can anyone give me an example of theyre very first real estate transaction. and how it was financed and everything? i wanna get into real estate but i need to know how transactions are handled when youre just rehabbing properties and selling them. i’m stumped. :banghead
Way back in the late 70’s I was just out of college and just married and moved to Houston to make my Millions in real estate. I started painting apartments and lived off Parker in a 1 br at North Meadows apts. I started selling(trying to sell) large apartment properties at Kaylor/Leathers Assoc. in Bellaire We saw a chance to buy a small 3 br house there for $50,000 owner financed with very little down. I do not know how we got the down much less the money to paint and fix up the place. We lived there about a year and finally sold the place for $70,000. Hind site is 20/20. Had we only kept it till today what $250,000 to 300,000 for lots on 3rd Ave there. I never did sell a commercial deal but there were plenty to be had then at 3,000 to 10,000 per unit, some even cheaper. We barely made it even having our electric cut off several times for non pay. I would do it again, it built a lot of character. Boy the good old days. Take care
Welcome to the board.
The very first rehab I did was also the first property my wife and I owned. It was a condo that we bought for $50,000. It was an owner financed deal. We put $5,000 down and the seller carried the note for 30 years at 8%. We put another $5,000 into remodeling the condo (we did all the work ourselves) and then sold the condo for $75,000 cash. :thumbsup
The second deal I did was also owner financed. I bought the property for $45,000. I put $5,000 down and the seller carried the balance for 15 yrs at 8.5%. I put about $5,000 into rehabbing the property doing all the work myself and sold the property for $65,000 cash.
As you can tell, those were not “no money down deals”. They were creative only to the extent that in both instances I received favorable financing from the seller. Those two properties made me aware of how powerful “sweet equity” really is.
It wasn’t until my third property that I did a true “no money down” transaction. I was looking for a way to not use my own money. A friend of mine who is a full time REI investor turned me on to hard money. I didn’t know what hard money was at the time, but she explained everything to me.
I found an ugly bank repo that was worth $60,000 on an after repaired basis. I bought the house for $30,000 from the bank using hard money. I put $5,000 into the rehab ( I didn’t do the work this time) and I sold the property 4 months later for $54,000 cash. A little below market value, but I wanted to move it quickly. I had borrowed the entire amount from the hard money lender and didn’t use one penny of my own money.
While I was in the middle of that deal I found another bank repo that was worth $55,000 to $60,000 fixed up. It was in VERY bad shape. The worst one I’d bought to date. I bought it for $23,000, put $10,000 into the rehab and sold it 4 months later for $53,000 cash. Again, using none of my own money. I used hard money to buy it and fix it. I didn’t do the work on that one either.
While I was in the middle of that rehab I found another property that was worth $50,000 and I bought it for $25,000. I was hooked at that point.
Those experiences weren’t without their problems. Contactors not showing up, finding little gotcha’s here and there that cause’ the rehab to be delayed, I lost a contract on one and my realtors hadn’t collected any earnest money, and on and on and on. :banghead
Like they say, you can’t have the rainbow without the rain.
Hope my story helps a little. I’d love to hear other peoples stories too.
Got my first deal by doing exactly what Carleton Sheets told me to do. I called FSBOs in the paper until I found a motivated seller.
Lady had her parents house listed in the paper. Her parents had moved out of state some years back and had used the house for a rental since. Now the house needed a few repairs and the tenants were usually late with their payments so they wanted to get it gone.
FMV after about 4k in repair was 85k. She was asking 69k, I offered 58k, we agreed on 62k. I used the banks money. Put up a 5k CD in lieu of a down payment and after prorations I walked away with 1k at closing.
After I got the tenants out, we got to work. A little FYI here, always figure in a nuisance factor if you have to deal with THEIR tenants. Believe me, no matter how much it is, it won’t be enough.
Spent 3k on paint and carpet and sold 1 month later on a L/O for 2k down and 150 per month cash flow. They stayed 6 months, got divorced and moved. I spent another 3k on exterior paint and other repairs. Got my 3k back and 250 per month cf on this L/O. This couple stayed for 18 months and cashed me out at 92k. Net profit was around 27k.
