Deal Case Study: Finding the Right Buyer for a $500K Property

Dan Austin: [0:00] Hey. Welcome back to another episode of the collecting keys real estate investing podcast, the podcast where we teach you how to make massive income and not just passive income. Today is a Friday episode, so you got me, Dan Austin, as your host. And keeping up with the recent trend of what we've been doing on the Friday episodes, I have a wholesale deal, somewhat of a complicated one. I think we like to share more of, like, the weird ones that we end up doing because those are the ones where you actually make good money and you do things that other people can't, which makes your business a lot more successful. You know, you got the low hanging fruit standard piece of crap house that you can sell at like 50¢ on the dollar to to some flipper that's still gonna go and make $30.40 grand on it. Like, those are easy. You can learn how to do that kind of anywhere, but it's those, like, weird ones like this one that you try your best to monetize anytime you can. I know a lot of people would overlook this deal, but we made 20 on it. And I'll I'll run down the details. So it's kinda crazy when it came in. I was like, what the heck is this? It's a 6,000 square foot a class property here in Spokane, like, huge. It it was on, like, a large lot in a nice neighborhood, had two outbuildings, like nice outbuildings in the back, probably like 40 by 40. And then it had another detached house as well.

Dan Austin: [1:23] It was like a two bed, one bath, like a mother-in-law suite. So really, it was a pretty slick property, like landscapes. Everything was nice. Like, it it could use a little bit of update on the inside. There's a little couple little hokey things. But to be honest, like, it was you could list this thing. Seller, they didn't wanna list it. I think he didn't he didn't say, but I think he was going through something like a divorce or whatever, and he didn't really want his neighbors to know that he was selling the house and that they're moving. So he wanted to work with us. He's like, I don't care. I just I wanna work with you guys. I don't wanna work with a broker. And and sometimes you get sellers that are like that. I just I just don't wanna work with a real estate broker. So so they call us. Anyhow, get this thing under contract at $500,000, which is for most people in most markets across America, not all, but most, that's pretty high, and that's pretty high for us. Usually, a lot of our wholesale deals, we're contracting for $200,000 or below or low 2 hundreds. We're gonna make a little bit of fee on that. So this is like double what we're normally contracting things at. I'm putting the dispo package together, which we do a standard email template and that we need like a marketing email that we can blast out to our buyers list and then use that to share on like social media and in different investor groups.

Dan Austin: [2:34] And so put it together, I'm like, damn. This thing's, like, nice. Like, who is going to be my buyer? Because I'm looking at my typical flippers. They're not going to buy this. And let me step back. So ARV as is, like, you're just buying it. It was we looked at it. It was probably 635,000. And then if you did some updates to it and really, like, made it, like, a nice property it's 6,000 square feet. Right? If you made it really nice, it was probably closer to 700, 725,000. So there was some meat on the bones, but none of your, like, bread and butter fix and flippers that I knew at this time going into the end of the year, they they got their butts spanked a few times. They just kinda wanted to glide in the year, and we're only gonna buy things that were, like, slam dunks. Right? And so I was like, who's gonna buy this thing? So anyways, we're gonna send it out at 520,000. I think I could have probably got a little bit more out of it, but we want it to be a solid deal for someone that's gonna come and buy it because like I said, as is, they're gonna walk into some equity, and then they can they can do what they want. And I started thinking, you know, really, the person that's gonna buy this is gonna see this as as like a rental property as a primary because they could live in it, get the instant equity, and then rent out the back house and still have, you know, the two shops and all sorts of great luxuries of having a property like this. And then as you live in it, you flip it, you add that equity to it just by, you know, doing things like, you know, moving the kitchen around and stuff like that.

