The owner of this property approached Lou and asked for his consultation before they sold the property. They had moved out of the house years before. At first, the owner wants to do the fix-up, change-outs, and rehab of the property themselves.
In fact, they already hired 7 contractors over a period of several years but sad to say the result is a disaster.
Partially because of their inexperience and not understanding how to get bids from contractors. Most importantly though, they do not know how to put things into writing that goes with rehabbing a property.
Because of these issues, they end up hiring Lou to gain his expertise in real estate.
If you want to know what the Street Smart Ways that Lou shares with this particular client, just watch this video.
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Hi! It’s Lou. And I wanted to tell you about a deal that we’re working on right now. It’s just been fun and fantastic. We had an opportunity, where someone actually came to me to consult with them about selling their property. Now, they had moved out of the property, years before and they had ensued doing it themselves. They were going to do all the fix up and the change outs and moving around of the property. They had bought new appliances. They had bought new cabinets and they were ready to do the rehab and hired contractors over and over and over and over again. In fact they admitted to me that they had had seven different contractors over a period of several years. And every one of them was a train wreck disaster, partially because of their inexperience and not really knowing what to say, how to say it, not understanding how to get bids from contractors, not understanding how to get things in writing and being able to tie up the issues, that can go with rehabbing a property. So, they kept learning the lessons over and over. Now, what happened with this house is they had actually had a plumbing break, a pipe break. They were out of town. They came back home and all this water had gone down to the basement. Now the basement was completely finished. It had, of course drywall. It had a bedroom, a bathroom, a living room, a kitchen and a separate entry to the basement.
So, it was a apartment down there. It was just fantastic. In-law suite teen, suite apartment, it was all ready to go. And when that flood happened, then they had an insurance settlement. So, when they got that insurance settlement, they was quite a large sum and they had plenty of money to do the rehab with. Later, they got a brand new loan on the property. So, they cashed out again. They had the insurance settlement plus the money from the the cash refinance of the loan. And they set about doing the rehab. Well, that didn’t work out. So, they ended up hiring me as a consultant because they had someone that was coming in, to purchase the property. However, he had unlimited down payment was going to do all the work and they asked me, how would we set this up?
And I told him about our program, our lease with the option to buy or also owner financing. And they said, great! They went ahead and purchased the lease with the option to buy program volume nine. And they were going to set about just selling it to somebody else and letting them have the fun of rehab. And as things ensued, I asked him some questions about their buyer and they said, you know what, why don’t we pay you to just vet this person? They came over to our office. I listened to the story and I went okay. And then, after we were finished, I said, well, my advice is find someone that actually knows what they’re doing. This person has never done. Number one, any rehab at all, but number two, especially not a $30,000 plus rehab. And in fact, they had estimated the rehab to cost $60,000.
So, I said that would just not be a good idea with this particular buyer on this particular house. Certainly they could work with them on a different property, but not this time. So, one thing led to another and then they just simply offered me the house. They said, look, Lou, we trust you. We know you will do what you say you’re going to do. We will let you buy the property. Of course, I’ve proposed to them. One of the street smart ways that we buy property and that’s to take over the existing financing on the property. So, I proposed to take over their existing loan, which is approximately $271,000. And then I said, okay I’ll just make the payments on this. And I’ve got my contractors. My contractor had already given me a bid on the property. And so I said, okay, this is great.
So, I figured it would cost me about $35,000 to do that rehab. So, sure enough, we went to work. Now my contractor, unfortunately couldn’t work, non-stop, nine to five, all week-long on the property, because he has a full-time job doing contracting for somebody else. So, I had to take him nights, weekends, and holidays. And so, that extended out the time of our holding time. However, this contractor has been working for me for many, many years with me, for many years and does a great and phenomenal job and has an entire team of Eastern Europeans from the Czech Republic, from Romania, et cetera, they do magnificent work and I was willing to wait and I was willing to pay the price, meaning that I was going to have to carry that property over a period of time, I was going to have to make those payments on that underlying financing, while I got the job done.
So, it took longer than it would have taken. Had I gotten a contractor that was only focused on that property. It generally would have been able to get done in about two months, as it was, it took about four months to get the rehab done. Once we got the rehab done, I hired a flat fee listing agent. So, that means that you pay a fee to them. They don’t really do what a typical listing agent does. They just simply put it out on the internet. They go ahead and list it with the local MLS. Now, I made a mistake because in the Atlanta Georgia area, there’s actually two MLS’s. I did not know that this broker was only listed with one MLS, which happened to be not the one that’s the most prevalent in this area. So, the area that we were in is a very hot area.
Perfect. The number one high school in the state of Georgia in this might as well say the South and really terrific and hot area. However, by going into the other MLS, it actually hit it. Well, of course, I didn’t know that right away. And in fact, didn’t find it out for several weeks. And then I discovered, Oh, wow! We’re not in the other MLS. The one that was more important. Now, whenever you do a flat fee listing, you got to understand that you yourself are saving a fortune. So on this house, $460,000, just think about that 3% of 460,000, that’s about $14,000 that I’m saving in fees. Now, by the time I’m done paying for the flat fee listing, plus doing some of the marketing ourselves, we’re going to spend some money on this property and did, and so with the flat fee listing, that costs me about 500 bucks.
And then now, that included a whole bunch of extras in terms of the marketing that they were doing out through Zillow and other things. And in addition to that, we had a drone video done, and it’s just magnificent. I hired a photographer directly, that did the zoom and you’ll see the pictures here. And basically we also did a 360 degree view throughout the property. And we also did photographs. So, I had, a really nice package that could be delivered and posted to our flat fee listing, which we did do, and that helped to reveal it and expose it. One of the things I learned is in order to get some recognition on this since I was in this listing already and had already spent that money, was to go ahead, and change the price every little bit. So, when you change the price, even by a dollar, it causes it to jump to the top of the listings again, because it’s sending out to the various real estate agents, Hey, there’s a new price on this property, in this zip code.
So, that helped to get to exposure. We started getting showings and then we started getting some activity on the property. Immediately got a contract on the property, and these folks were, a bit challenging to work with. No doubt, a great agent. However, the folks that were buying were first-time home buyers, very skittish, very concerned. So, when they had an inspection done, and then there was a mold test on. And, oh my gosh! They found some mold. Mold can be cured by the way. But they found some mold and they decided to back out of the contract. So we, you know, re-upped the listing and boom! Got another contract on it. And that’s where we are at the moment. I’m going to add on to this video, when we have the closing, but I wanted to go ahead and give you the front end of the purchase, the rehab, where we’re at right now in it.
And so, our inspection period ends tomorrow. And then, and they have given us their little list of extras. Now, when you’re dealing with a credit buyers, one thing you want to know is they’re picky, they’re picky, picky, picky, but if someone’s paying full retail, you should have built into your numbers. Any kind of those little picky things that come from a credit buyers. And of course, they paid for their inspection, they did their inspection and they found some reasonable items that we are taking care of right now as we speak. So then, tomorrow we’ll be out of the inspection period, meaning that we’re moving towards the closing. So, in a couple of weeks, we will be ready for the closing. So I’ll give you the flip side as the closing occurs.
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