A successful deal I closed recently
# Entrepreneur of the Week Lilach Regev # Post5
I wanted to tell about a successful deal I closed recently, it's actually a package deal of 2 properties together, single and duplex.
This deal started from the duplex we saw through a broker, the duplex was on the market for a while and was offered for sale for $ 105K, we tried to file $ 90K and the seller did not agree to this price.
At the same time we saw the single (offered for sale for $ 82K) and the broker told us it was from the same seller.
What's great about the United States is that there is a lot of accessible information, so we knew this seller was in trouble because he hadn't paid taxes on the property for several years (he had debts on the 2 properties together of about $86K), and we saw an opportunity! ?
We also learned that the duplex in both units has tenants who do not pay anything that can seem daunting but if managed properly it is also a kind of opportunity: because in fact the previous tenants in the duplex had a lease of $ 650 per unit when the market rent is $ 850 which significantly affects the yield. We would rather put tenants who have been screened by our property manager than "network" tenants whose quality we do not really know.
We decided to submit a package deal on both together - Low ball - we submitted a bid of $ 150K, and the seller agreed, just before we signed we negotiated a bit more on price and submitted at the end $ 147K - we received an "accepted offer".
(*) When we entered into the contract that the duplex would be empty in closing (so that of course we would not have to evacuate the tenants ourselves).
So what fun we have a contract in hand, but Tachles knew we did not have enough money to purchase the deal and we decided to put partners in the deal and at the same time do DD (which is basically all the tests we do when we have a contract).
We ended up bringing in 3 more partners so they got into a 25% deal.
During the inspection period, we check ARV, market rentals and of course bring inspection that will do an orderly inspection of the property.
During the inspection itself, several necessary repairs were discovered and we received a renovation estimate of about $ 14K.
We renegotiated with the seller and closed a final price of $ 133K.
A total purchase of about 25% below the market price, with the business plan of course to renovate, populate and make a cash out refinance.
Now that you say what did you get out of all this? You would already be buying one property with one partner instead of buying two with 3 partners.
So there are some advantages to this format:
We were able to spend a better price on the properties as a package.
Allows you to enter with a relatively low amount of money into a transaction of properties whose cost is relatively high.
Risk diversification - When we have 3 doors we have better risk diversification, one tenant who does not pay in any month or God forbid has to make him a much less noticeable aversion and the yield is less harmed. For example, the duplex was inhabited right after the renovation and in the single it took two more weeks until a tenant came in. And the same goes for repairs, if over time there will be a bigger repair like replacing a roof / livelihood for one of the properties the yield is less affected.
Pictured are the assets and the end of the closing statement (the long one) which shows how much we put into the deal and how much the seller received net.
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