Wholesaling an Eviction - A success story

[Mike Bonadies]

Hey BP Friends,

I recently closed on a very interesting wholesale involving a rental property and wanted to share my success story!

The property: A duplex located in Gloucester City NJ. The property was older and had deferred maintenance but nothing out of the ordinary. That said the rent roll was very outdated and tenants were less than desirable. The bottom tenant had the same rent as the day he moved in fifteen years ago. The top tenant’s rent was only a hundred dollars off of market price but was consistently late.

The seller: The seller had approximately 20 properties in the local South Jersey area and was also a real estate agent but had relocated to Florida and was retiring. He didn’t have a property manager for the property and disliked coming up to NJ to manage the property. He wanted to sell his duplex because it was located in Gloucester City and as good as the cash flow is for that area it requires a more active management approach, something he wasn’t willing to continue to do in Florida.

The deal: Due to deferred maintenance and wildly outdated rent roll I was able to get the property at a discount. The reason the seller decided to go with signing a contract with me instead of listing was pretty straightforward. I am also a Landlord and I was familiar with what other landlords would look for. I could promise him limited viewings versus as if he had listed in the MLS. And of course, I was providing a cash offer & quick close. Originally I had intended to buy the property myself but ultimately decided that the property was a bit out of geographic criteria and therefore decided to wholesale it. My hard money lender were the ones who actually suggested a possible buyer who also a client of theirs was given the properties location and that it was a rental. We met, exchanged details on the deal (and extensive pictures), and we had a signed contract by the end of the day.

Where it gets interesting: One week before we were supposed to close the top tenant failed to pay rent on time. We had to start the eviction process, but the property would close before it could finish. In most cases lots of wholesellers and buyers would run in the other direction. Instead we were all landlords so I thought we could figure it out. The quick version is we had something called a "consent agreement" prepared by an attorney and signed by a tenant & judge. This agreement essentially states something to the affect that the tenant will pay according to their lease to the new landlord. If they fail to pay their rent court proceedings are skipped and the new landlord can go straight to eviction. This would make it black and white for the new landlord. Additionally, to cover everyone financially. The seller covered the cost of the attorney for the consent agreement and escrowed one month's rent in the HUD for release to the new owner if the top tenant failed to pay. We also got a locked in rate for the eviction of by the attorney who wrote the agreement so we knew what possible maximum cost would be if the new owner had follow through.

In conclusion: This was a deal that educated. Knowledge & experience of landlording landed me the contract. Understanding what landlords want and how they speak secured the buyer. Finally, putting on a problem hat that involved all three parties created a winning situation in light of an eviction.

-Mike @TerraVestra