​Podcast 77 Made me 90k an Hour!

Although I haven’t been a Bigger Pockets member for too long it has become very apparent that the information contained in the podcasts is excellent. That being said, without actually implementing any of this information it will remain as just that – something great to listen to!

I have been consuming podcast after podcast for the past couple of months and have learned many new things but a few weeks ago I received a call that allowed me to really put some podcast info to work, but before I dive into that; a little bit of background info: I live in a small town and own several small multi-unit dwellings, and after making a conscious decision over the 2015 Christmas holiday to focus on and expand my portfolio, I reached out to a local mortgage broker to help me. At our first meeting I presented her with my investor binder – a document I created that included income/expense reports for each of my (four) existing properties, my tax reports for the past 2 years, a net worth statement, a personal info page, and a letter of intent on where I wanted my investing to take me. This whole process took me 2 hours…….a long time you ask? Well, it was two of the most lucrative hours I’ve ever spent.

Over the next few months I spoke to, texted with, emailed with, and visited that broker many times, and she helped me put together two deals that I closed on the same day – you can read more about in a previous blog post. At this point the broker knows that I’m serious and willing to make things happen and when one of her existing clients expressed a willingness to ‘get out’ out of being a landlord she suggested she contact an active investor that she knows – ME. Out of the blue, I received a message from this lady who incidentally had called me a few months previous for a tenant reference check. She introduced herself and although I vaguely remembered the phone call months previous I couldn’t imagine why she had called. She quickly let me know that she’d like to speak to me about whether I’d be willing to buy her triplex and could I call her back.

Perhaps coincidentally I had recently finished listening to podcast 77 with Michael Quarles (a fantastic episode) where he spoke at length about negotiating with willing sellers. I listened to the show again, and then again, and then one more time. I took notes, negotiated with myself in the mirror, and yes, even tried to employ the tactics on my daughter to eat her supper (to no avail unfortunately). The next day I was ready for the call; so I pumped myself up, dialed her #, and proceeded to carry out a negotiation that Mr. Quarles likely would have said resembled an awkward teenager going on his first date. I was awful; desperately trying to ‘implant the idea’ that I’d be buying her house I said the words “buy your house” every other sentence for about 3 minutes. After very specifically indicating on his podcast that it’s important to never say a price as the seller should be the one negotiating with themselves, I was asked point blank by the lady “so, what would you be willing to give me?”. I tried to fumble around the question but I knew what I wanted to pay and realized that in that moment that I needed to stray from the script I’d created from Mr. Quarles and indicate a price. The rest of the conversation included several verbatim quotes from Mr. Quarles which had the seller agreeing with me on things such as a slow market, houses not moving quickly, etc. and I can imagine that she was even shaking her head up and down as suggested in the podcast.

Fast forward a few weeks, and I’m a week away from closing on the property. The purchase price was 127,500 and although I’ll need to put in approximately 4 grand up front, I’m still going to earn over 16% cash on cash return. In actuality, I’m going to earn an infinite return as I have two colleagues putting up the money for the downpayment who I plan on paying a set fee each month for 12 months before refinancing the property after 12 months and paying them both out at a healthy return. I know the value is there for the refinance as it appraised recently for $180,000. So, in essence, due to my two hours creating my investor binder, that eventually led to this deal where I put up $0 and acquired a $180,000 property…….i’ll take that ROI any day of the week!

As Michael Quarles said, there are reasons people want to sell their homes and why they want to sell at a discount. As investors, it’s our job to solve their problem and buy their home in a scenario that benefits both parties. This lady is thrilled to be selling the property, I’m thrilled to be purchasing an excellent cash-flow property with an immediate equity position, and my investors are thrilled with their pending return on investment.

Thank you Michael Quarles for the information you shared; although I may not have been as smooth as you – I fumbled myself to a great deal and next time I’ll be much more confident!