Motivated (difficult to tell)
Seller circumstances: co-owner of childhood home with sister, who had a stroke
Seller financial situation: owned free and clear
House situation: vacant, a hoarder house that needed bio-hazard clean up crew
Exit Strategy: Wholesale (double closing)
Mailing List: Out-of-state absentee owners with equity
# of Mailings before calling: 5
Date called: 10/24
Date of closing: 1/7

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Filed under Deals, Education, Marketing, Planning

3 Closings in 5 Months!

It’s not unusual to find a serious gap in posts from me, but I’ve always been faithful to report back.  I’m thrilled that this time the update comes after 3 different closings in the last 5 months!

Closing #1:  3/2/2 in OKC, acquired using creative financing

This lead I got from my absentee owners marketing.  The ARV was somewhere between $95 – 100K and the seller agreed to a price of $61k (what she owed on her mortgage).  The place needed work, though, and had a squatting tenant, so rather than put it under contract when I wasn’t totally sure, she agreed to let me lease/option the place at a monthly rate that was just above what her monthly mortgage payment was.  My exit strategy was to sell the house before I needed to make that first payment (although I was prepared to do so if needed).


I immediately negotiated with the tenant (sooo much easier said than done) and gave him cash for keys.  I then marketed the property and sold it to another local investor, getting a check for about $7k. The whole process (from first phone call to closing) was about 5 weeks.

Biggest lessons learned:
-Negotiations (well, successful ones anyway) are really about relationships, respect and kindness, enforcing boundaries, being willing to walk away (without anger), and lots of listening.
-I discovered a secret strategy for finding buyers (ha! gimmicky sounding but so true)
-Motivated sellers are willing to be more flexible with you, if your ideas make sense and you have established credibility.
-You push into a whole different level of client satisfaction if your offer includes solutions to every single problem they have related to this property – not just selling it.
-Creative financing (rather than outright buying or straight wholesaling) made a deal for me when there might not have been otherwise.

Closing #2: 3/2/2 in Broken Arrow, OK, a turn-key rental property we’re keeping

Again, this lead came from absentee owners marketing I am doing in the OKC area.  She wasn’t interested in selling that property but did want to sell this one.  In our first exchange I couldn’t offer her high enough, but she contacted me a month later to discuss it more.  Eventually, she accepted my owner finance offer and we closed this past Monday. This is our very first rental!

The highlights of this deal:
-The property already comes with long-term tenants locked into a lease.
-The neighborhood is great and we’re getting about 1% of property value for rent.
-The owner financing allows us to cash flow right away and build enough equity to refinance later and not pay more each month for the mortgage.

Closing #3: 3/1.5/2 in Del City – A straight wholesale deal

This deal also came from my absentee owners marketing.  This is the Big One I’ve been waiting for.  I got the property under contract for $20k and immediately flipped it for $33,500.  I had my first double-closing (called a “slip” by the closing agent) and walked away with a check for $12,607!  Definitely warranted another happy dance.  🙂  I can’t wait to pay off some debt and surprise my family with some special gifts!

A few more lessons learned:
-Confirmed the awesomeness of my buyer-finding strategy: it’s the second time in a row I’ve found a buyer in 7 days or less and added more than a few people to my buyer’s list.
-Realized that my buyer-finding strategy comes from something I took to heart from Steph Davis over at Flip This Wholesaler: when looking for a buyer, make sure you stand out! (I actually used that ad to sell a house in 2010 in 2 days.)
-Fell in love all over again with Dropbox for being able to quickly share over 100 photos to potential buyers.

I am so grateful and excited to be able to celebrate these closings.  It’s an assurance that if your path is a good one, all you have to do is keep running, walking or crawling and you will get there.  🙂

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Filed under Deals, Ethics & Etiquette, Fear, Motivation

2010 Update

Obviously something is amiss, since I haven’t posted since July.  That “something” is more like a whole sequence of somethings that have interrupted our plans, but have not changed them (if you are an investor, you know this alone is a victory!).

My third pregnancy has turned out to be a difficult one (an experience I haven’t had before), and knocked me to my feet.  Exhaustion, gallbladder issues, back problems, swelling, etc. made it impractical to work as much as I was working before.  Add to that the fact that we are a family comprised of a 4yo and 3yo, and life sometimes came to a halt.

In addition, we found out in October that my husband was being transferred to a different city 1 1/2 hours away from home.  We’ve become a commuter family, traveling back and forth together, while all along trying to sort through our solution to this turn of events.

Despite all this, I am very proud of what my husband and I have accomplished this year.  To emphasize that, I wanted to enumerate those things, mostly for myself and my attitude walking into a new year!

My husband began an unclaimed funds business and managed to close on one deal and begin another.

