I used to browse this forum all the time before I got started. It’s a pleasure to be able to share one myself. I hope you enjoy reading it and can add another arrow in your quiver as a result.
I used Propstream to pull a "tired landlord, equity, owned > 10 years, and owned by an individual" list. I skip-traced that list on Propstream and uploaded that list into Mojo where my VA from the Philippines cold calls for me. I have her leave a personal VM, not a dropped, pre-recorded one, for all calls that go to VM.
I received a callback from a lady on one of my VA's VMs. She said the property my VA called about was not for sale, but that she had a pre-school that she needed to sell. I've only done residential deals but I thought, what the heck, I'll talk to anyone that needs to sell anything. I called her back. On the call, she told me the pre-school had been in the family for 50 years (she actually went to pre-school there about 50 years ago) and that her mom died a few years ago - they were getting tired of managing the property by themselves. In addition, they took a loan out on their primary residence to pay off the pre-school but when Covid hit in March of last year, they had to shut down. There was no income coming in to pay for the loan and they were not able to make the payments. Moreover, the property wasn't financeable due to the deferred maintenance and it needed to be a cash sale. She said she wanted $300K for the property. Long story short, I told her I would do my due diligence and get back to her.
So I looked up the property on Propstream. It was 3500 sq ft on a half-acre. It was zoned R9 but it was granted a conditional use for a pre-school 50 years ago. All the residential properties around it were 3 beds, 2 baths, about 1200-1500 sq ft on much smaller lots. All those houses comped-out to between $400-500K.
At this point, I knew there was value here - I just didn't know how much and whom could most realize that value. A good friend of mine is a commercial broker with Marcus & Milichap in NYC and he tells me about his deals where his clients will buy buildings, put long-term tenants in those buildings, and package the building with the lease at a 5-8% cap. Also, I know just from hearing about my friends and their kids, they spend anywhere from $750-$1250/month. On a $300K mortgage, even with a private money interest rate at 8% and a few points... a few kids a month in that place and my debt service is paid. Oh and I forgot to mention, everything was included in the sale of the real property, all personal property from furniture to slides, legos, everything...
I did a simple Google search and looked on Loopnet to figure out the market rents for a property like this. I was able to comfortably conclude that I could get $12-15/sq ft annually for this space. At this square footage, I was looking at grossing between $42,000 and $52,500 annually. Assuming operating expenses, property taxes, utilities, and capex, I figured I would net half that. Assuming I could package the building with the lease at a 7% cap, that would generate a sale of between $300K and $375K, conservatively. Ok so not great, but not bad. I continued down the rabbit hole.
I hit the phones and called every pre-school and day-care within 25 miles, from Kinder Care to all the mom & pops. It was too small for Kinder Care and all the mom & pops weren't looking for a new location at the moment. I ended up calling a commercial real estate broker, Cari Jones with the Philips Group here in Vancouver, WA. I told her about my deal and asked whether she knew of any possible tenants at her firm that could benefit from a discounted property like this. She didn't know of anyone looking but told me to call EOCF (Educational Opportunities for Children and Families), a 501(c)(3) organization funded by Head Start.
I called EOCF and was directed to their asset manager. I told him that I had a building that was fully turn-key for a pre-school and was looking for a tenant. He said that they don't lease, they only buy properties. But he said they are currently looking for a new location in Vancouver. I told him that I had a property under contract that I think would be a good fit for them He wanted to visit the property and I obliged. We set a meeting to view the following week.
A tip for anyone that is in real estate, if you can ever find a buyer that is run and or funded by a government, it's a beautiful thing; They have deep pockets and will almost always overpay for it. After all, it's not their money anyway. Sure, I thought my exit was going to be a lease with a later sale, but an easy sell would be even better.
Ok, so I've got a meeting with EOCF in about a week and they think I have the property under contract. At this point, I did not have the property under contract. I called the seller and told her that I was interested in the property but because of all the deferred maintenance, the most I could offer her was $250K. I told her it would be cash, we could close on a date of her choice, no real estate commissions, blah blah blah. Long story short, she did a good job of negotiating and got me all the way to $305K, plus I had to pay her excise tax and all closing costs - she wanted to walk with $305K. We signed and I submitted my 1% earnest money to escrow. I was able to get the keys from the seller's daughter in order to show EOCF the property.
