I am new to real estate investing. My wife and I completed our first flip last June. This was a test case for us – so we could use the experience to decide if we wanted to dive in deeper. It went well. We liked the experience. We especially liked transforming the house into a home, and hearing the buyer compliment the quality while we were at the closing table. So, we decided to make this a habit and started looking for a second deal.

Well, we did eventually find another deal. We were able to close on the purchase last Friday. But, as I reflected on the experience I realized that many other people contributed to us reaching this point.I want to acknowledge the strength of community – and touch on a small portion of how the community helped us. What follows is the story of how different people contributed. They included @Brandon Turner, @Brett K., @Clay Smith, @Anson Young, @Michael Quarles, @David Robertson, @J Scott, and @Mark Ferguson and Carol Scott.

It started with one of the podcast “quick tips” from Brandon Turner. He mentioned that when someone asks, “How is it going?” you have an opportunity. I put his tip into practice and started using it to update my work colleagues on our business. Recently, that meant responding with something like, “We sold a house, and are looking for another one to buy and rehab.” Followed by how much I enjoy the process. After a few weeks of this I received a text message from a colleague. She had a neighbor who experienced some setbacks, had a house with 100% equity, and needed to sell quickly.

Fortunately, in my search for properties I recently crossed paths with a realtor who was also an investor. While talking about needs for funding, he mentioned that local bank that he uses. I met with his banker contact, and I think his name is what got us in the door. The banker seems to think very highly of this realtor, and by association with him the loan process seemed very smooth. In the end we were able to get a large HELOC with good terms in less than three weeks. The timing here is important. We started this process just before we heard about the seller – but were able to act quickly during negotiations.

“Coincidentally”, I had just completed reading a book on negotiation by J. and Carol Scott and Mark Ferguson. I also listened to a podcast with Anson Young. In that podcast there was a reference to another podcast by Michael Quarles that I listened to also. I also purchased Anson Young’s audio book on finding deals and listened to it during a trip. I used a combination of all these sources to plan how to approach the seller and help them find a solution.

Prior to meeting with the seller I did as much research as possible about the property. That included going to the courthouse and searching records, looking up information online, checking for back taxes and such. It also included taking time to physically drive by the property and checking out comps. I am also privileged to have a local realtor named Brett K. who works with investors. He also created a list of comps for me. They matched mine well, and gave me confidence in my ARV estimate. Brett also took afterward to walk the property and give a first-hand assessment. To be honest, without this help I would have had a hard time moving forward. The price point is higher than our ideal range, and I needed his support to help reduce my fears. After all, now I had an ARV estimate from an experienced expert.

I met with the seller and discovered that he had been in the remodeling business previously. That helped shape the negotiation direction. I asked him, "How much do you think the property is worth?" He told me a number for what he thought it would sell for after it was fixed, and gave me his opinion of the cost to fix the house. Surprisingly, his ARV value wasn't way off from my own. I also asked him what he would be willing to take for the property. He gave me a number. This number was a little higher than what I thought would likely work, but not too far away.

After meeting with the seller I had a lot of information about the repairs needed on the property. It is a BIG rehab. I completed a rehab budget using cost data from a variety of sources, including information shared by Clay Smith who is a local investor. I compiled my estimate using a spreadsheet system developed by David Robertson. I am familiar with spreadsheets, and could have made my own, but I am happy that David saved me the trouble. After completing this analysis I had my number.

Now it was time to meet with the seller again. I tried to tailor my approach to what would be comfortable for this seller. Because of his experience, I decided to share my full process during the negotiation. Here is where Davids’s spreadsheet was a big help. He created various reports that work great when sharing information with other people. I used the Homeowner Offer Report and the Repair Estimate Report when I met with the seller. This put the focus on a professional analysis – not just a rough opinion.

I told the seller what I thought my eventual selling price would be – he agreed. I described my renovation estimate – he agreed. I explained my holding and selling costs – he agreed. I showed him the resulting offer amount – this time he didn’t agree. He thought the offer was too low. He wanted more money. Fortunately, I didn’t just offer him a value. I offered him two choices (from the recent negotiation learning). I offered him a lower standard cash purchase price, and a second higher price if he was willing to do seller financing to help me with funding the renovation. He said that he simply couldn’t accept the lower cash offer. He needed some time to think about it – and asked to meet again in two days.

We met again. He wanted to make a deal work. The second number (seller finance option) was close enough to his expectations that he accepted. There is a saying that goes something like this, “a signed contract is the beginning of negotiation.” Somewhere during the process he decided that he wanted a “clean, cash deal” so he told me he would take the lower price instead. Giving him this choice worked great, and I think helped him feel like he had options. This put him at ease a bit.

We completed an inspection, and other due diligence quickly. We were ready on our end to close in about 10 days. However, the seller had some tax liens that took some time to sort out. This delayed the closing a little. In the end we closed 17 days after our signed agreement.

We have a pretty good scope of work. Now we are busy building our renovation plan and lining up contractors. We are looking forward to the day a few months from now when we have given this property new life and have created a safe, comfortable and beautiful home for someone to enjoy.

@Brandon Turner

1 Vote