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Monday, April 15, 2013

Potential Deal?...Don't Walk, Run!

This week I was reminded that when opportunity knocks the advantage goes to the proactive person and not the reactive one. You see, I got an email with a potential deal in my preferred area of real estate investing. Although good deals in my area are rare, they are possible because that is how I got House #8.

This was a wholesaler deal, meaning that an investor finds the property and puts it under contract and then tries to assign the sales contract to another buyer (me). They make their money by setting the sales price to his end buyer higher than the sales price he contracted with the owner of the property. The difference in prices is their profit.

I immediately gave him a ring but I couldn't get a hold of him until late in the day so we set an appointment to see the house the next day.
I looked at the house the next day and it was pretty perfect for me…

It was in a very nice and well kept subdivision yet it was the ugliest house which is ideal. Why?…

Because a house like this can be bought for under market value because of it's condition but then once you fix it up it should sell quickly and for a good price because of the neighborhood.

Sure enough the house was a mess…broken windows, weeds 3ft. tall, junk all over the place inside and out, etc. Apparently it was a rental house and the owner is out of state so he had no idea how the tenant was treating the house (lesson for you landlords…).

From my quick assessment the house would have required a good cleaning, full interior and exterior painting, new kitchen counter tops and appliances, all new flooring and some miscellaneous repairs maybe a new AC too. I would also have gone for a privacy fence in the back to sweeten the deal. It looked like a $20,000 to $27, 000 rehab job.

Unfortunately for me it seems I was not the only one who thought that deal had good potential…

Unknown to me while I was looking at the house someone had not only signed the contract but delivered the earnest money the night before! Not even 12 hours after the deal was announced…

Apparently I did not learn my lesson well the first time that this happened to me and here is the second time…and a lot faster too.

I tell you there is a feeling of desperation in the Atlanta real estate investing air that is unbelievable!

On the other hand I have started "marketing" to ugly houses in my area. It's very low-tech, all I do is drive around my target area and when I see an ugly house I just leave a little postcard saying I want to buy their house. I have gotten two calls out of this, both from owners that were more curious than interested in selling.

I've been told than when dealing with homeowners it can take several tries before they seriously consider you so I will make another round this week and see how it goes. More on that soon...

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