From your responses, I know you guys appreciate my personal stories of experience when it comes to investing. So today, I am going to share a particularly unusual story about how I made $15,000 in 12 days without using any of my own money or credit…
It all started with a little Junker in Phoenix. A motivated seller contacted me through my online marketing. I use mobile marketing machine to generate my squeeze pages and integrate my mobile marketing into one easy to use system. I am not promoting this right now, just saying…
So anyway, the seller contacts me explaining he owns a property in Phoenix but lives outside the state. His parents passed away and is now the owner of the property. The seller further explains that he has been paying the taxes and stuff for a couple of years and it’s time to sell the property and pay off some debt.
I quickly ran some numbers, gave him a call back, and asked him his lowest price. He answers with the number of $30,000. I then agree to physically go check out the property, so he has a neighbor hide the key.
I get there and the place is a COMPLETE JUNKER. However as an investor, I continue my walk through because I know a 4 bedroom/2 bath in downtown Phoenix might be a highly profitable deal. So I call the seller back, and our conversation goes something like this:
Me: I’ll give you $10,000 for it (Thinking there is no way)
Junker Owner: Great. How fast can you wire the money?
Junker Owner: It’s a deal.
So, what can we learn from this?
You can’t steal in slow motion. Money loves speed and will not wait around for you to catch up.
So anyway, back to the story. I immediately send the paperwork to Junker dude. At that point, Junker dude tells me he has a brother with whom he shares ownership. So then I have to draw up another contract and get it signed right away by Junker dude’s brother.
After sending the paperwork, I realize that it looks like I am purchasing the property for $10,000 from each brother’s (a total of $20,000). So I then have to send an addendum for each bro to sign – agreeing that the total price between the 2 contracts is $10,000.
Although the actual deal hasn’t gone down, getting that paperwork done gives me control of the property. With the contracts signed, I gain what’s called “Equitable Rights” and I can put the house back on the market. This legality is worth about $30,000-$40,000 in retail.
So then I go to open escrow and my Title Manager lets me know I have another problem. There’s no paperwork to prove the Junker brothers own the property. The parents never went through probate correctly.
So, what is my point in telling you this?
So anyway, I then immediately find a Phoenix lawyer through referral. I call him up and ask him the quickest way possible to prove that the parents gave the right of ownership to their sons. The lawyer did an awesome job and guided me to find the parents’ certificates of death through the use of public records. I faxed those documents over to him and he filed the necessary paperwork to make the Junker brothers the legal owners of the property.
What is my takeaway here?
I then put up the property back on the market for $25,000 (using mobile marketing). Within 5 minutes, I received a text from another investor, Patrick, taking me up on the offer. I let him know as a wholesaler, I insist on controlling the paperwork and needed $25,000 cash or hard money within 10 business days.
So now I have 2 escrows open at the same title company — one with the seller (Junker brothers) and one with the new buyer (Patrick).
Patrick turned around and sold the property to another investor for $34,900. So now this property has been flipped 3 times with simultaneous closings.
And what’s the key learning from this?
When you’re making $5,000 or less on a wholesale deal, it’s fine (and cheaper) to just assign your contract and get paid your profit as an assignment fee; if you’re making more than $5K, it’s a good practice to setup a double closing (2 back-to-back closings) — or in this case, a triple closing…which keeps your profit in the dark from people in the deal who might otherwise have a hard time swallowing your profit.
My final point is:
It’s a good rule of thumb that if you ever do a triple-play deal like this, make sure you’re working with an investor-friendly title company who really understands how to handle simultaneous closings on multiple “related” transactions.
I hope you guys have some gained some insight from this story and my own personal experience. It’s been my pleasure to share it with you.
Keep it Classy.
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