Mindset sub-transaction
Entrepreneur of the Week Daniel Nigeri # Post 4
No matter how much you read and research, learning is the best way to do it. As in any other field, so in real estate, the more you do, the more you will understand! Every action, no matter how small, requires learning, and the more you do - what we once learned seems obvious to us.
The amount of challenges and hassles in hallsailing and flips is endless. Every day something happens and every day you learn something new and get better.
In today's post I will share with you an interesting challenge from one of our deals, how we dealt with it and what morals we learned from the deal.
This is a hall sale in the city of Cleveland.
By about two years we got near to a property in an attractive neighborhood for investors in Cleveland when the seller was asking for a very low price of $ 20. We immediately contacted him, it turned out that he is the landlord's son, and it turns out that she does want to sell. Her son tells us that the house is abandoned and in poor condition - it was his parents' house many years ago and he has been standing abandoned for several years (since his father passed away).
The reason his mother wants to sell now is that the county has started a foreclosure (foreclosure) process on the home because of a debt in property taxes that has not been paid for years. The debt reached the $ 16 range. The auction date is set for another two weeks and the seller has no time left. We signed with the seller a purchase contract with two days for inspection and quick closing before the auction date when the plan is to find a buyer before closing and do double closing, or if we do not have enough because of the schedules just buy and sell a poster.
Within two days we inspected the property we sent a contractor and 2 strong buyers who work with us to see what offers we will get from them and what are the numbers:
Post-renovation market value - ARV - around $ 150
Renovation - in the area of $ 60
Purchase price - $ 20
Buyer's offer to purchase the property from us after negotiations -
58 a thousand dollars
Needless to say, the numbers are staggering, $ 38 is a lot of money for the business and at the time it was the largest hallsale deal we did in the luxury islands. We signed a contract of sale with the new buyer and in fact the purchase and sale of the property were matched to the same day (2 transactions).
A few days have passed since the deal with Teitel and a week before the closing I get a phone call from them with the following problem:
Hear there are debts in taxes of 16 thousand dollars, another week of auction, although the purchase price covers the debt but the mother has only 50% ownership. After the death of the father no probate process has been carried out (a legal process in which the legal heirs - whether in this case, inherit the father's assets) then the mother can not sign a full transfer of ownership. Although the process of inheritance is simple in her case (they were only married to each other all their lives and he passed away that they are married) and is supposed to take about 30 days but we do not have those days because of the auction so there is nothing to do.
By and large the Teitel company tells me that the deal is dead and they have no way to save it within this time frame even though there are no other liens on the property and if we had reached the seller long enough before that it would have been solvable.
No way! The biggest deal we've done to date is exploding in our faces. We are a start up business and this money is very important to us for the future to realize our plans.
I did not agree to accept it.
The first solution that pops to mind is let's buy the property in a tender - a solution that is not good enough, it is clear to us that in the tender the property will cost much more than $ 20.
So I start calling lawyers to find a solution, and this is the solution that my lawyer and I have been coming to since the same case.
We will pay the debts in taxes on behalf of the seller, against which we will receive a mortgage deed on the property. Basically the seller is given a mortgage on the terms of a balloon loan on the amount of debt in taxes and zero interest, and she undertakes to carry out the inheritance process by a lawyer that we bring. From the moment the process is completed she has 14 days to complete the sale transaction to us (the original contract) otherwise she starts paying very high interest on the debt and we have the right to foreclose on the house.
My lawyer wrote the mortgage note and loan agreements within a few hours. We signed with the mother and also all her children signed the purchase contract - in case God forbid something happened to her (a very old woman) it was important for us to ensure that the children would be committed to the sale as legal heirs.
Immediately afterwards we paid the taxes and canceled the foreclosure process. We connected the mother with a lawyer to carry out the inheritance process which took three weeks and about a week later we purchased and sold the house that day according to the amounts stipulated in the initial contracts with the buyer and seller.
Within three days of the announcement of the title company and under quite a bit of pressure, we found a solution to a deal that, according to the title company and my final buyer, you were dead and hopeless.
So true maybe for an experienced trader it will sound pretty trivial. The truth is that today we too after closing over 100 deals since the business was established. But at the time it was a very special victory for us and one that will stay with us forever and really not because of the money but mainly because of the following things we learned from that deal and accompany us to this day
Do not take what others say for granted even if those people are very experienced, because even the most experienced people are wrong. An entrepreneur should take the responsibility into his own hands only. Fight for your successes and do not release them easily after you have worked so hard for them. With a one-moment decision I could listen to my buyer and my title company and just get pissed that the deal was gone.
I'm so glad we did not do that because we got a very important lesson to continue the business.
Creativity - In this deal I really learned for the first time that there are so many real estate solutions that can help close deals and just need to know the different tools and how they can help in different situations. After this deal we learned to negotiate with future sellers with much more mental flexibility and creativity and sometimes offer non-standard solutions.
Profit and risk - It is important to remember that this transaction involved no small risk. Although in the end we earned twice as much on the money we invested in just two months, but a lot of things could have gotten complicated in full for a few reasons and we could have found ourselves in long legal complications that are not necessarily worth the time and investment. In the end it's not a deal of millions.
We did our thinking, we were aware of all the risks and yet we decided to go for the deal because the expected + sure profit we got would seem to us equal to the risk involved in the deal.
This is the first deal in which we really took a more significant risk. After this deal our approach to risk changed greatly and quite a bit after we set up our flip company IDS CONSTURCTION.
It was important for me to share with you this deal and what we learned from it because something in this deal changed me as an entrepreneur a lot in Mindst - and that's my biggest profit from it.
Since the deal we have managed to make bigger deals, quite a few creative deals (some even more complex), we have always learned to take things into our own hands, and allowed ourselves to take more calculated risks.
Looking at it today, at the money level, this deal is another small win for our company and that's all. But on the mental level, the impact of the deal on our business, a start-up business (we barely existed for a year at that time) you were very big and very important.
So there is no doubt that something has changed in our society and in me as an entrepreneur after this victory. This has been a turning point for me and the business and this is probably the main reason why this deal is the first thing that pops into my head every time I think of moments of success.
In the next post I will tell you about a very creative and lucrative deal we made on an asset that we hold to this day, and a lawsuit we received and lost quite a bit of money. And most importantly, what have we learned from each case!
I added some pictures for illustration. Hope you enjoyed sharing! see you again tomorrow
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