Not a very creative deal but it was a money maker. That’s really all that counts.
Here’s my beginning into the creative world. It was posted on CREO sometime in 1999.
Part-Time Newbie Having a Blast
by Tim Randle
I thoroughly enjoy reading about other newcomers’ successes and figured I’d share ours.
I’ve read and thought about real estate investing for many years and never took action. My wife and I both work full-time and have 2 kids under three. We finally decided to get serious and here’s our story…
My wife and I joined WealthBuilders in Austin, Texas around January 1999 and attended a LeGrand seminar shortly thereafter. We also purchased the Carleton Sheets “No Money Down” course and retired the 7 year old copy we already had. Anyway, we became sponges, absorbing as much as we could wherever we could.
Late March it finally dawned on us we will be learning for years and we need to make some calls. The last Sunday in March I scanned the ads and called first on one with a header “25k Below Market”. We were the first to call (8 a.m.) and the first to see it. The seller was asking 126k and owed 110k.
Comps indicated a range of 135k to 145k and it was assessed at 151k (thus the 25k below). After viewing the house, we knew it needed at least 6k in repairs. I called the seller back that evening and offered 121k using a wrap to mirror his note. He called back an hour later and said they really wanted to net 10k in cash out of the deal after closing. We had already set up our lines of credit so I immediately agreed to increase my offer by 1k and said we would close as soon as he removed his non-paying tenants.
The following Sunday I found an ad stating 100% financing (and not posted by a realtor). A man answered and told me he was willing to let someone assume a note he had for a house he had sold to a lady who was in default. Comps indicated it was fairly priced. We had a signed contract by 10:30 that morning.
We went and set up an L.L.C. and bought both properties on May 3rd. This second house we rented for $125 per month more than our payment prior to making any payments. The tenants have pets, but the $1,750 in security deposit provides some comfort.
Back to the first house. Our first offer at $141k, which would have netted us about $10k at the time (ooh, this is easy), fell through after a while and I submitted a “help” post on the News Group. JPiper and others scared us into not spending more money on it and just getting out. Suddenly, the initial intent of just getting the first one out of the way and seeing if we could net $5k to $10k was replaced by fear. Were we too rash? The experienced folks told us that our deal was too skinny (with the caveat that they weren’t familiar with our market). Oh, well, it will provide a lesson and still possibly some profit.
A couple came to view the house one evening and did so in a hurry. The man (will call him D) asked several questions which led me to believe D was an investor. Turns out, he lives in a fourplex and owned another and was looking for a personal residence. I suggested he sell me one of his fourplexes since I would really rather own multifamily, anyway. D wasn’t interested. They popped by the next evening as well while I was showing it to someone else. They wanted a number to make an offer and still didn’t want to sell me a fourplex.
The following day I met a handyman who was there to “unconvert” the garage and D showed up again. I pestered him again and this time as he was leaving, he agreed to consider “trading” a fourplex for the house. Here are the details:
Fourplex recently appraised for $139k, owes $102k, so equity of $37k, rents $2,150, pmt PI only $830, other expenses $600.
House valued by me at $145k, owe $110k, so equity of $35k, I picked up the $2k equity difference and wrapped the $102k.
He was concerned about taxes so I suggested we maintain the $6k difference in “price” and lower our prices.
I sold him the house for $121k and bought the fourplex for $115k which should cashflow $600 to $700 per month. I now owe about $15k on the LOC, and thus have about $22k in additional equity.
I also have another house for sale currently which should easily net $12k to $15k as a flipper. Tomorrow, I meet with one man who has two duplexes and is willing to finance and another man who has a fourplex who is also willing to finance. At this point I haven’t quite convinced myself I could maintain my current lifestyle if I were to do this full-time, but I frequently wonder what I could do if I did spend more than five hours a week (excluding education).
Man, this is a blast! Thanks for listening, and to all the other newbies out there, don’t sit on the sidelines for a decade like I did. Just do it!!!
To put it short and simple, take one step at a time. When I look at everything I have to do to purchase I get overwhelmed. When I concentrate on only what I need to do next, I’m at tilte with a pen and cashiers check before I know it.