  • The first deal brought in a net of $10,000 before taxes, with only $500 in upstart costs (including training).
  • The second deal is an unclaimed fund that will have to go through probate.  If successful, it will net his business $4,000 (before taxes).  Either way, we will be schooled in probate law in Missouri.  🙂

I closed on two real estate deals this year, which blows me away.  To close a deal is a very meaningful accomplishment      for me!

  • The first deal was a probate that I wholesaled.  For a whopping $500.  (But to see the relief on the woman’s face was wonderful, as well as learning the ropes and being paid to do so!)
  • The second deal was a tax sale house (purchased BEFORE the tax sale, directly from the homeowner).  I paid little for it ($1,000), then paid back taxes on it (~$4,000), then cleaned up the property a bit ($750), and then sold it for $9,000, netting my business $3,250.  I was very happy with the experience, and the lessons learned were big ones!

We brought in a total of $13,750 this year and I’m very thankful to see that 2010 was the year when feet were put on the plans of 2009.  🙂

In addition to the money, it would take a long time to list all the lessons we’ve learned, but they are invaluable.  We also developed many relationships that have benefited us and will continue to help us meet our goals, and spent countless hours ironing out exactly what those goals are: with a plan, we know exactly where to go!

We’re still working out our 2011 goals, since adding a new baby to the mix is tricky business (trust me on this people!).

I’m happy to end this post, hit publish, and feel the satisfaction of keeping this blog alive, since it represents my progress.  It may be be slower-going than my optimistic and ambitious self would like, but I am thankful and proud that we are persevering, and that will inevitably will lead us to where we want to go.

Happy New Year!

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Sold!

In my last post, I told you that we got our first house from marketing to those on the tax sale list.  We spent way too much time these last 4 weeks working on it.  We hired people to tidy up the lot and landscaping, clear the belongings out of the house and have been working on getting clear title.  The owner who sold it to me was a joint tenant on the deed.  The other owner was his aunt, who died in 1999 and he never cleared it up.

Here’s a tip for those of you who might have to deal with this:  if the surviving joint tenant on a deed is NOT the surviving spouse, you WILL have a headache to clear up the title.

In Oklahoma, the Oklahoma Tax Commission must issue an estate tax certificate, stating that the deceased’s estate is clear (in my case, I only had to request a 10 year release, since it had been so long).  Then you take that certificate, along with the deceased’s death certificate, and an affidavit from the surviving joint tenant, all down to the courthouse to file with the county clerk.  That should move the title from both their names to only the surviving joint tenant’s.  I got word from the OTC that I should have that estate tax certificate/10 year release in the mail this week.  It’s been a real hassle to get it done!

Along with the tax sale property we picked up in June, I got my first wholesale deal!   And it’s a PROBATE!  I DID IT!  😀

The heir is in Detroit and has fallen on hard times.  The house is in a not-so-great part of town and wasn’t worth much.  There was still room to make some money, however, so I put it under contract.

Since I had both properties ready to market, I made my marketing plan and implemented them at the same time.  I re-read Stephanie Davis’ article here, and it was really helpful.  I used a combination of craigslist, signs and calling buyers.  In fact, we had a serious cockroach problem in the Tax Sale House, so we used Stephanie’s craigslist strategy

I posted the ad on Tuesday, posted another (non-cockroach) ad for both properties (emphasizing cashflow) on Wednesday, put a FSBO sign in front of one house, called a few people, and by Thursday I had acceptable offers on both.  I had signed contracts on Friday!!! 

We’re set to close next week on the Probate House, and as soon as we get clear title on the Tax Sale house, we’ll close on that one.  By the way, the buyers came from the craigslist ads.

For a happy ending, I wanted to share that my buyer for the Probate House is a guy I know!  I met him at Panera several months ago and haven’t seen him since.  When we met, we got to talking about REI and wholesaling (which is what he does), and he challenged me to go out and just start making offers.  Well, I did.  He was so happy to see that I took his advice, and that he was my first buyer!  🙂

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Filed under Deals, Motivation

Chicken Little No More

I am happy to report I did NOT fall off the face of the blogdom world because I gave up.  I’m actually ecstatic that it’s because I’ve been so very busy that I haven’t updated.  (Although I will consider it another reason to utilize Virtual Assistants and create more time!)

I have no facts or charts or productivity reports.  Alas, I have no time for it now.  Don’t worry! I am keeping it updated, I just haven’t paid any attention to it.

I can assure you that I have been EXTREMELY productive this month.  In fact, I’m making a baby!  Baby #3 is the temporary name for this precious little one, although I hope to pick something later that has a better ring to it. 

