BRRRB (Extra B for Buy from Tenant)

[Brett Sayers]

I have no idea how this landed in my lap.. . .

Sometime in June while I was painting my current HouseHack getting it ready for a tenant to move in, my contractor called me talking about a deal he ran into that he wanted to flip but didn't have funds for. I offered to finance the deal as a private lender, but they wanted to go it alone.

Fast forward to August this year and the contractor calls me back asking if I still wanted the deal. I dropped my plans that day and headed out there. It was not in the best shape and the owner was the contractors buddy trying to unload and avoid 2 mortgage payments. They had a handshake deal to buy the property for $52,000 for the 3/1.5 1142 sqft ranch on more than 1/2 acre with a fenced in yard. I immediately got my agent to draft a contract with me paying all closing costs etc. We closed a week later and I paid the contractor $1,000 for bringing an awesome deal. He also got all the work.

I had a bonus structure set up with the contractor. He said it would take 2-3 months tops to replace all the subfloor, paint, remodel both baths, put in new fixtures and re-side the house among other things. We agreed if it took him 7 weeks to finish I would tack on an additional 10% to the labor cost, 9 weeks would be 5%, and if it went past the 3 months he said, a 5% penalty per week. The house was completed in just over 7 weeks (he got the full 10%), with a total cost of $54,000 with materials, labor, and other holding costs. All in around $108,000.

The property appraised at $130,900 and the local bank is lending 75% LTV ($98,075). I'm in to the house out of pocket at about $10,000 with an additional $20,000 added to my net worth.

I listed the house on cozy.co and a local Facebook group two weeks prior to finishing the rehab. I scheduled an open house and had 4 prospects show up. The only one to fill out an application wanted to move in almost immediately, and put down a double security deposit due to credit issues. At the open house, he saw my "I Buy Houses" sign in the yard and mentioned that he had his home burn down last November. He asked if I wanted to buy and I said HELL YEAH. He has moved into the house at $1150/mo rent for the month of November and we are scheduled to close November 30th on the lot with a slab and driveway (cleared other than that) on 0.16 acres.

At the closing table, I will buy the lot for $15,000. It is written into the agreement that the seller will pay at closing 1 year rent up front for the house I just had rehabbed. That's $13,800 (less November rent already paid). He gets a place to stay for a year, I get a vacant lot to build on, and guaranteed rent literally IN THE BANK!

I've had an offer already for $5,000 over my purchase price at a simultaneous closing as well. I am not sure if I will build or sell yet, but....... this is like Monopoly for real!!! Buy Rehab Rent Refinance Buy from the tenant for the Repeat. Maybe Brandon Turner can coin a phrase for it and write a book.