Wow, where do I begin. I had a friend that had a property he bought at auction for $13,100. It was 1.3 acres of land with a well and septic on it. He was a friend of the family that had to sell it (estate auction).
In any case, he bought it and agreed to let one of the family members buy it back for 60 monthly payments of $300 per month (0% interest loan over 5 years). He put a single-wide mobile home on it, a new roof etc., and basically he figured he would break even on it, and take care of a desperate friend.
12 months into the agreement, the tenant defaulted, and continued to live there for the next 4 years rent free (nice guy, my friend). He finally got frustrated, and told me that he’d sell me the property for $17,100. I told him that if he had an irate tenant there, it may take six months or longer to get them out. I may have to incur legal expenses to evict them etc. We settled on an article of agreement of sale giving me a year to boot them out, fix the property up and sell it.
I went to the tenants with a 5-day eviction notice. (Of course, they yelled at me, swore a little etc.) I left, contacted my friend and told him it was going to be a problem, asked him for leverage. He agreed to sign over his 4 years of past rent due (knowing I’d never get to collect it), but would help me use it to get them out.
I went back 5 days later, with his “collection agreement” told the tenants that they had 30 days to get out (required in Pennsylvania), and if they weren’t out in 30 days that I would go after them for all $14,000 in back rent, damage to the property (which ended up being destroyed by animals (cats urinating etc). Since the property was basically destroyed, I told them to take what they wanted, but to “GET OUT!” and 29 days later they were history.
Anyway, I then went to the bank to get financing for a “construction” loan, since I basically owned the property now (didn’t have to make a payment for 12 months). Had the property appraised (without the mobile home on it). It came in at $28,000.
Got a construction loan for $69,000. I talked to a contractor friend (needed a general contractor to pull it off), and he agreed to take the advances and forward me some of the cash to do the work myself. (I pocketed about $12,000 from the $30,000 in construction funds at that time, and used it to finish the basement up on a double-wide I bought as part of the $69,000 for $32,000 + shipping and setting it up).
All in all, I’ll have $17,100 (property) + $69,000 for mortgage (of which I gave the original seller $3,000 when I got the $69,000 loan to take care of 10 months payments against the original $17,000 loan, and also took out a few credit cards for about $9,000. So adding that all up, about $94,000.
The property was apprised last week for $125,000 leaving me about a $31,000 profit as well as the $11,000 I got up front. The property has only been listed one week now, but I got plenty of room to negotiate, and I want the profit out to take care of the credit card debt and pay the mortgage off and the original land holder.
All said and done, I look to pocket about $30,000 net in less than one year. Not too bad for 10 months worth of work, and my first deal. I made a few mistakes first time, but I took the info I got from Carleton Sheets and modified it to fit the scenario at the time. Everything worked like a charm. THANKS A LOT!