Finding good deals VS great deals !!! Opinions?

[Felix Vargas]

How do you find good deals ?? How do you find great deals . What's the difference in strategy?

[Don Konipol]

@Felix Vargas

Nobody who advertises “great deal” really is selling a great deal. The great deals, being few and far between are well hidden. In my experience, most have to be “worked” to get from a mediocre offering to a great deal.

In this information readily available age, with companies now offering to buy your property and close in 15 days, there just aren’t many people who don’t know their properties value. So the rare “find” of the naive seller - well that’s basically gone.

The first thing you need to find a great deal, or even a good one, is to be able to recognize a great deal. It won’t magically appear in a group of similar properties all listed for $200 per square foot at $75 per square foot. If it is you can be sure it needs extensive and costly repairs and upgrading.

Many great deals are made by people able to reposition and reconfigure property use. So all this requires extensive knowledge, imagination, courage, capital and credit. You can add experience too if the project is of any significant size.

Since I have no special knowledge or advantage in the construction trades, nor am I particularly gifted at reimagining property use, I have gotten my “great deals” through persistence, knowledge, and having the cash available to close quickly. To give concrete examples, I relay the following actual situations

1. I purchased an auto repair shop for $115,000. The owner filed bankruptcy, and the property was being liquidated by Bk trustee. My research found that their had been environmental problems on the property. The trustee thought the property worth $275-$300,000. I informed the trustee of environmental problems, and he asked me to get 2 bids from licensed engineering firms to remedy. I chose the companies know for the highest fees, and submitted said bids ($75,000 and $67,000) to trustee. My bid of $105,000 was countered at $115,000 which I accepted. I then hired an environmental engineer to remedy the property at a cost of 3250.00! I leased the property to an automotive franchise at $3500 per month. At the end of six months I sold the property to the franchisee for $350,000.00.

2. In 2012 condos were not financable in Phoenix area. Prices had crashed 60% from their 3008 highs. I purchased a package of three high rise condos that the seller had paid $1,450,000 for in 2007 for $465,000 cash. I liquidated the condos over the next two years for a total of in excess of $765,000.

3. A few years ago I received a call from a mortgage broker that a client of his had to sell a owner financed commercial mortgage note he held to get cash to save his failing hotel property. The note was secured by a small strip retail center anchored by a convenience store. The store had gas tanks, and the Major note buyers wouldn’t touch it. I ran an environmental screen, and there were no compliance issues. The note has 13 years to run, an unpaid balance of $465,000, with payment to of $4015.00 monthly. I offered and paid $250,000 for the note, which provides me a 17% + annual return.

Lest you think it always comes up gold, let me share one of my worst investments. A former car dealership location was auctioned at the courthouse steps. I was one of two bidders, and thought I got the deal of a lifetime at only $275,000. I spent three years unsuccessfully trying to lease or sell the property. Finally, I sold the property to the guy who bid against me at the auction for $250,000. So I lost $25,000 on the sale, $45,000 i paid in insurance, 39,000 in property taxes, $16,000 in emergency repairs, and $6,000 in a special municipal “assessment”. A $131,000 loss on a $275,000 investment. Fortunately, while loses do occur there far and few between.