new jersey investing

Mike Mike Mike….Guess What Day It Is…

Scott Costello All, Blog, Featured, Probate Investing 26 Comments

Have you seen that Geico commercial with the Camel? I love that commercial! Every Wednesday either my wife or I will inevitably send a text message to the other person saying….”Guess Way Day it is?” or “Mike Mike Mike Mike….”  If you haven’t seen it here is the video…

Today however is not HUMP DAY, but DEAL DAY!!!   That’s right folks, my partner and I closed Deal #5 and got a nice big fat check!

Just like every deal, this one had it’s issues.  In the beginning, even though we had an acceptable offer on the table the owner wanted to give their neighbor a chance at the house first.  I was sure that he would and he did.  However the deal was contingent on whether the neighbor could get financing to do the rehab.   Luckily for us he could not and the Contract Was Ours!

This was a probate deal that we had sent a mailer to back over the winter.  So the owner saved our letter and called us when she was ready.   It typically happens this way for us and our deals.   The owner had power of attorney over the property so even though she wasn’t technically the owner, she was able to sell it.

The Deal Details

Purchase Price: $75k

Our estimated after repair value (ARV) came in at 195k, so we were confident that we would be able to sell the house for our asking price.

After Repair Value: $195k

After looking through the house our repair estimate was around 50k.  The kitchen and bathrooms needed to be redone.  Their was a water leak in the roof and the detached garage needed to be torn down or replaced.  It also needed new windows.  Everything else was minor in the house.

Estimated Repair Cost: $50k

Houses in this area of the county, my partner and I feel comfortable looking for a $15k profit.  It gives us some wiggle room in case we underestimated repairs or over estimated the ARV.   On one of our past deals the profit shrank all the way down to $2500.   Depending on the area, we will ask for 5k for level 2 areas (all rentals), 10k for level 3 areas (even mix of rentals and owner occupied )  and 15k for level 4 areas (majority Owner Occupied).

Asking Price $90k

Finding a Buyer

We first took the deal to our top buyers because you always want to offer your deals to them first before starting your marketing.  This builds great relationships and trust.  Unfortunately each of them had repair estimates closer to 75k which put their offer price at around 65k.  That was not going to work for us.   Now we are getting nervous!

Next step was to start marketing this house on all the major rei boards, craigslist, my blog and anywhere else we could think of.  We got some hits, but nothing worth moving forward on.

At this point we were discussing our options…

  1. Try and renegotiate with the owner.  We’ve done this before but you lose credibility and trust with the owner and risk losing the deal.
  2. purchase the house ourselves and rehab it.  This was not something we wanted to do plain and simple.
  3. Use our inspection clause to get out of the deal.

As we were discussing our options, my partner (who recently got his agent license) was talking to his broker about the deal.  The broker had a buyer for us!  Whole Crap!  But wait…..

The buyer was interested, told us all about is other projects, how he could rehab things for cheaper because he had his own crew.  All sounded great to use and he was willing to pay our asking price.    So we got our lawyers involved, started the process of getting the deposit and the documents signed.   This guy was a Major foot dragger and excuse giver.  One day his lawyer had the signed contract and deposit, the next week it was his father who had the contract and deposit.  He had already ordered a door for the house.   All the time our lawyer did not ever get the signed contract or the deposit.  So after 3 weeks of this we started looking for another buyer.

Magic Happens!

This is where the magic happened!  The broker agreed we should move on from his original recommended buyer and said he had another guy who might be interested.  So he made a phone call and 90 minutes later we had a signed contract and the full 90k wired to our lawyer’s escrow (this guy uses the same lawyer).

WHERE THE HELL HAS THIS GUY BEEN!!?!?  I love him!

This was 10 days ago, and we closed yesterday with no problems what so ever.   That is what I call a good cash buyer.  He didn’t even look at the house and just trusted the brokers opinion on the house.  They have done a lot of deals together and apparently have a great trust in each other.   Put this guy on our preferred buyers list for sure.

Payday: Subtract 5k

Now because we got our buyer through a referral (from my partner’s broker) we had to pay the broker a fee.  We agreed to $5k. This is actually a good deal for us, because the typical agreement is 50% of the profits.  So my partner and I will split 10k according to our agreement, which makes for a happy happy day!

Closing Giveaway!

When ever I close a deal I like to give back.  How I do that is to give away something to one of my readers.  I’m working on what I can give away so stay tuned and look for another post in the near future.  I love giving things away and helping people out.