EOCF met me at the property with the CEO, their architect, the asset manager, and their real estate agent. They spent about 45 minutes walking around the property and when they were all done the CEO and architect left and it was just the real estate agent, the asset manager, and me in the office. The real estate agent said, "ok, here's where we tell you we don't want this.... what do you want for it?" Thanks to my fiance, the chief negotiator of the household, she said to throw out a crazy high number and tell them that we were going to field all offers through the week and choose the highest and best on Friday. I told them we were thinking somewhere around mid $400K's. They said that was reasonable and they left.
A few days later I received an offer from EOCF's broker, $500K! Plus, on top of that, they offered a $100K charitable contribution deduction of up to $100K if I were to acquire an appraisal that could support that kind of value. This was possible because of their 501(c)(3) status. That charitable deduction would wipe out $100K of profit that would make on this deal, which would probably save me around 33K in taxes. Before I accepted, I called around and I found that commercial appraisals were booked weeks out and they were $4K and obviously there was no guarantee that the appraisal would support the $600K value. I countered EOCF's offer with $515K and no charitable deduction. They accepted.
A thousand other things happened in the interim... which would probably bore you more than I already have. Long story short, I had to come down from $515K to $485K in order to close the deal. As of today, all parties have signed and the A-B transaction recorded today, while the B-C transaction closes on Monday (I did a double close with this one because of the spread). After all excise taxes, escrow fees, real estate commissions, and recording fees were paid, I walked away with $138,500, which included my $5K earnest money ($3K plus another $2K I had to give the seller from an extension I needed).
To date, I have never done a deal where enough value was created where all parties were so happy. The seller was able to get about $10K more for the property than they thought possible, EOCF got a property that can hold from 75-100 kids (Head Start pays them a $10K grant/year per kid!), EOCF's broker made $25K on the deal and they didn't list the property and they didn't find me a buyer, they were simply in the right place at the right time, Cari Jones with the Phillips Group is getting $5K for about 4 minutes of her time (I'm giving her 1% for the referral), escrow is happy because they made fees on two closings, and I'm waking away from closing with almost $140K!
This deal has changed the direction of my business. I still go after residential deals, but now I'm more focused on mixed-use and commercial properties for the next 3-6 months. Unfortunately, covid has claimed victim to a lot of small business owners. Many of which are unable to pay their debt service due to loss of income from operating under 100%, or not operating at all. Blue-chip tenants and government institutions are benefitting from this because they have enough cash reserves to swallow these small business owners. My political beliefs aside on how I feel about this is irrelevant, it's is a fact. Brokering that gap is an opportunity that I simply can't ignore.
Pictures of each HUD-1 are located in the original post:
https://www.biggerpockets.com/forums/850/topics/964735-my-133k-wholesale-deal-new-wholesale-strategy
@Jon Kessler thank you!
I used Propstream to pull a "tired landlord, equity, owned > 10 years, and owned by an individual" list. I skip-traced that list on Propstream and uploaded it into Mojo where my VA from the Philippines makes my cold calls. I have her leave a personal VM, not a dropped, pre-recorded one, for all calls that go to VM.
I received a callback from a lady on one of my VA's VMs. She said the property my VA called about was not for sale, but that she had a pre-school that she needed to sell. I've only done residential deals but I thought, what the heck, I'll talk to anyone that needs to sell anything. I called her back. On the call, she told me the pre-school had been in the family for 50 years (she actually went to pre-school there about 50 years ago) and that her mom died a few years ago - they were getting tired of managing the property by themselves. In addition, they took a loan out on their primary residence to pay off the pre-school but when Covid hit in March of last year, they had to shut down. There was no income coming in to pay for the loan and they were not able to make the payments. Moreover, the property wasn't financeable due to the deferred maintenance and it needed to be a cash sale. She said she wanted $300K for the property. Long story short, I told her I would do my due diligence and get back to her.
So I looked up the property on Propstream. It was 3500 sq ft on a half-acre. It was zoned R9 but it was granted a conditional use for a pre-school 50 years ago. All the residential properties around it were 3 beds, 2 baths, about 1200-1500 sq ft on much smaller lots. All those houses comped-out to between $400-500K.
At this point, I knew there was value here - I just didn't know how much and whom could most realize that value. A good friend of mine is a commercial broker with Marcus & Milichap in NYC and he tells me about his deals where his clients will buy buildings, put long-term tenants in those buildings, and package the building with the lease at a 5-8% cap. Also, I know just from hearing about my friends and their kids, they spend anywhere from $750-$1250/month. On a $300K mortgage, even with a private money interest rate at 8% and a few points... a few kids a month in that place and my debt service is paid. Oh and I forgot to mention, everything was included in the sale of the real property, all personal property from furniture to slides, legos, everything...