The due date is January 27, 2011, and seeing as how no one (well, almost no one) who reads this blog has any idea of who I am In Real Life (and how hard it was for me after little Emma was born), you might not understand that the very first thought I had when we found out was: Okay, that leaves almost 8 months to create the money in our budget for domestic help!  🙂

It’s amazing what true motivation (should we capitalize that?  Yes…True Motivation.) can do for you.  I have the ball rolling, and I do not feel at all like Sisyphus now.  I feel confident from the fact of necessity.  I must and will and can accomplish our goals.  (Did I mention I have a Superwoman/Megalomaniac complex during pregnancy?  It’s not exactly a complex if it’s real, though, right?)

With that said, my first deal came along!  And it wasn’t at all what I was expecting.  It wasn’t a wholesale deal, it was a short sale, and I have improved my knowledge of REI drastically with this experience.  I just submitted the short sale packet to the lender, which means that I’m only just beginning, eh?  I’m excited at what will happen with this one!

I also bought my first property, through the tax sale.  It was glorious, because Pregnant Super Kelly was able to receive the last-minue call on Thursday evening, work up all the paperwork for the sale late that night, have a mobile notary do the signing, record the deed and pay the back taxes on Friday morning (Yes! He did all that!) – all to stop the sale that would have happened on Monday.

And did I mention I did it all over the phone and computer while I was out of town!?!  How’s that for outsourcing and having a portable business?  😀  I was so overjoyed I forgot to stuff myself with chocolate that day.

Now we need to do a bit of clean up to the property and get that thing sold.  Since I already have the deed and paid so little for it, I’m not in the typical wholesale rush (and thankful for it!).

I have other deals in the pipeline (are newbies allowed to use club lingo?), but my biggest focus is to sell this property so that I can have the $$ to start getting the entire system (namely, VA’s) up and going again. 

Here’s to shedding that Chicken Little feeling I have loathed!

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April Showers bring May Flowers

April was a hard month for me.  I’ve been marketing and marketing and marketing and have yet to get a deal.  My “yes”s don’t have enough equity, and my equity’s say “no”.  Here’s what I accomplished last month:

  • Sent 68 probate letters
  • Created a probate tutorial to outsource my research
  • Hired a VA to research 7 months’ worth of probates for $15
  • Sent 124 eviction postcards
  • Ordered business cards
  • Sent 5 vacant house letters

Not bad, but it’s disappointing not to have a deal.  Here are  the results of my efforts:

 

April 2010 Marketing Results

 You can see that probates are my overall winners.  They got me 7.3% this month, and 8.2% overall.

Evictions were horrific.  I have a .008% response rate for April.  I emailed Vena Jones-Cox (inner circle member benefit – yay!) and she gave me some advice on how to tweak it.  I’ll keep working on it.

My vacant houses (Driving 4 $) was amazing.  I sent 5 letters and got a call back.  That’s a 20% response rate!  And she was a yes (it’s a short sale in the workings)!

My total marketing (which began in March) looks like this:
Total pcs sent: 247
Total responses:  12
Average Response Rate: 4.8%

My statistics tell me that I need about 20 responses to get a deal, so I’m counting on that.  With an average response rate of 4.8%, that means I need a total of 420 pieces of marketing mailed to get a deal.  I’ve sent 247, so that leaves 173 more pieces to send.

My goal is still to get my first wholesale contract signed by June 1, 2010.  That means I have 173 pieces to send in the next two weeks! 

Here I go!

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So much to say…

How can so much happen in a few days?

I wish part of the so much that happened was I got a deal – but it’s not.  Close, though!

The lady I’ve been talking to about her brother’s property decided to do something else.  I told her we couldn’t meet her number, and she didn’t seem interested in a short sale.  She was very appreciative and said she would call if she thought of anything she needed.  I’ll probably call to check up on her next month.

I got ANOTHER call today!  Another probate, but in a very nice part of town.  It’s her parents’ house, cosmetically outdated (since 1968!), but otherwise sound.  Problem is that these people have done some research (which is a good thing to do!), but have misinterpreted the data to mean “We can ask for full price”.  I don’t know how “the house needs a LOT of repairs and updating” and “we’re thinking of listing it for about 4k less than the assessor’s value” go together.  I told her I’d look at the numbers and call her back.  They don’t sound motivated.  But I’ll take a 7.1% response rate on this probate campaign!  That’s two calls on the letters I sent out last SATURDAY.  I would love some more calls.

Also, I went to my chiropractor/applied kinesiologist on Monday and she discovered something odd about my wrist.  She said it was messed up, started working on it and I screamed!  Apparently, working on the computer so much (which has doubled the last two weeks) took its toll?  She said it was so bad I might need a brace!  She told me to avoid typing the next few days (ha!  I’m blogging right now.)

This prompted me to make the probate tutorial a priority, and I’ve decided to hire a Virtual Assistant to do all my researching I planned to do this month.  I’ll let you know how much it costs to live the high life and have someone do the grunt work for you!  😀

Have a great week!

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