Thanks to everyone who reads, comments on my blog and sends me emails.  you keep me motivated and are the reason I am where I am.  Thank You!!!

 

 

 

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Scott Costello

Scott is a part time wholesaler, but full time real estate investing addict! As his family grows and his free time shrinks,He has been slowing building his wholesaling business over the past 7 years in between life events.Drive, dedication and never giving up are his strengths.
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Comments 26

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      Thanks Sharon, that is very generous of you!

      Jessica, who comments on my blog has an SEO business that I’m going to check out. She is currently on her honeymoon, but when she gets back next week we are going to talk. I will let you know how it goes.

  1. That’s great, Scott! Congratulations on persevering! It’s funny you mention the SEO – I was just thinking that I might want to pay someone to do that, too. I’ve done a bit myself, but it’s just too time consuming to research everything.

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      Thanks Rachel! It was a frustrating process for sure. Actions speak louder then words, and you can be sure we will never do a deal with that other guy. He is just hurting his reputation. I bet if we talk to some other people he has dealt with they will have a similar story.

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      Jeremy,

      My best advice for you is to keep at it and don’t get discouraged if things don’t go gangbusters in the beginning. The hardest part for some is actually getting the probate leads to mail to. Some have it as simple as going on line, others have to pull the information from a newspaper. I had to go to the courthouse and get the leads myself. It’s more work, but it just means less people are mailing that list.

      Try and answer as many of the calls that come in. It’s great experience and don’t be afraid to answer a question with…”Sir/Mam I’m afraid I do not know the answer to that question, but I’ll surely get the answer for you and let you know.” Then follow through. It builds trust.

      Like I said before just apply what Ron has to say and stay consistent.

  2. Awesome advice Scott!

    The 2 counties I am mailing to the probates are onliine. I still don’t think anyone is mailing to them. What I am going to do is start Oct 1 and mail to a minimum of 75 a month. Between now and then I am trying to set up a system to streamline it for myself to guard against inconsistency.

    Since you’ve been mailing to them how often do you mail and after finding the leads have you set up any kind of system to make things easier on yourself?

    Thanks.
    Jeremy’s last blog post ..Lehigh Valley Development: PPL CenterMy Profile

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      I start mailing to my probate list about 6 weeks after the probate files have been submitted. I then mail one 3 weeks after that and then 5 weeks after that. I would mail more but my budget won’t let me at the moment. So I hit them three times each over a period of about 60 days.

      To streamline everything I just upload the probate list into SI Lead Manager and schedule out my mailings. They usually go out once a week on Mondays.

  3. Scott – I have been working probates for a long time now and there is one important thing I have learned. A whole lot of these folks don’t even think about selling the house until a year or more has passed. They are either just too grief stricken or they can’t face cleaning out the house and dealing with that side of the probate issue.

    The last 3 or 4 probates I purchased had been sitting there for more than a year. If you are quitting at 60 days, you are leaving a lot of money on the table.

    Sharon

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      Thanks for the comment Sharon. I’m very aware of that fact, but the money isn’t there to send out more letters. You got me thinking that maybe once a year I’ll send out a giant batch of mailers to people I haven’t touched in over a year. Do you think that would make sense?

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  4. Jeremy –

    It’s not at all unusual. Some people are just lazy, and others just can’t deal with the process.

    I just bought a property from a guy that had been putting off dealing with cleaning out what used to be a really nice house for a year. His dad hadn’t done any repairs for probably 30 years (nor had he cleaned it for what I expect was close to 30 years).

    The son had opened the estate but had never done one thing. He called me in a panic and said he had to have the estate closed and the taxes filed in exactly 4 weeks from during that time to that date. His question was how quickly could I get it done, and could he just walk away from all the “stuff”? He was accepted my offer without any hesitation, but he just wanted it done in time. It was a win, win for both of us.

    Sharon

  5. Jeremy –

    I have found that not too many folks “get right on it”. The exception might be someone that had already started to clean out the house and plans to list it. That person wouldn’t be your motivated seller willing to take a deep discount; at least not today. Now down the road when the house doesn’t sell for the price they have put on it, that can (and does) change sometimes.

    I know there are people that teach folks to mail to probates for 60 days or so. And you might get someone during that time, but overall it has been my experience that is it much longer than that.

    Sharon
    Sharon Vornholt’s last blog post ..The Silent Killer of Your Flipping Business…My Profile

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