Creative Strategy & Hot Market Enabled $60k Flip Profit

[Travis Lauchman]

What many of us love about real estate is that there is no limit to flexibility and creativity in deal making except for our own limits on education and understanding of structure. The great news is that with time many of these structures become evident simply through problem solving. I want to share an interesting structure of a deal that turned out to be a great success for our company and that we will look to replicate again :)

The scenario: Seller owes around $125,000 on an end of group townhome. In the condition that it's in, the property is worth about $85,000 to us. We make an initial offer of $80k and its rejected but in that communication we learn the Seller is moving south and knows that they will need to bring cash to the table to get the property sold. We approach them again offering an additional $10k for an offer price of $90,000 if they will hold the deed/mortgage so that we are able to avoid transfer costs, raising the capital for purchase price, etc. They agree to those terms and we setup a few legal instruments to protect all parties:

1. 1. They give us Power of Attorney to sell the property without prior consent assuming they will get at least the $90k promised paid toward their mortgage
2. 2. We have a internal agreement drafted by attorney detailing the structure and timeline including sell-by date, who is responsible for electric, insurance, etc.
3. 3. Our title company holds the mortgage balance above $90k that the Seller would need to pay at closing in escrow - just in case they change their mind and leave us holding the bag we wanted to make sure those funds were available! This was enough to make us comfortable investing the renovation cost. 

We spent around $47,000 renovating the property and listed it at $199,900. We received multiple offers in the first 3 days and landed on a conventional offer at $210,000. Importantly, we steered the end-buyer toward our title company so that the transaction mechanics wouldn't get overly complicated. With only $47,000 of our own capital invested we were able to return a $60,000 profit making it, strictly from a cash-on-cash return as a flip, our best deal ever. 

There are no limits to what we can accomplish out here. We were fortunate to ride a hot market to increase profit and its vital to keep a pulse on that but without a little creativity we could have easily accepted the 'no' after the initial offer and moved along with life.

Let's keep making the magic happen, everyone! Have a great weekend!