Dan Austin: [3:56] So I put the email together, sent it out, and then I post it in a couple of our local real estate Facebook groups, investor groups, and immediately start getting some decent traffic. And a lot of it was brokers who have retail buyers that wanna, like, hook the retail buyer up with a great deal because they can say, hey, you're walking in all this equity, which is great. I love working with realtors when they know what they're doing, but the problem is is you gotta be careful because realtors wanna go through their normal realtor process, and that could be kind of a pain in the butt. Fortunately, on this one, we did have a longer closing date, which made it yeah. I think we had, like, close to sixty days, maybe maybe a little bit less than that when I send it out. But we got a lot of brokers, and we got a lot of investors that wanted it as their primary. And I would say 90% of the people asked me, hey, can you take conventional financing? And I was like, like, I don't wanna deal with that. Because what comes with conventional financing is, obviously, they're probably gonna want an inspection, which is fine, I'm not like gonna say no to that, but they're gonna call an inspector, come out there and look at all the pipes and wires and all that stuff, then an appraiser's gonna come out. And the last day before closing, the week before is when lenders underwriting finally looks at it and says no, and so we could go all the way till the close date, and they say no, and this happens quite regularly.

Dan Austin: [5:13] And when you're wholesaling a deal, it gets kind of tricky because, you know, there might be some things, right? Like, it can't be financed for some reason, you just don't know because like, we're not doing a full on inspection at this point. We could have, but we're not. And the other problem becomes when you're looking at conventional buyers, you can't wholesale it because they can't reconcile the fact that their borrower is not on the purchase of sale agreement. So lots of issues. You can, however, figure it out. There are ways to do it. It's just usually it's not a thing you wanna go down, because the last thing I wanna do is jerk around a seller. Like, I wanna go for a for sure thing, and that's where I'm saying I could have probably made another 30 or $40 on this thing, if not more. We're fielding the calls, and then as those start coming in with a lot of conventional people, I'm like, yeah, could we novate this thing? And so I started going down that path. Maybe a novation is the way to go. Again, we're going to the end the year, kinda didn't wanna have to do anything complicated. I think we definitely could have done a novation on this for the seller, but the big thing he had, you know, is he didn't wanna list it, so that's where that wasn't like an initial thing we wanted to do. And even if we novated it, we probably wouldn't have listed it.

Dan Austin: [6:17] We would have just found a buyer off market and novated it to them, because then then a conventional, you know, lender could have they can reconcile that. They can say, oh, okay. They're here's the document saying that this person is now on that contract. The seller is still signing all the documents. You probably would have been cool with that. But, you know, we're trying to make this simple. So anyways, I get it necked down. And, you know, this is the big thing is I gotta do a walk through because these people are gonna buy a $500,000 house. And like I said, most all the people I had a couple guys that didn't wanna flip it, but the numbers were so big. I was like, I don't wanna risk these guys because I know them. I know what their numbers look like, and so I don't want them to walk it and say, no, this isn't for me for for whatever reason. So like I was kinda setting them on the sideline because I had a couple other people that were super hungry. They're like, I wanna give you an offer right now, blah blah blah blah blah. I've got hard money. They gave me proof of funds. And so what I did was, you know, I necked it down from like 25 people that were like, I wanna see it, or I wanna show it to my client, down to two people. We're gonna walk it. We walked the property. We looked at it, and there's like I can do a whole another podcast on this walk through. It was like the most stressful walk through I've ever had.

Dan Austin: [7:21] And these buyers that I brought, like, I thought I I kinda showed them the ropes, told the rules on how we do walk throughs, but they just threw it all out the window. It actually really pissed me off, but that's another podcast. So anyways, we do the walk through. Everything goes good. They both come in with offers. One of the buyers was a broker that wanted to buy it for himself, and they came in with a silly offer. Like, I told him, I was like, dude, you can't no. We're like, VA fine he wanna do VA financing and then wanted, like, the seller to make all these repairs so they give VA financing, and he wanted, a $30,000 commission on it. Like, all sorts of stuff that was just like, that's not how it works. So I immediately threw that out. I was I was actually kind of offended at how how dumb he was. But the other buyer came in, was like, yep, I want, and he wants to move it in as a primary, and dude is a live and flip young guy, done some deals around town. He had approved funds from a private lender. He brought his lender with him, which is a whole another story as well. Everything is good to go. So I accept his offer of 520,000, quick little $20,000 wholesale fee. And then he comes out and he's like, man, can we do can we do conventional? We went back and forth for like three days on this where I was like, dude, can't do conventional. He's like, my lender can do anything. They can they can do all that stuff.