I did a simple Google search and looked on Loopnet to figure out the market rents for a property like this. I was able to comfortably conclude that I could get $12-15/sq ft annually for this space. At this square footage, I was looking at grossing between $42,000 and $52,500 annually. Assuming operating expenses, property taxes, utilities, and capex, I figured I would net half that. Assuming I could package the building with the lease at a 7% cap, that would generate a sale of between $300K and $375K, conservatively. Ok so not great, but not bad. I continued down the rabbit hole.
I hit the phones and called every pre-school and day-care within 25 miles, from Kinder Care to all the mom & pops. It was too small for Kinder Care and all the mom & pops weren't looking for a new location at the moment. I ended up calling a commercial real estate broker, Cari Jones with the Philips Group here in Vancouver, WA. I told her about my deal and asked whether she knew of any possible tenants at her firm that could benefit from a discounted property like this. She didn't know of anyone looking but told me to call EOCF (Educational Opportunities for Children and Families), a 501(c)(3) organization funded by Head Start.
I called EOCF and was directed to their asset manager. I told him that I had a building that was fully turn-key for a pre-school and was looking for a tenant. He said that they don't lease, they only buy properties. But he said they are currently looking for a new location in Vancouver. I told him that I had a property under contract that I think would be a good fit for them He wanted to visit the property and I obliged. We set a meeting to view the following week.
A tip for anyone that is in real estate, if you can ever find a buyer that is run and or funded by a government, it's a beautiful thing; They have deep pockets and will almost always overpay for it. After all, it's not their money anyway. Sure, I thought my exit was going to be a lease with a later sale, but an easy sell would be even better.
Ok, so I've got a meeting with EOCF in about a week and they think I have the property under contract. At this point, I did not have the property under contract. I called the seller and told her that I was interested in the property but because of all the deferred maintenance, the most I could offer her was $250K. I told her it would be cash, we could close on a date of her choice, no real estate commissions, blah blah blah. Long story short, she did a good job of negotiating and got me all the way to $305K, plus I had to pay her excise tax and all closing costs - she wanted to walk with $305K. We signed and I submitted my 1% earnest money to escrow. I was able to get the keys from the seller's daughter in order to show EOCF the property.
EOCF met me at the property with the CEO, their architect, the asset manager, and their real estate agent. They spent about 45 minutes walking around the property and when they were all done the CEO and architect left and it was just the real estate agent, the asset manager, and me in the office. The real estate agent said, "ok, here's where we tell you we don't want this.... what do you want for it?" Thanks to my fiance, the chief negotiator of the household, she said to throw out a crazy high number and tell them that we were going to field all offers through the week and choose the highest and best on Friday. I told them we were thinking somewhere around mid $400K's. They said that was reasonable and they left.
A few days later I received an offer from EOCF's broker, $500K! Plus, on top of that, they offered a $100K charitable contribution deduction of up to $100K if I were to acquire an appraisal that could support that kind of value. This was possible because of their 501(c)(3) status. That charitable deduction would wipe out $100K of profit that would make on this deal, which would probably save me around 33K in taxes. Before I accepted, I called around and I found that commercial appraisals were booked weeks out and they were $4K and obviously there was no guarantee that the appraisal would support the $600K value. I countered EOCF's offer with $515K and no charitable deduction. They accepted.
A thousand other things happened in the interim... which would probably bore you more than I already have. Long story short, I had to come down from $515K to $485K in order to close the deal. As of today, all parties have signed and the A-B transaction recorded today, while the B-C transaction closes on Monday (I did a double close with this one because of the spread). After all excise taxes, escrow fees, real estate commissions, and recording fees were paid, I walked away with $138,500, which included my $5K earnest money ($3K plus another $2K I had to give the seller from an extension I needed).
To date, I have never done a deal where enough value was created where all parties were so happy. The seller was able to get about $10K more for the property than they thought possible, EOCF got a property that can hold from 75-100 kids (Head Start pays them a $10K grant/year per kid!), EOCF's broker made $25K on the deal and they didn't list the property and they didn't find me a buyer, they were simply in the right place at the right time, Cari Jones with the Phillips Group is getting $5K for about 4 minutes of her time (I'm giving her 1% for the referral), escrow is happy because they made fees on two closings, and I'm waking away from closing with almost $140K!
