RE News And Investing Tips
Why It’s A Good Idea To Buy Real Estate From Wholesalers
Yes it’s true! Even though we are one of the largest and best Atlanta area wholesaling companies, we still will occasionally buy properties from other wholesalers. You may wonder why we would consider buying from another wholesaler? Because a deal is a deal no matter where the deal originates. Many direct wholesalers spend considerable money on marketing techniques which can allow them to pick up off-market deals that a smaller investor would not have access too. Because this is our primary business we completely understand that a wholesaler is in business to make a reasonable profit for the deal that they may have spent $1000’s in acquiring such deal. Let me give you an example of one of my favorite purchases from an area wholesaler. I now refer to this deal as my “free” house.
Back in 2011 I received a flyer from a small local wholesaler advertising a very basic 3 bedroom/2 bathroom home in Lithonia, Georgia. The flyer reflected a house that had obviously been vacant for several months or maybe even years. Weeds had grown up almost completely hiding the house, the gutters had small trees growing from them and the inside had obviously been somewhat vandalized. The list price of this subject deal was an amazing low price of only $17,000 cash. Now many investor buyers would have immediately starting trying to negotiate a lower purchase price. On the other hand we immediately agreed to a full price offer to lock up the deal and directly headed out to the subject property. Now it is true the house needed considerable work but we quickly recognized the overall potential of the deal so we moved forward with providing non-refundable earnest money and moved the deal to closing. A valuable lesson with this scenario is when you see a potential deal, move quickly and don’t try to low ball the wholesaler if it’s a deal.
I remember actually telling this particular wholesaler that I hoped he made a significant profit on the deal as I was so pleased with my numbers. Turns out the wholesale did make a $10,000 profit on the deal which is very significant, especially for this priced house. Was I upset at their significant pay day? Heck no, I loved my deal! Many times we receive low offers on our subject deals that provide us no profit and these potential buyers end up losing great deals. I have actually gone back to these buyers on occasions and have asked the question, “did you not like the deal at our list price” and most times the answer is well yes it was a great deal at your list price! So if such a great deal why try to get the deal at an even lower price resulting in not succeeding in buying? Remember RE investing purchases should not be an emotional decision based upon one winner and one loser in the transaction, but should be determine strictly on the numbers. If the numbers work for your individual strategy, pull the trigger and move the deal forward!
Now back to this particular deal, we ended up spending $13,000 to renovate the property back to rent ready condition. You see even though the yard was so overgrown that it was hard to see the house, we knew this was not a significant cost. So now we own a 3/2 home in a nice family neighborhood at a cost base of only $30,000. Now to make this deal even sweeter, this particular house was purchased by our self-directed Roth IRA so all future profits are tax free! Since this purchase, the house has been rented at a below market rent rate of $750/mth so the proceeds have now completely paid back our initial $30,000 investment. Thus the reason I refer to this as my “free” house! In addition with recent market appreciation our little free house now has a market value of $60,000 and I am confident that within the next 5 years our little free house will be worth $100,000! How many of these type deals do you need to be financially free? This example is how you truly create wealth investing in real estate. So remember when you see one of our deals that makes sense, take action. Negotiate if you wish, but realize don’t lose a potential $100,000 free house just to save a couple $1000’s. That’s just bad business!
If we can help you with similar types of strategies give us a call, we are here to help you succeed!
Now go buy some houses you will be glad you did!Great Time For Investment Rental Properties || Top 10 Real Estate Markets In 2016 »
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