Deal!

Exciting, CHECK! Frustrating, CHECK! Stressful, CHECK! Satisfying, CHECK! It’s certainly been a bumpy ride to this point – and we already have a number of items added to our “Lessons Learned” bucket. Fail fast, learn fast, adjust, and succeed – right?!

This post is a “point in time” reference, taking place after closing on the purchase, before the rehab begins. I wanted to capture the moment at this milestone in the process. Check out our facebook page to see photos and accounts of progress as the project unfolds.

Direct Mail

We used standard postcard mailers. After the first round of about 3,000 postcards, we had about 40 phone calls. That’s 1.33% – actually a pretty good response rate for this business. From there, we were able to achieve:  five (5) appointments, three (3) offers, and eventually one (1) property under contract.

The Property

This property is located in Ann Arbor and has been vacant for about 2 or 3 years. It used to be a rental, and the last tenants weren’t very gentle when they left. We affectionately call it “The Bird House”, because until our cleanup started, there were about a half dozen dead birds on the floor throughout the house.

Contact and Offer

Stacey was the key player here. She made the initial contact, had the follow up calls, went to visit the property, and negotiated the offer. The hard part here was sticking to the numbers. During the negotiation process, we really wanted the deal – and nearly talked ourselves into an offer that could have turned things upside-down. If we stick to our budget for the rehab, we’ll come out in the black – not by much – but enough to claim success.

One of the best parts here is the connections we made. Yes, this was a deal to close, but more importantly, this opened the door to a relationship with another real estate investor, familiar with the area, familiar with the business, and extremely personable. Hopefully, someday we can become a valued contact to her. That’s what it’s all about, right?!

Purchase

This is where things started going from exciting to excruciating. We opted to use hard money for this deal, rather than self-fund it like we did the last one. Yes, it costs more and hits the margins pretty hard … but it allows us to use leverage so we can continue with the business. Otherwise, we’d have to stop marketing, offering, buying, and rehabbing other properties until we had the money back in our pocket!

Our lender was great during the upfront phases, helping us get started, gather the information, and get us pre-approved. Once it down to finalizing the loan and funding the deal, things got ugly. First, they pretty much forgot about us over the Thanksgiving holiday. We got an email that confirmed that – which turned into them saying they didn’t think they could make the closing date! Yikes. The last thing we wanted to do was blow the deal because financing fell through. Eventually, after a number of emails back and forth, they agreed to expedite the loan so they could make the date.

Great! Right?

No.

Once we got to the “closing”, our loan was suddenly handed off to another person, who insisted on even more paperwork. It was almost like starting from scratch. The real kicker was the insurance. They insisted on a paid receipt. We had worked out a deal with our broker already to pay by credit card immediately after closing (so we would be insuring a property that we actually owned) – and we had the paperwork from the insurance company guaranteeing that the policy was already bound to the property before closing. Unfortunately, this didn’t “check the box” for this lender. I had to race (drive) to the bank, get a cashiers check, race back, and have the Title company amend the closing documents to show that THEY paid the insurance company.

All that would have been fine, had we been told upfront what was needed. We had finished setting up the insurance weeks before closing – and it wasn’t until AT THE TABLE that we found out something was wrong. We basically sat around the table with our sellers, staring at each other, waiting for the Lender to pull through with their end of the deal, and hoping that the seller could walk away with a check. No such luck.

Ultimately, even though we got all paperwork completed, we closed in escrow (the Lender didn’t get their approval done in time). That means the Title company held all funds, keys, etc., until all money was approved, provided, and moved to the right spots. The lender finally funded the deal on Monday, and the check was sent overnight to the seller.

The sellers were very gracious, but those 4-5 hours at the Title company were absolutely miserable (and pretty embarrassing). Fortunately, in the end, the deal worked.

Learn and adjust, right?!

On to the next one!!