Before I share the details, I just want to point out that sometimes a success story leaves out that which was not successful and leaves you with what appears to be a very straightforward, simplistic view of what went into creating this happy ending.
Some examples of what is left out in this case: sleepless nights; spousal fights; failure; rejection; making cold calls; thousands of dollars of education (books, tapes, and one-on-one mentoring fees); over-optimism; personal risk; change; getting out of my comfort zone; hundreds of hours of reading, listening, networking, prospecting, and thinking. Keep these things in mind as you read.
I made $8,300, buying and selling a house in 74 days
After months of thinking and reading about real estate, and some missteps into some niches that seemed to promise more than I was able to get from them, I finally found a way that I thought would allow me to start doing real estate. It came about from Scott Britton’s home study course, The Sure-Fire Quick Start Guide for Real Estate Success, which I bought on January 20.
I devoured the material and dove into the homework assignments with abandon. (Well, to the extent that I could outside of my steady job and father/husband duties with my wife and two young children.). I found some nearby neighborhoods that I liked to start investigating.
Incidentally and somewhat ironically, they were within a 1/2 mile radius of the monthly >Columbus Real Estate Investors Association meetings. So here I am, the new guy, finding a deal using a buyer’s broker just steps from “ground zero” for investors! It definitely renewed my faith in having an “abundance” mentality.
Then I found an agent and started looking at houses and making offers. “Nothing happens until I make an offer,” I kept repeating. My offers were kind of low, but I was determined and convinced that a deal was there if I chose my targets wisely and kept my focus.
The fourth time was the charm
The fourth offer I made (February 16) got a warm reception, and we got into contract after a series of offers and counters. The original asking price was $123,900 for this three-bedroom brick ranch. We closed on March 10.
Sales price: $90,000
Net price: $96,000
I tapped some credit to come up with 10% down and used a bank to get a conventional loan, plus title fees, courier fees, wire and processing fees, and my personal favorite, “doc prep.”
Once we were in contract, I started to advertise this house to sell it myself. Within one week of buying it, I was in contract with a buyer (an owner-occupant), and he was taking the house AS IS–which was what I’d hoped and felt was possible as the house was in good shape.
The rest of the time (from March 15 to April 30 when we closed) was spent working with the buyer on the details for closing and waiting for him to get qualified for the loan with help from his mortgage broker.
The buyer did not have perfect credit, and the fact that I was reselling this house for a higher price in such a short amount of time caused some concerns for the lenders. We closed on April 30.
Sales price: $116,500
Second mortgage I agreed to carry: $12,500
Cash to me: $21,692
Profit: $21,692 – $15,941 = $5,751 + second mortgage
Now, before I deduct the carrying expenses and complain about taxes, I’d like to pause here to take in the view:
Based on my recently acquired specialized knowledge (and some guts to go through with it), I’ve generated a nice lump sum of cash and a stream of monthly payments (on a house I no longer own–i.e. no tenants, management, or leaky roofs) A 30-year $12,500 mortgage at 7% would bring in payments of $83.16 per month.
The carrying costs, which included advertising, utilities, and so on were about $750. My goal was to cash out, so I sold the second mortgage to a third party for twenty-five cents on the dollar, or $3,125.
Pre-tax net profit: $8,326
And again, I want to mention that this leaves out the bumps, pitfalls, good and bad luck, and the hoops that had to be jumped through. It says nothing of the houses I’ve been in contract on that were not consummated, despite my having paid for inspections and appraisals.
Somehow, all of that has faded out of my consciousness and become part of the intangible, the tacit knowledge and confidence that I now carry with me, searching for the next deal…
I want to extend a heartfelt thank-you to all of you, mostly unwitting, co-conspirators on the Main Newsgroup who helped me solve problems, calm my nerves, get wisdom, and find the right and true path through the minefield here!