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First Deal: A $20,193 Payday

by Bill Konst aka Bill K. (AZ), Gilbert, Arizona   

My Background
For seventeen years, I was a "company man." But with each passing year, I was becoming more disillusioned with the corporate lifestyle. After watching many friends and family members lose jobs due to plant closings and "right-sizing," I decided that NOW was the time to take control of my future BEFORE someone else took care of it for me.

It seemed irresponsible to leave my happiness and financial health in the hands of a faceless employer. So, in September 1998, I ordered the Carleton Sheets infomercial course. After reading Carleton's material, I was hungry for more. A search of the Internet for "Carleton Sheets" led me to CRE Online.

My first post asked about coaching and mentoring programs. Many folks directed me to William Bronchick. In December 1998, after contacting Bill, I decided to purchase all of his courses and his mentoring program.

In February 1999, I was laid off. It was the best thing that could have happened to me. I immersed myself in Bill's materials and attended the CRE Online Convention in Dallas in March. What a revelation! I was ENERGIZED. I knew that real estate investing was my future.

Using a technique from Bill's Big Profits with Lease Options course, I immediately sent flyers to out-of-state owners of property in my town. Out of 134 letters, I received two responses. One of those responses turned into my first creative real estate deal. Here are the details.

My Purchase
This seller contacted me near the end of March. He was facing foreclosure, and the trustee sale was scheduled for the end of April. The seller was hoping to refinance his property, but he wanted to have an "out" in case he couldn't get refinanced. He was desperate to keep a foreclosure off of his credit record. So I had about a month to find a way to make this work.

While the seller pursued financing options, I proceeded as though I was going to buy his home. I found out that he was nine months behind in his payments, current on one set of homeowner's association dues, and three months behind on another. Curing these defaults would cost approximately $8,500.

Seven days prior to the trustee sale, the seller accepted my offer of taking over his property "subject to" the existing financing, a first loan of $71,700. I would pay all closing costs and cure his defaults. It turns out that seven days was not enough time to close. So I contacted the lawyer handling the foreclosure.

After the lawyer contacted the lender, they agreed to postpone the trustee sale two weeks. It worked out perfectly. I only needed an additional nine days to close the sale.

Here are the numbers:

Existing Loan Amount: $71,700
Reinstatement Amount: $8,500
Foreclosure Fees: $1,400 (lender's lawyer)
Closing Costs: $3,400 (which included $1,600 for minor repairs and painting)
Total Purchase Price for the Property: $85,000

I agreed to make the existing monthly loan payments, but I didn't assume any responsibility for the underlying financing. Additionally, this "subject to" transaction occurred with the full knowledge of the lender and the seller. The deed was transferred on a Friday at 4:00pm.

My Sale
At 1:00pm the next day, I placed a "For Sale" sign with informational brochures in the yard. I taped one of the flyers in a window, near the front door, so that information would be available in the event that the box with the flyers was empty. I was asking $106,250. This is near the top of the market for this neighborhood. The comps and an appraiser had suggested a range of $100,000 to $105,000.

Before I could get back in my vehicle, a couple stopped by to look at the home. Before that couple left, another couple, who were driving the neighborhood, stopped in to take a look as well. Any doubt that I had about selling this property in a timely fashion evaporated quickly.

When I got home ten minutes later, there were two messages on my answering machine. I received four more calls that day and set up an open house for Sunday at 10:00am. Only three of the six scheduled buyers showed up, but one signed a contract for full price on the spot.

The agreement called for the buyer to pay ALL closing costs. But I'm not all heartless. I threw in a homeowner's warranty for $420. So, here's the final tally:

Sales Price: $106,250
General Cleaning: $160
My Share of Closing Costs: $420
First Loan Payoff: $72,177 (includes monthly payment)
Check at Closing: $33,493
Initial Investment: $13,300
Gross Profit: $20,193

My Thanks
Finally, none of this would have been possible without the support, encouragement, How-to Articles, Success Stories, and other resources of this fabulous web site. My only hope is that my initial success will provide a spark that enables someone else to benefit as I have.

Thank you all. Part of this success belongs to each of you. I can't wait to read YOUR story in these pages. Continued success, my friends!

 
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