How I Made $1,500 in Three Hours, on My First Deal!!

I've known, for the last 10-12 years that I wanted to be in real estate in Memphis, TN.  The reasons / excuses for not taking so much as my first step for over a decade are many but, I'm trying to keep this short and sweet.  After listening to EVERY BiggerPockets podcast, TWICE, I found myself having brunch with a group of friends.  One of whom, Jay, was living in a 'C' class neighborhood in a home badly in need of repair.  He owned the home out right, it had been in his family for years.  During the course of conversation, he mentioned the home, the leaky roof, the mold in the bathroom, the drive to and from work everyday, the poor neighborhood, etc. 

Twice before I had offered to help him fix the roof and at least once before I suggested that he fix the home, rent it out, and move in to something nicer, closer to town.  Jay was clearly not going for either of these ideas.  It was obvious that the whole situation left him feeling overwhelmed. 

This particular morning, I opened my mouth, and without even thinking said the scariest words that I had ever uttered... "Jay, if I can get you $15K for the house, would you sell it?"

Now I had heard about whoelsaling but, I had never done it and I had learned about the 2% rule and the 70% rule, but I had never had to use them, and I knew that Jay's house was in a prime rental area. So I did the math...

Rents in the area, for a 3 bed, 1.5 bath home, around 1000 sq.ft. run around $700. So at $35,000 the property hits the 2% rule.

I pegged the ARV around $40K (being very conservative).  If I presented the deal to an investor with an ARV of $35K, the %70 rule says he or she should pay no more than $24,500.  

If repairs actually ran closer to $9K (about %15 above estimates) then a fair price for the home, in it's current state, is $15,500.  Maybe I could make $500 wholesaling the deal!

Jay said he'd be thrilled to get $15K for the home.  I went out there with him, took a bunch a pictures, and toured the home.  In addition to the whole house needed a coat of paint and a bunch of cosmetic repairs.  I pointed everything out to Jay and explained that it was probably going to take another $4K worth of cosmetic repairs, a number to which he agreed.   So we settled on $11K for the home and I wrote up the contract.  I was so nervous that I actually misspelled 'Eleven' .  I told him that I needed 30 days to find a cash buyer and close on the house.  I spent about hour out there altogether.  This was early morning, January 9th.

Before the ink was dry on the contract, I put an ad on Craigslist asking $15K (expecting to have to negotiate down) and sent an email to a couple of people that I met after introducing myself on BP.  

By lunch, I had a half dozen emails or phone calls.   

At 5 o'clock, I got an email from Chris asking for the address.

At 5:30 Chris emailed asking for pictures.

At 6:30 Chris sent me an offer for $12,500 and proof of funds.

At 7 o'clock, I had an assignment agreement for $1,500 and the whole deal was done; 2 hours worth of emailing back and forth.

It's now January 25, Jay just called me.  He was leaving the title company with a check in hand and headed out to celebrate.  I'll pick up mine in the morning.  

Like Kemmons Wilson once said "... success requires half luck and half brains"   I knew nothing about contracts, nor did I even have one at the outset.  I didn't know how to find cash buyers.  I didn't know how long it would actually take to find one or what would happen if I didn't find one.  I didn't have a closing attorney or title and escrow company.  I reached out to some folks I met on BP for assistance along the way.  I applied what little bit knowledge I had gained from the podcasts, and I took a leap.  It was almost certainly more than half luck and considerably less than half brains but I've never been so proud of myself and never been more confident in my ability to figure things out.  

Thank you BP, @Joshua Dorkin, @Brandon Turner, @Douglas Skipworth, and the 158+ guests on the BP Podcast.  I couldn't have done it without you.