$40,000 Equity for a Couple Days' Work

I have read every one of the stories posted on this site, and most of the discussion threads. I thought I should give back by sharing a success with you. I have been doing real estate investing for about four years... part time. I have focused on duplexes up to six-plexes. I have had great experiences with them, and made a GREAT return on my money. I had been doing it the old fashioned way: get a good price, put 20% down, get a new loan, repair the place, raise rents and flip in a year or two. Nothing too creative, but still very worthwhile. I have wanted to get into single family homes, but they just don't have the bang for the buck that multi-units do... or so I thought. I sent out a first mailing of letters to people with a Notice of Default on May 21st and then decided to drop in on a couple of the people. I found several people that might be interested, if I follow up over the next few weeks, and I had time for just one more stop before an appointment. I asked if the owners might be interested in selling... stumbling through my dialog. They said "yes." I asked them how many months until the sale, and they said the second was foreclosing in a few months, but that the first would be selling before that. I asked when, they said May 28th, 9 a.m. If you will check your calendar, you will see that that only gave me two business days to stall the foreclosure sale and get my purchase done. I got up the next morning (May 23) at 2:30 a.m. so I could do the research needed before the next business day started. I did a rough simulated appraisal on the property and found it was worth at least $145,000. I checked the county records and found $105,000 ($80,000 first and $25,000 second) in liens. By 7 a.m. I was talking with the second (in a different time zone). I worked until 7 p.m. that night, hoping to bring the property current and buy subject to. By the next morning (May 24th -- sale is one business day away), I had decided I could not do it without a new mortgage (old financing stunk and would require $25,000 in arrearages). I started the process for a new mortgage and went in circles with the sellers' mortgage companies for the rest of the day. With 10 minutes to spare before the deadline, I got the sale postponed. For my trouble, I have a property that I bought "subject to" and will fund with my new mortgage at the end of June. I have renters lined up for July 1st, and they will set up a contingency fund with three months rent up front. I know, several of you will say that I could have bought the first, foreclosed it in a quiet sale, and wiped out the $25,000 second. The second had not requested notice from the first. However, I committed to the sellers that I would try to keep the property from going into foreclosure, and I needed to keep my word. Besides, $40,000 equity for a couple days of work is not too bad, and the property will cash flow $250 a month. No money out of my pocket, except the fee to postpone the sale, and the closing costs, which will be refunded at the close of my mortgage. Note that I did need good credit, so that I could get a commitment for a new mortgage to postpone the sale. You might say that getting a new mortgage is not very creative, but for a boring old traditional real estate investor, this transaction is a good first step toward creativity. Joe Spencer [Return to Menu]