My brother, Nick, and I low-balled the owner of a vacant multi-unit property offering him a really low down payment and a lower asking price–with owner financing, since we knew he owned it free and clear. (If you don’t ask, you don’t receive right?)
After letting his agent know we really didn’t have any more money for the down payment, they countered with the same down, a little higher interest, and split the difference on the price. We were ecstatic!
Closing quickly because of the owner financing, we hustled to get the due diligence done. My brother had a brilliant idea… He said, “We’ve got the keys for the due diligence. Isn’t market research diligence?”
So he listed the property on craigslist.org with a good description, and his phone started ringing. Well, now I guess we have to show it. I mean, we do have the keys.
We showed it to several people over a few days and found tenants who wanted to rent both of the residential units. Their old lease was up that weekend, and they had to move NOW to avoid getting stuck.
Now we’re in a pickle. We weren’t closing with the owner until mid week, and they needed to move over the weekend. We don’t own it yet, but we didn’t tell them that…
We wrote up a contract saying something to the effect of: We’d like to early occupy (often used in home purchasing) with the ability to sublet. I can’t remember exactly what we wrote, but now we needed the current owner to sign off on this idea, but he wouldn’t answer his cell phone!
His home number wasn’t listed, but there’s this great new thing called the Internet, and most counties (boroughs in Alaska) have their records online. So I checked what other properties our seller owned here, and luckily, there was only one.
So, we showed up at his door and explained all the “due diligence” we’d been doing. He thought it was brilliant and offered us coffee, signed it, and wished us luck. So, the tenants never knew they moved in before we owned it, and we received $2,300 rent and $2,300 security deposit BEFORE we owned it.
Our closing went as planned, and the property pays for itself with just those two units rented and additional units left for us to rent.