Creative Renegotiation For a Real Win-Win
by Brian Baker
Editor’s note: if you transacted a good deal that you would like to share with us, please email firstname.lastname@example.org Please put “MREIA BUSINESS” in the Subject Heading.
Jackie Jackson’s website brought in a seller that was ready to trade up into a larger, country-style home down the
street. They needed to sell their current house to raise the down payment on their new location. The house was a
3-bed, 2-bathroom property that was nearly in rent-ready condition; just the usual items (carpets, paint, etc.) that
could be replaced quickly. The house was located in Bradenton – much too far for Jackie to be able to easily get
to. Yet, Jackie was able to form a JV (Joint Venture) partnership with a local individual who could be at the house
when needed. Jackie felt she could easily wholesale the property. To do so, Jackie also estimated repairs for a retail sale, including roof repair. This brought her repairs estimate to a total of $25,000.
After briefly attempting to wholesale the property for a few thousand dollars in profit, Jackie realized that the ARV
(After Repair Value) was too low and the seller’s price point was too high for most investors. So, Jackie decided to go with Plan B. She went back renegotiated the terms in order to help the sellers achieve their goal and hers. Jackie stayed with her original contract purchase price of $72,000 and offered the seller $45,000 at closing if they would hold a 2nd $27,000 mortgage (seller financed) with Jackie, with no payments for three months, so they could close on their second home and Jackie could purchase and sell their first at retail value.
Jackie borrowed $65,000 from a private lender for the first mortgage, gave the seller $45,000 of that, and then held two mortgages on the property. Jackie received $17,000 cash back from the first closing! Also, Jackie was able to rent back the house to the sellers while waiting for their 2nd closing on a prorated amount of $1300/month!
After completing just $500 in termite repairs, and then aggressively marketing the property, Jackie received five offers via a local realtor... three were full-price, and two were above-price! Jackie took the highest offer and was able to sell at the appraised value of $130,000! After all closing costs, Jackie made a healthy profit of $39,687 for herself and her JV partner without ever travelling to the property!
Purchase Price $72,000
Seller’s Closing -45,000
Private Lender +65,000
Total Upfront +$17,000
Sales Price $130,000
Holding Costs -98,813
Repairs - 500
Rent Collected +1,127
Total Exiting +$22,687
Gross Profit +$39,687
Reprinted Courtesy of the Central Florida Realty Investors. Visit www.CFRI.net
From the July 2016 issue of the CFRI Newsletter.