This deal has changed the direction of my business. I still go after residential deals, but now I'm more focused on mixed-use and commercial properties for the next 3-6 months. Unfortunately, covid has claimed victim to a lot of small business owners. Many of which are unable to pay their debt service due to loss of income from operating under 100%, or not operating at all. Blue-chip tenants and government institutions are benefitting from this because they have enough cash reserves to swallow these small business owners. My political beliefs aside on how I feel about this is irrelevant, it's is a fact. Brokering that gap is an opportunity that I simply can't ignore.
Hi all,
I’ve read countless posts On BiggerPockets about other people’s success stories. Prim people who finally put their research into action and pulled the trigger on their first deal. Finally I now can be on the other end of that experience.
I found this deal on Propstream. It was from a list with the filtering filters: non owner occupied, out-of-state, vacant, equity > 50%, price < $200K, non-corp/trust owner, with entire state of Oregon. I downloaded the list and skip traced it on Leadsherpa. From there I uploaded the list to Mojo and hired a VA in the Philippines at $6/hour for 20 hours/week to make cold calls for me with the script I uploaded for her. To inventive her, I paid her $250 for every lead I closed. It took 7 full months but I finally came across a deal that I could tackle, or thought I could at least, ha. It was a 2 bed/1.5 Bath, 974 sq ft manufactured (built 1986) on 0.44 acres near the beach in Florence, OR.
I bought the property for $77.5K in the beginning of August. I used hard money for the purchase but I had to put up 10% of my own funds. I financed the purchase price and $28.5K of the construction budget plus the 4 points for the money and all other closing costs (a total of $102,500). I only had $4500 to my name so I had to borrow the other $6K from my girlfriend (she charged me 67%, my chief negotiator). The interest rate on the hard money loan was 10.99%.
I have a full time job and the property was 3.5 hours away in Florence, OR. Not ideal doing most of the work myself. I estimated my ARV at $160K. I knew that was conservative but I wanted to under-promise/over-deliver to my hard money lender. The rehab took me 4.5 months working on the house every weekend and I blew my budget by about $9K. However, I put the property on the market last Monday, December 28th at 2pm, for $199K and I accepted an all-cash full-price offer at 10:30am the next day! He waived the inspection and bought the house "as-is." All the docs are signed and we are scheduled to record the deed tmrw. Woo hoo!
All in I was $129K invested (including the construction overruns that came out of my own pocket, a little over $9K), $14K of that was my own money. After I paid realtor fees and my biggest helper (I paid him 10% of the gross sales price > $160K to incentive quality), and after paying my closing costs, I made a gross (pre-tax) profit of $54K.
I’ve learned so much from this community that I had to share my little bit of success with everyone on here that dreams of taking just a bite out of this real estate apple. If I can do it, ANYONE can do it. Thanks again everyone!
Pics: https://drive.google.com/drive/folders/1nMC7kyCyBvrtoUjU2P9P_g_9C1gjRuuM?usp=sharing
Spreadsheet: https://docs.google.com/spreadsheets/d/19koYc2gRbRdmTJ5Lyv5d-qi836TH5uB58P0c1RId24E/edit?usp=sharing
Does anyone have a copy of this (electronic or tangible) they'd be willing to sell me? Thank you.
@AJ Shepard, @George McCleary, @Mathew Wray, I very much appreciate your candor and support!
@Will B. Oregon seems to be pretty strict with their disclosure laws. ORS 863-015-XXX lays out the rules for when a licensee is a principal to the transaction. It mandates the disclosure of your license on ANY advertisement, even.
I'm a new RE investor in Portland, OR and I just received my real estate license. My business model is to purchase properties below market value but, for the ones that want retail a retail price (or just don't meet my buying criteria), I plan to list/refer to my principal broker. Does anyone know of a principal RE broker in Portland that would be willing to work with a licensed agent in a non-conventional capacity?
@Nicholas Brady, good for you for getting started so early. In my opinion, the ROI on a degree just isn't what it used to be. All a degree will do for you is make yourself more attractive to a potential employer. Other than that, your results in your craft speak way louder than a piece of paper. After your first job, you're degree means less and less as you progress in your career. If you provide lots of value and people can trust you, that's worth way more than any degree. Good luck, sir!
@Ani Kap, if you're gonna refinance out of it when the rehab is complete, I would say the difference in a single percentage point with a holding period of a few months on a loan that small is immaterial. So you've gotta pay an extra $200, so what. If the margins on the deal are small enough to make that matter I wouldn't waste your time. Just my two cents. Good luck to you, sir.