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$60,500 Profit on a Short Sale Foreclosure

by Denise Schmidt   

After attending my first Creative Real Estate Online Convention in March 2002, I came home with three programs in hand ready to start my investing career.

I read and read for hours on end. Family and friends laughed at me and thought I was crazy to go into such a business. At the time I had four children, and l was living with my husband who put us in a big financial bind because of his addiction to pain medication.

I needed to refinance my home, which put us in a bigger financial bind, but it was necessary to avoid a tax foreclosure on my large home in New York. I was able to use the rest of the money to keep my head above water.

After attending Terry Vaughan and Ed Garcia's workshop [How to Get Lenders Fighting to Give You Money] in June 2002, I learned how to fix my credit and deal with creditors.

It was an amazing feeling after Ed Garcia gave me the ammunition to deal with an attorney who was determined to destroy my credit with nine violations on my credit report because of my husband's drug problem. After almost four months of dealing with this attorney, all nine violations were removed. Thank you Ed! Your the greatest!

Now armed with a ton of education, I set out to find a great attorney. I believe that was harder than finding a great deal. After a few hundred dollars spent on trying to educate an attorney in helping me close my deals, I finally found a great one, and I was off and running.

I formed my Limited Liability Company (LLC) on June 20th, 2002. I have to say my attorney did not even take me seriously. He told me to do a few deals then come back to him. Why spend unnecessary money on forming an LLC?

While I was at the June workshop, I had a seller who was crying the blues because his wife dumped him for another woman, and he had a home worth $180,000 that his wife walked away from leaving it vacant for almost a year.

The home was in foreclosure, and the note on the property was for $178,000. Four Realtors had walked away from the deal because their 6% commission was nowhere to be had. This guy was begging me to help him and, I thought I was too green as an investor.

At the workshop, Terry and Ed had all of us stand up and talk about the deals we were currently working. I didn't think this was a great deal and felt embarrassed to stand up in front of a room with a bunch of investors for fear I would look less than intelligent.

Well, needless to say, I stood there listening to all my options about how I could make it work. None of it made any sense to me because I was just standing there thinking I was way over my head. I listened, went home, and did nothing. The seller kept calling and begging me to help him.

I called Terry because now I had him and Ed to use as a sounding board. He hooked me up with a seasoned investor in New Jersey who walked me through buying my first note from a bank. Thank you John!

I ended up negotiating the bank down to $90,000 for the note, I gave each of the home owners $5,000 each. (Yes, I was generous on my first deal.) The home was two miles from my residence, and I knew the market was hot here.

I convinced my mother, who I knew had the $100,000, to do the deal with me. I told her I would give her $10,000 at the end of six months for her return on her investment. Of course, it was a no brainier, but I still had to hard sell my own mother.

Well we bought the note in January for $90,000. I withheld paying the sellers their $5,000 each because I needed at least $5,000 to get the home repaired. I gave them a promissory note payable upon sale of the residence. I closed on it May 15th, 2003 for $177,500. After paying my attorney fees and a few other expenses, I came out with $60,500.

For those of you out there who are contemplating whether it will work or not, yes it can. During this process, I found a wonderful new mate and best friend who enjoys fixing up my homes. Thank you Rick! Thank you, too, Terry and Ed. You are the best!

 
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