When I heard about some apartments for sale in July, I almost walked away from them. For my first deal, I was looking for a two-bedroom/one-bath or a three-bedroom/two-bathroom home, something “easy” for a first-time deal and a novice investor. But I drove by and saw that they were two fourplexes, not a large apartment complex.
After the drive-by, I went to the courthouse and pulled the property card. The county had the last appraisal (from two years previous) at $221,746. I called the company and made an appointment to do a walk through. I met up with the president and then let the man talk.
The more he talked, the worse he thought of the property, and the better off I was. We walked through all eight units, stepping over trash, clothes, and furniture. Finally he asked me how much l would pay. My response was:
“Let’s see, you’re asking $150,000, and as you yourself have said, they need a lot of work. I will have to get back to you with a figure. For now, I think they need about $50,000 worth of work.”
I called two weeks later with a low-ball offer. Here’s my math: The two-year old county appraisal is $222,000; the company is asking $150,000; from that I subtracted $60,000 for cleanup and rehab and $6,500 for Realtor fees (would have been paid by seller anyway if property was listed); for a total offer of $83,500
The Chief Financial Officer checked with the owners of the company and called me back within ten minutes with a counter offer of $90,000! I agreed. Two days later, we signed an Option to Purchase contract for three months with a 30-day extension.
After price and length of time were negotiated, it came down to earnest money. He asked how much; I said one dollar; he said okay. For one dollar, I tied this property up for four months. Within minutes of getting the price locked in at $90,000, I had an investor wanting to go to the bank.
All in all, I had 20 hours in this deal; some more walks through, meeting with contractors for bids, etc. At the end of my contract (the full four months), my investor and l did an assignment of contract. He bought the apartments for $90,000, paid me $20,000 for my contract.
I walked away with a check for $20,000 that’s $1,000 per hour. The investor who bought the apartments from me spent $90,000 for the property, $20,000 assignment fee, and $90,000 to rehab. Seven months later, that investor sold those apartments to an end buyer for $320,000 for a total profit $120,000.