What's the most interesting deal you've ever done?

Question

What's the most creative (On Paper) Deal you've done? Ever do anything with options on houses? Or IRA investing? What are the best tax strategies you've done? Etc...  Really curious about the options used. I've got a friend who uses them all of the time and I want to learn more!!

Ned Carey · Answer

Our most creative deal would be

We wholesaled a property for the same price we paid for it and still made $70K!

We contacted an out of state seller who was behind on taxes. She had a 3 unit building we figured was worth to us about $90K as a safe price to buy since we were going to wholesale it. The property needed a lot of work but was probably 100+ years old and had  some wonderful ornate architectural features.

Difficult seller

The woman wanted $240K, that is what it was assessed for, so she figured it  must be worth that. There was no way that was a deal. She was tough to deal with and quite unrealistic. She had recently lost the property next door to foreclosure. She was eventually going to lose this one if she didn't do something. She did find an attorney to help her, but I think he just felt sorry for her and knew he would not get paid.

Our first try

We  knew the property had lead paint, and the furnace didn't work according to the one tenant left. She swore it had no lead paint as it had been "Fully renovated" in the 90s, and the furnace just needed oil. We were able to negotiate her down to about $160K. However the contract stipulated that if we found that there was lead paint or the furnace didn't work she would lower the price to compensate for repairs.

Sure enough the property had lead paint and the furnace was dead. However she refused to honor the contract and wouldn't budge on the price, we tried to wholesale it, but the price was just too high. We had to walk.

More debt against the property

In addition to the tax lien the property also had a 60K mortgage. We tried to buy the mortgage. They would not sell, but agree to accept a discounted payoff. We also knew the tax lien investor had bid too much for the house and could not foreclose profitably. Since the lien was purchased, more taxes had accrued and another 40 to 50K in new taxes was due.

Our second try at a contract.

When we saw the tax case was coming up for a hearing we reached out to her attorney and told him about the tax sale hearing. This could be the end for his client. We offered to buy it again but this time we could only pay $115K  He said "Can you make it $120k so I can get paid?"

Now she owed $60K for the mortgage,  about $20K to the tax lien holder and another 40K in new property taxes. Basically she would get nothing. She owed as much on the house as the sale price. We said what if we give you $20K net and we will take care of all the back taxes and bills. She agreed and we had a deal.

Now it started to get complicated.

We somehow found out that an agent had made her a higher offer and told her "Their four page contract is not valid"  Obviously the agent was wrong and was interfering with our sale. That could lose him his license. We got an attorney to file a specific performance lawsuit and file a lis pendens. That made the seller and her attorney realize that she better sell to us.

The great news was there was already a buyer in place for $25K  more than out contract. The bad news was that buyer was very skeptical of the deal by that point and got scared away.

Our enemy becomes our ally

The agent who tried to steal the deal from us got us so mad I was tempted to file a complaint to the real estate commission. Checking their website showed that was a common reason agents got fined or reprimanded. But with yet another twist in this deal the agent had another buyer. So we inked a deal with his buyer for $120K.

Now the real negotiating starts.

So how do we buy at $120K and resell for $120k and make any money? We got the bank to accept $5k as payment is full for the $60K mortgage. They had long since written this off, No restrictions, no fancy short sale package.

Now to the tax lien holder. He had bid 175k for the house. We knew and he knew the house was not worth that and his lien was worthless. We also knew that the courts have a timeline for cases. If you drag your feet too long the court will dismiss your case. Tax sale is my specialty and We knew they had until Dec 20 to wrap up the case. We had real negotiating leverage. He had a deadline and could not foreclose. He was owed approx $17K. We offered $2K to buy the lien from him. His attorney said    .     .     .     wait for it    .    .    .   you've heard something similar before   .    .   .   "Can you make it $4K so that I can get paid"  We now had a deal to buy the tax lien.

Add it all up

So we saved $55K on the mortgage payoff and $13K on the tax lien. Now there was one more small detail. Since we owned the tax lien, when the house is sold the tax lien gets paid back to us. However a quirk of MD tax liens is the city was holding $4k of the tax lien holder's money that was rebated back to us.

The seller got $20K. We made about $70 just by negotiating. The rest of the sale proceeds went to the city for the current taxes.