The Deal That Taught Us How To Turn Mess, Debt, And Divorce Into 190% ROE

#EntrepreneurOfTheWeek – Omer Menashe & Dor Pollak
#Post5 – The Deal That Taught Us How to Turn Chaos, Debt, and Divorce into 190% ROE 🔥

The deal we’re presenting today reflects, in our eyes, everything we’ve talked about throughout this week’s post series. In this deal, we encountered a major opportunity alongside significant challenges, and we had to prove our ability to close complex transactions even when time and conditions were working against us.

This deal came to us through a wholesaler with whom we had built a strong relationship over time. He knew exactly what our buy box looked like as investors who specialize in these types of deals.

The property is a brick home built in 2020, located in a strong and highly desirable area — Mesquite, TX 75181. The house is turnkey, with an existing mortgage balance of $265,000 at a 2.65% interest rate. The PITI presented to us by the wholesaler was $2,950.

Something immediately felt off. Based on the mortgage balance and interest rate, the PITI simply didn’t make sense. As we always do with Sub2 deals, we immediately requested the mortgage statement — a critical step in deep deal analysis.

It didn’t take long to uncover the issue:
The PITI was inflated due to missed mortgage and escrow payments. As a result, the lender placed forced insurance on the loan and increased the monthly payment. Instead of the normal $2,150 PITI, the temporary payment jumped to $2,950.

Other investors who reviewed the deal likely dismissed it immediately because the numbers looked too tight at $2,950. But once we understood what was happening, we quickly recognized the magnitude of the opportunity — and what needed to be done.

For context:

Market rent: $3,150

True PITI: $2,150

Section 8 potential: ~$3,600 (4-bedroom home)

Deal Structure

Purchase price: $355,000

Mortgage balance: $265,000

“Silent lien”: $40,000
(An FHA-covered balance due to missed payments. This lien accrues no interest and is only paid off at the end of the mortgage term.)

Down payment: $50,000, consisting of:

Missed payments, negative escrow balance, and unpaid HOA: $38,000

Wholesaler fee: $11,000

Cash to sellers: $1,000

At this point, everything looked solid.

We signed the contract, deposited the EMD, and scheduled closing for October 22. However, during the title process, we discovered the deal was stuck — the sellers were a divorcing couple, and the wife refused to sign the contract as written.

The closing date passed. Title attempted to follow up, but the seller delayed. By late October, we were informed that the wife had definitively refused to sign. The wholesaler canceled the contract, returned our EMD, and gave up on the deal.

Despite the disappointment, we quickly realized this was the second major opportunity within the same deal — a narrow window to completely flip the situation.

What Did We Do?

We performed a deep analysis of the sellers’ options and consequences if they didn’t sell. The property was scheduled for foreclosure in early December, and the seller had until the end of November to cure the default.

We realized the sellers had very limited leverage — and that the real issue was money, specifically how much cash the wife would walk away with. We decided to call her directly.

During a 35-minute conversation, we uncovered her pain points:

Her ex-husband delayed the sale

Debt accumulated

She couldn’t understand why a home worth $420,000 would leave her with only $500 at closing

We realized the deal hinged entirely on cash at closing.

Because the wholesaler was no longer involved, we had effectively “saved” the $11,000 assignment fee. We explained honestly that time was extremely tight, but if we moved quickly, everyone could still win.

We offered her $5,000 more, bringing her cash at closing to $6,000 instead of $1,000. We asked her to request that her ex-husband allow her to receive all the closing proceeds.

This meant jumping from $500 to $6,000 net — a dramatic difference that we knew could unlock the deal.

And it worked.

She agreed, set the condition with her ex-husband, and he accepted — preferring $0 over a foreclosure loss. We signed directly with the sellers, without a wholesaler, saving ourselves an additional $6,000.

The deal closed in mid-November, about two weeks after signing directly.

Final Numbers

Purchase price: $349,000

Market value: $420,000
(A $71,000 spread on a turnkey property — extremely rare in creative deals)

Rent: $3,100

Monthly expenses: $2,150

Net monthly cash flow (after management & maintenance): $485

Annual principal paydown: $7,200

Year 1 ROE (Return on Equity):

Total value created: $84,020
($71,000 equity + $7,200 principal paydown + $5,820 cash flow)

Cash invested: $44,000

👉 190.95% ROE in Year One, excluding appreciation.

Ongoing ROE (cash flow + paydown):

$13,020 annually

29.5% annual ROE

This deal is a rare example that includes:

Immediate equity

Strong cash flow

Significant principal paydown

Or as we like to say: winning from the bottom, the side, and the top.

Key Risk Considerations

Work with a Transaction Coordinator (TC) specializing in Sub2 deals

Ensure proper insurance coverage with an experienced agent

Review mortgage documents for tax reassessments or payment adjustments

Confirm the property is truly turnkey, requiring no additional rehab

Final Thoughts

This wasn’t luck.
It was relentless execution, precise opportunity recognition, and decisive action.

Tomorrow, we’ll wrap up the week with key takeaways, insights, and our goals moving forward.

You’re welcome to join our Creative Finance Community on WhatsApp, where we share deals, breakdowns, insights, and real-time updates 👇👇
https://chat.whatsapp.com/JgnJFwcrbuRAgwg9Eq6Vup?mode=hqrc

See you tomorrow!