Success Stories
Dave (bal'mer) - Education allows you to pick up money laying on the sidewalk
By
May 8, 2005, 12:23

Education allows you to pick up money laying on the sidewalk -

On a cold January day I was out looking at a property. I received a list of first mortgages in default. One property was in a hot area--Federal Hill. I was not familiar with comps there but did my research and realized that this property, for the back mortgage of 50k, was a good deal.

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After going back to the guy who gave me the list telling him I was interested in it, he said that he thought there was a mistake on the list, but was not sure. I asked if I could contact the owner and speak directly to him to find out, and he agreed.

I contacted the owner through a bit of research and found out he owns many properties down there and chuckled when he heard that it might be in default - I later found out that it was a mistake. After wasted time I was slightly upset, but at least I learned about the area.

I continue down the list., I went to another house with a first in default on the other side of town a few days later. I saw a neighbor's house with a screen window and a hole cut and all these cats jumping in and out of it. (It was probably about 30 degrees outside). I knocked on the door to ask if her neighbor’s house was vacant (the one with the first in default). A very skeptical lady answered the door and told me it was occupied. I spoke to her for a minute or two, thanked her and started walking off. She called back "Do you buy houses?" (incidentally, I was wearing old jeans, a skater's hoodie jacket and carrying a big flashlight, the way I dress so as not to attract too much attention in various neighborhoods). I reluctantly turned around and said, "yeh, sort of". I was a little taken back, I did not present myself as someone who bought houses.  So she called me back, invited me in and told me about a house. She said she wanted 45k, no negotiating before she would tell me the address. I assured her that I would not make an offer unless full price after the property address was received.

Well, ironically (or coincidentally – I always mistake the two) the property she wanted to sell was only four blocks from the one I had been chasing earlier in the hot area of Federal Hill. It was an EOG shell on a one-way street. I could not find comps at the time on the small, one-way street, but the houses on every block around it were going for approximately $240K - after being rehabbed. I went back and signed a contract and gave her a $20.00 deposit.

I immediately went to work, had the contractors replace the bad locks on the front and back doors and gave her a set of keys. I hired a consultant to go down, tie up wires, sweep the floor in basement and knock down some of the sheets of plywood onto the support beams and take pictures to show prospective buyers. I went to work on selling it. I tried to get 78k, but only people who wanted to use their financing were willing to go that high. I lowered my price a bit and started getting offers. Most of the offers were right around 60k by people who had the funds to close and were willing to give the 4k earnest money that I wanted and Proof of funds statement. I ended up accepting an offer of 58k. I was more concerned with getting my 4k non refundable in case I was forced to close the deal if the end buyer did not come through.

So we went to close. I walked with a check a few dollars short of 13K. My seller was happy--she got rid of an old rental that she hated and had been sitting vacant for many years. She had it gutted years ago because the condition was so bad after the tenants. She now had money to fix her personal residence up, I had my contractors go by to bid the work for her and had them deliver 16 bags of cement from the other target property to her personal residence. I was happy--I made a few dollars. My buyer is  happy; he is currently selling the house and stands to make a very nice profit.

I titled this story “Education allows you to pick up money laying on the sidewalk”, and the education that I speak of primarily came from Steve Cook. On this deal I asked him for advice on determining the value On the back streets, on selecting which offer to accept and I spoke to Him about the area because it is in Baltimore where he lives. His advice was a nice reassurance, but it was my original study of his materials, attending his bootcamp, lunch meetings and conversations that I have had with him that gave me much of the education to do this and my other deals. 

dave (bal'mer)