During the summer of 2017, Mike started looking for our first property. He learned about “driving for dollars” from Bigger Pockets and the Professional Investors Guild, our local real estate investment group. Driving for dollars is a way of generating leads for motivated sellers. Basically, it’s driving around neighborhoods and looking for houses that look distressed — overgrown yards, need obvious maintenance, or appear vacant. Think about your own neighborhood. Is there that “one house” that is a bit of an eye sore? While those properties may be a headache for the owner, they are a potential money maker for an investor. Put the two together and you have a potential real estate deal that benefits both parties! There are lots of reasons why a person might be motivated to sell their property. Perhaps they inherited the property and have no desire to keep it, it has become too much for the owner to maintain, it’s undergone extensive damage and will cost a lot to fix, they are relocating out of the area for a new job, or they need to sell for financial reasons.
Listing the property with a real estate agent is always an option, of course. After all, the owner would typically make more selling it that way. However, it’s not always the route that sellers take for a variety of reasons. For one, they might not be motivated or otherwise able to fix up and clean the property to get the most from a retail sale. Also, there is no guarantee when or if the house will sell once it’s listed on the market. For people in a hurry to relocate, for example, this is a major consideration. There are also a lot of closing costs involved for the seller when working with a real estate agent.
A cash purchase by an investor avoids all of these hassles.
So, back to our story … Mike drove around and found 18 properties that he was interested in. (As a lead generator, this is not a lot. At all. We have since found hundreds.) He took these 18 properties and looked up the owner’s information in the county records and sent handwritten letters (admittedly, written by someone with neater handwriting) expressing interest in purchasing the apparently vacant property.
And … the phone rang! One of these owners wanted to sell! 🙂
It was the owner of a 3 bedroom/2 bath, 1272 sq ft house built in 1950 in Milton, FL. It was the house the owner grew up in and she inherited it when her father died. She rented it out for a couple of years and, unfortunately, it was a bad experience with difficult tenants. She just wanted to get rid of it.
Note: it is EXTREMELY unusual to find a motivated seller with such little effort. In fact, one thing that they don’t tell you when you are getting into this business is that you will become an expert marketer — whether you want to or not. More on that later …
The seller and Mike set an appointment to meet at the property on 9/30/2017. Here are some pictures from that visit:
Living room with patio doors
Bath between BR 2 (not shown) & 3
Hot water heather (in bathroom)
Ceiling above kitchen bar
Side entrance (to dining room)
Considering the work that needed to be done on the house, which had been vacant for some time, they agreed on a sale price of $17,000 (yes, that’s right!), signed a contract the next day, and closed the following month. As far as financing, Mike asked her whether she would prefer to have a lump sum payment of $17,000 cash or receive payments of $138/mo for next 15 years. She preferred the payments and had the option of calling the remaining balance due after three years (this is known as a balloon payment).
Mike started demo a month or two later with help from our good handyman friend, Matt. Since the holding costs on this property are so low, Mike planned on using this house as a DIY hobby house to learn and practice on. And this is the perfect house for that — it’s a big job. It needs EVERYTHING … electrical, plumbing, foundation work, appliances, flooring — the WORKS. After about a year, it became clear that this project was just going to take too long being mostly a one-man show and we are now getting this project on track to be completed in the spring of 2021. It is gutted and ready to roll! Well, once we lock down contractors, that is. Good contractors are hard to find in the best of times and Hurricane Sally‘s damaging visit to NW FL in September hasn’t made things easier. Finding solid contractors has definitely been the toughest part of our investing journey so far. But … we will find them! 🙂
We will be documenting this rehab step by step, so stay tuned!