General Real Estate Library Articles on home buying, selling, marketing and 203k Consulting
Helping folks in Real Estateby Dean Glosup
Recently I had a long conversation with a person I do not know (or did not know) and she mentioned that she did not know me and why should she trust doing business with me and that got me to thinking. Why should anyone trust me? If they do not know me at all, then why should they trust that I am a "good guy". I don't have one of those yellow capes I see on the commercial, but I am a good guy. The question becomes, how do I, as a Real Estate investor, convey that to someone I do not know.
One way is via stories. Stories told to me or read to me or that I have read is how I came to know most of what I know as an adult. Stories from my dad, or my grandpa or mom etc. I used to just love stories from any of them and that tradition has passed on from me and my wife to our two lovely daughters, both of whom would drop whatever it was that they were doing anytime should I decide to launch into one of my "stories".
So for the edification of all, here is one story that tells a bit about some of the stuff I do...
In June 2007, I got a call from a retired aerospace engineer. This guy was a recluse, a real hermit. He had “checked me out” on the Internet, Local Better Business Bureau, and local Real Estate Board for complaints and also had agonized as to whether he should call me or not. A very skeptical guy. He did not want me (or anyone for that matter) to see his house, but when he called me he said “My house is worth probably $400,000.00 and I will sell it to you if you can do it quick for $200,000.00 CASH.” I said “let me think about that for a minute...” And that is about how long it took me to race over there.
What I saw would scare a Marine Special Forces guy or wake the dead. Ugly doesn't capture it. No systems worked. Electrical was burnt out, no A/C, heater unit dead, water heater dead; I could have gotten a tan in the living room. The roof was SO bad that you could see daylight through it because the rain has washed (not leaked, WASHED) through the roof and the ceiling was on the floor (still) and there were spaces between the roof sheathing where the sun shone through and basically NO shingles left.
I turned on the water and a rusty gunk sort of flowed out, oozed rather. I had to ask him if he lived there or not. He actually said he did. I said “Wow what potential this house has! Why don’t you just fix it up and sell it yourself.” He said “I don't have the time.”
This might seem strange but I see this all too often. Some people are just not inclined to clean very often and find themselves too busy with life or whatever and things slowly go out of control. This fellow's situation was seemingly a disaster, but he had lived in this squalor for 20 some-odd years and it just got worse and worse until one day he woke up to a sad situation. Then he called me and thankfully I was there to help him out.
I followed him through the pathway through the piles of ceiling on top of the sofa and love seat in the living room that lead to the kitchen table and we took a few minutes to clear a spot off the table and while I stood there (no way was I going to sit down in that house) and we drew up the contract.
I bought the house subject to the original $95,000.00 1st mortgage with the balance of the purchase price in cash which I got from a credit line of mine of $110,000.00 for a total price of $205,000.00. I closed in a week and paid $1,200.00 in closing costs (title insurance etc.) He moved out over the next two days.
He also had a 1968 classic VW Beetle, a 1996 900cc Japanese Pocket Rocket motorcycle, a 250cc Dirt Bike in his garage and a 1972 Classic Chevy Truck with a brand new engine in it, in the driveway. They were all in similar disrepair to the house but they all ran! Since he had nowhere to store them he simply signed over all 4 Titles to me. (Value $10,000.00+ total) SWEET!
I decided to do the rehab rather than wholesale it since that is what I do. I allowed myself a rich budget and spent about $75,000.00 on the following; all done in 3 weeks.
New roof including new sheathing and 2x12 fascia boards around the whole house, new stucco on most of the outside of the house, new 3 1/2 ton A/C on the roof with all new ducting and registers, full copper re-pipe, fully rewired the house and also wired it with CAT5 cabling for full Internet access in every room, tore out all the moldy insulation in the attic and replaced it, replaced about ½ of all the drywall in the house due to how bad it was, scraped the acoustical ceiling popcorn off and texture coated all walls and ceilings in every room, put new rounded corners in the whole house for the drywall like the new houses do, gutted the kitchen and bath and used upgraded materials on the (ceramic tile) floors and counter tops and tile shower/tub enclosure, tore out the 6 windows and the sliding glass door and replaced with double paned glass, new front door and all new paneled interior doors, installed canned lights in the living room, hall and kitchen (recessed lights) replaced all doorknobs with those paddle handle fancy ones. Installed neutral tan carpet.
On the yard and outside I installed a short 18” retaining cinder block wall in the front, replaced the 20x20 ft pad in front of the garage which was asphalt with reinforced concrete. Installed automatic sprinklers and laid sod in the front and back yards, partially replaced the redwood fence around 2/3rds of the property and rehabbed the remaining fencing with fresh stain.
The same guy who did most of the interior work bid for all the outside work and the bid was way too high, but I felt duty-bound to do it. Then my 15 year old daughter talked me out of it saying, “But daddy, I thought you always got three bids on everything. I think he is trying to take advantage of you”. Based on that I got my own personal home gardener to look at the landscaping/driveway project and he bid it for HALF the other. Needless to say Anjelica (Jelly) my daughter earned a $200.00 commission for saving me $5,000.00 on the project. I was happy to pay it and she was happy to get it.
I sold the house for $390K with me paying 3% of closing costs.
After all the dust cleared my net proceeds check was $80,109.78 plus $3,000.00 the Title Company held back because the sale occurred right at property tax time and the mortgage company had just paid the taxes but the County had not shown them paid as yet. Plus the $1,600.00 in the tax/insurance escrow impound account plus the 10K in vehicles for a grand total of $94,709.78, minus $200.00 to Jelly!
So I had a seller who was very happy to get rid of the problem house he had owned for so long and, by the way he was betting I would make over 100K and we discussed it while I was buying the house. I told him I only made $95K on it and he was thrilled. The ultimate buyer was a single mom nurse with a young son and needed a house which was private. This house was at the end of a long driveway and was totally private and so it was perfect. She bought it for $390K yet it did appraise for over $475K and so she got a deal on it not to mention the fact that the house will need no upgrading or repairs for probably 20 years or so.
The Gardner was thrilled he got a side job and made some extra bucks and even Jelly was thrilled when I handed her $200.00 in CASH after closing.
So you can see it is possible to actually make a killer profit and help all concerned handle what they want and everyone is happy with the outcome AND it is fully disclosed to all.
Who am I? I am a entrepreneurial business owner along with my wife. We sell Designer Sterling Silver through our outlets at many Sam's Clubs throughout the USA. See our site at www.designersterlingsilver.com My passion, however, is Real Estate. I have been in the Real Estate business in various capacities for the last 25 years. For the first 13 of those years I was primarily a hard money Mortgage Broker. I found people who were in need of cash and I then found investors who were in need of safe yield and brought the two together. I still occasionally keep my hand in Real Estate Loans of various types, thought mostly I consult on them rather than actually do them. During the last 8 years I have been in the business of buying, fixing and re-selling houses. I have bought, fixed and subsequently re-sold over 26 houses in that time. I pride myself in never having had any arguments regarding this business, let alone lawsuits or even disputes. I will not do a deal in which anyone does not have their needs met. We all have to be happy or no deal, including the Seller, the Buyer who ultimately buys the house from me, and even the contractors who do the fix-up work on the houses. All above board and all disclosed and everybody happy, or no deal. In this business, this is not always the case.