Turning a Default Buyer Into a Better Deal

Sometimes, life happens. When this tenant-buyer defaulted, we turned it around and made a better deal out of it.

What happens if your tenant buyer defaults? Well, you make it into a better deal!

Sometimes, life happens. When a tenant buyer defaults, it’s not the end of the world. We always tell our Associates to stay calm when these things happen. The worst thing you can do is panic and try to get yourself out of the deal!

In many cases, you can pivot and salvage the deal or—in some cases—even create a better deal. That’s exactly what happened to us with this deal.

The Lake View Property

This was one of the earlier deals added to our YouTube channel, over a year ago. It was a great deal…until our tenant buyer defaulted!

It was an unfortunate scenario for everyone involved. Our goal is always to get our tenant buyers to the finish line, but sometimes it doesn’t work out. So we pulled an audible!

We ended up re-selling the house by placing another tenant buyer in the property. We vetted them, brought them through our process, and truly believed they’d get to the finish line.

In this deal, we were working with a great house in Connecticut with a lake view. As you’ll see below, it ended up appreciating between the time of the first tenant buyer and the second, which added some additional profit to an already great deal.

Although we won’t get into it in this post, there were some other cool nuances to this deal—like an apartment above the garage that the tenant buyer was able to rent out for an additional $750 per month.

And don’t forget—since this was our second tenant buyer, we still had the nonrefundable deposit and spread from the first tenant buyer was in the property! The transition cost us some money, of course, but there’s plenty of additional profit that we won’t be getting into here.

Here’s what happened…

The Re-sell

Let’s get into the numbers. The original source of this deal was an expired, which we purchased for $399,000 on a 48-month term.

The monthly payment was structured as a $1,000 principal-only payment to the seller. We then had to insure it, as we own it, so that was approximately $150 per month in addition to the approximately $900 in taxes (which, remember, gets passed on to the buyer!). The seller lived out of state and came to us when he had a life event and needed to sell the property. He was very flexible on the monthly payments, which is why we were able to get it down to $1,000 per month. The taxes and insurance were pretty high for the area, but the overall monthly payment was still fairly low.

Now, we bought this property over 20 months ago. As of the first tenant buyer leaving, the balance due to the seller was $379,890. Let’s check out what happened when we resold it.