Dan Austin: [8:30] So I like, okay. Well, maybe your lender knows something I don't know. He's like, he doesn't work at one of those credit unions that that, you know, blah blah blah that don't, you know, fund things. I like, okay, cool. So I get ahold of the guy. Guess what? He works at a credit union. And then the guy's like, yeah. I could totally do a wholesale fee. That's not a problem. Yeah. We we we'll just tack it on there. Was like, okay. Lender calls him back. Oh, yeah. So what we'll need to do is instead of you getting a wholesale fee, we're just gonna put it as a, what do you call it, consulting fee. I was like, okay, whatever. Anyways, get another callback. Yeah. So we we can do the consulting fee thing, but you need to get the buyer's name on the contract. I was like, okay. You guys can't do a wholesale deal. You guys can't fund it. No. Click. Hang up. And I went back to the the buyer, and I just said, hey, you gotta go private money or your your cash or private, whatever, hard money, or you're not getting the house. And he's like, oh, did you really try that hard? I'm like, I tried, and I'm just not willing to do what your lender wants to do. Again, we probably could have, and I in a in a in a case, a different scenario, I probably would have done that, and we'll do that sometimes where we'll actually just go back to the to the seller and be like, hey.

Dan Austin: [9:34] We found somebody that's gonna buy your house. It's not gonna be us, but this person is just as qualified as us. We're gonna sign a purchase sale agreement with between you two. Okay? And then the seller knows he's getting the same amount of money. Everything's good. And then the the actual buyer will pay us outside of closing, like our fee, whatever we agree on. I don't like this guy enough. And so I just said, no, you're either doing this or not. And he was bummed because he's like, he's basically what he's gonna have to do is get private money to close on it and then go and refinance it with conventional. So he's gonna have another $20,000 in fees anyways. And so that's what we did, he ended up saying, okay, we officially got it signed around, made him put his EMD in this one, I was super tight, I'm like, get your EMD in tomorrow, no messing around, I want your lender's phone number, I wanna call them, and I set the closing date like a week and a half before the actual purchase sale agreement close date, because I wanna be able to pivot and help make sure that this guy gets to move out of his house and sell it if my buyer, for some crazy reason, backs out. But anyways, in other scenarios, I could have made him put down more EMD, five k was reasonable once I knew that he gave me a proof of funds from his private lender here in town and I could call them and and and confirm, yep, everything's good, they're going to fund it, because that's the big thing. Otherwise, this guy's gonna basically just lose $5,000 because he has no way to back out of this. So that's how you wholesale a 6,000 square foot, a class retail type property to somebody.

Dan Austin: [10:55] You gotta look at your buyers. You gotta really strategize, like, who is going to be the right fit for this? Put yourselves in the buyer's shoes. In our market, there are flippers that would flip this. Going into end of the year, it's a little tough, especially for our typical buyers that, you know, got spanked a little bit this year. And to be honest, like, I never talked to this guy, I never knew this guy, but he had been on our list. He had been in the Facebook groups. Like, he was kind of a newer investor. So you can dig deep on your buyers list and be creative and find those folks because if at first you fail by sending it to all your flipper friends, look at why the hell they don't want it, and then like, look at who does want it. And also be willing to work with real estate brokers, because I was 100% open to working with real estate brokers on this. You gotta be selective, because they need to be investor friendly brokers, and they need to understand what you're trying to do here, which I work with. I've wholesaled like four or five deals through brokers, and I just throw a little commission on top for them as well, and we negotiate a good price for their buyer. And I love working through those guys because then the cool thing is is they go and wrangle the buyer for you. You don't have to do it. So don't be afraid to work with brokers.

Dan Austin: [12:01] You just gotta make sure way beforehand that they're, like, checked in, they understand how you're gonna wholesale this deal and what that means. So hope you guys enjoyed this, hope you learned a couple things from me here. If you wanna hear more stuff, or you got questions about this deal, hit me up on Instagram at investor man Dan. I always love answering questions and talking to people, help people out there. Other than that, have a great weekend. See you.