Like so many others, I was inspired when I read, Rich Dad, Poor Dad by Robert Kiyosaki in the spring of 2004. I immediately began to search out more educational materials on real estate investing and came across Creative Real Estate Online.
I was hooked! I spent hours and hours systematically reading almost every article on the site. I quickly knew that real estate was my investment vehicle of choice. I ordered several real estate books by William Bronchick.
That summer, after I graduated from university, my wife and I moved to British Columbia, Canada. I continued to read about real estate investments, began to make contacts in our new area, and began to translate the US-based knowledge I had gained into Canadian. I phoned every “We Buy Houses” ad in the paper and built up a list of local investors to whom I could flip properties.
In January 2005, I placed my first ad in the paper. I didn’t get very many calls until I changed the ad to “We Buy TRASHED Houses.” I was nervous when I received my first call and didn’t ask all the right questions, but it got easier and easier with each call. I was learning a ton!
I sent out 3,000 postcards as per Richard Roop’s article The Ultimate Direct Mail for Buying Houses. And I put out about 50 bandit signs with the standard “We Buy Houses” message. Several opportunities were “almost deals” (and of course myriads of properties weren’t even close).
One day, I received a call from an older lady who saw my sign and wanted to sell her house. Based on information from a Realtor, she thought her home was worth around $220,000. Just to fish out her motivation level, I told her I might be interested if I could get the property for $185,000, or so. To my surprise, she phoned back and countered at $190,000. Okay, so I had some motivation to work with!
I knew money was tight, and she wanted to move fairly soon, but later on it became clear that the primary reason she was willing to compromise on the price was because she hates Realtors as a result of a bad experience. It is amazing how much money people will give up because of strong emotions.
Anyway, I asked my Realtor what he thought it was worth, and he said $215,000. So, I visited the home. It was in a lot worse shape than I had thought. It needed new flooring throughout, new paint inside and out, and a ton of clean up. I told her I would do some research and phone her soon.
To be honest, I thought that when I made her an offer that reflected the work that needed to be done (I calculated it at around $16,000), she was going to laugh me off the phone the same way others had. So I dragged my feet getting back to her.
Finally, several days later, she called me, but I was at work, so I couldn’t talk about it. But that reinforced that she was motivated. And when I called that evening and heard her daughter say, “It’s the call you’ve been waiting for,” as she passed over the phone, I knew she was pretty eager.
The number I came up with was very conservative. I am still learning the ropes and not eager to commit to something I wouldn’t be able to assign to a rehabber. I didn’t want to make her a promise and then use a weasel clause to let her down. So I offered $145,000. As I expected, that was too low for her, BUT she did come down to $175,000.
I wasn’t comfortable going forward with that price, but I had a hunch that there may be some interest at that level ($40,000 below market value). Plus, I figured that if she had a cash offer on the table she would probably go down to 170,000. So, I decided to go the safe “bird dog” route and told her that I might know of someone who would be interested at that price.
I created an opportunity profile sheet and sent it out to my list of rehabbers. I asked for $3,000 for the referral. Quite a few people responded. One was from a very experienced local investor with whom I had built rapport. He was interested in the property, but he would only involve himself if he had exclusive access to the seller until he had made his decision.
Apparently, he had had bad experiences with newbie investors shopping referrals around and angering everyone involved. That was a good lesson for me. It’s one thing to shop around a property if you have a contract that you want to assign. But if you are only bird dogging, it doesn’t work. The seller will end up getting several different offers, start to get greedy because of the surge in interest, and all of a sudden there is no deal for anyone! Anyway, I could tell that this investor was trustworthy, and so I agreed.
I called the seller and told her to expect a call from my colleague. He phoned, and she changed her bottom line price to $185,000! (I know, I know, I should have signed a contract on the property, but like I said, I’m still learning what’s a deal and what’s not.)
I told my friend that she had agreed to $175,000 with me and to remind her of that. At any rate, my friend visited and was able to negotiate the price down to $170,000! The contract was signed, and I had my first deal under my belt!
The story doesn’t quite end there, though. When they tried to close, the seller’s lawyer implied that she was mentally unstable for wanting to sell her house for $170,000 when it was worth $215,000. The seller (who is completely with it and knew exactly what she was doing), fired the lawyer on the spot.
The next lawyer brought in a real estate agent friend who told her that he could get her a higher price, etc. They tried to circumvent a signed contract! Anyway, the seller knew what she wanted and the sale went through. (Remember that she hates Realtors.)
Having plenty of experience, my investor friend didn’t back down because he knew the law, had a good lawyer, and knew that he wasn’t doing anything wrong. He was furious with the unprofessional conduct of the lawyer and real estate agent and is pursuing the possibility of getting the real estate agent’s license revoked.
I’ve learned a lot from this deal. Most importantly, the experience confirms that there are deals to be made even in a very hot market. The next step for me is to sign a contract to purchase a property then assign it.