Deal Case Study - Off Market Lake Cabin

Mike DeHaan: [0:00] Really quick, before today's episode, I wanna talk about our new accelerator program. We're gonna be taking 10 investors every quarter and plugging them into our proven marketing systems that we use to operate our business every single day. And we will be applying them to you and your business in your market. And at the end of twelve weeks, you will have greatly increased the velocity of which your business has started to take root and hold in your market. So you can spend less time building, less time trying to figure stuff out, and instead just focus on closing deals. So this is an intensive program. It is only for people who are extremely serious about wanting to take their business to the next level and ultimately quit their w two job in the next twelve months, which believe it or not is possible. So if you think you are a good fit, please go to collectingkeyspodcast.com/launch and submit your information and see if you're the right candidate. Again, we're doing 10 people every quarter, so spots are limited. So if you apply, we don't get back to We apologize. But it will be first come first serve or I guess like first qualified first serve. So again, collectingkeyspodcast.com/launch. Go there and we'll talk to you soon.

Drake Johnson: [1:04] The number one thing I hear every single time is, wow, you actually answered the phone. Mhmm. Or wow, you actually called me back. Right? And then by the time you get to the appointment, it's like, okay, this thing is real.

Mike DeHaan: [1:16] Welcome to the collecting keys Friday focus. What is going on guys? Welcome to today's collecting keys Friday focus. Today, we are doing a deal case study with the Drake Johnson, as he goes by on Instagram. But Jake is a member of our Instant Investor mastermind community, who has done some very, very big things over the past year, and it's been really fun to watch him grow. And we are going to do a deal case study with him today. And if that is your first time coming into one of these episodes, basically what we do is we do a deep dive into a deal from someone within our community, so you can see what real real estate deals look like and not just the highlight reels that you hear on every other real estate podcast out there. Because unfortunately, all those deals are fun, they are not the reality 99% of the time. So we ask the same five questions in every episode, so you can get a general gist of what the entire deal look like from beginning to end. And, yeah, let's go right into it. So, Drake, thanks for hopping on the show, man. I appreciate you joining me today.

Drake Johnson: [2:17] Yeah. Absolutely. Thanks for having me, Mike.

Mike DeHaan: [2:19] Yeah. Absolutely. So start off, what kind of property is this deal?

Drake Johnson: [2:24] Yeah. So this is a single family residence out by the lake here in my market. It was a actually an absentee inherited home.

Mike DeHaan: [2:33] Okay. And so absentee inherited, so like, is it like a rental property at that point or was it just like empty?

Drake Johnson: [2:40] No. It was actually vacant for seven years.

Mike DeHaan: [2:44] Seven years. That's kinda scary.

Drake Johnson: [2:45] It

Mike DeHaan: [2:46] is. Okay. Yeah. That the first ever house I flipped had been abandoned for two years and that was a freaking nightmare. I can't even imagine seven. So alright. Cool. So how did you find this deal?

Drake Johnson: [2:55] Yeah. So this was direct mail. He responded to one of our offer cards that we had sent out. Very first piece of mail as well.

Mike DeHaan: [3:04] Nice. Very first piece of mail as well. Awesome. And that's you guys had a good, I guess, clip with first responses. Typically, it takes a couple more than that, so that's great.

Drake Johnson: [3:13] Yeah. It's actually surprising.

Mike DeHaan: [3:14] Yeah. I mean, that's that's why I like the little offer cards though is because they encourage that conversation a little bit more than Mhmm. Especially like the yellow letter crap that most people send out that like Mhmm. I don't know if anybody responds to those at all. But Yep. That's why I don't do it. Alright. So what kind of seller was this person?

Drake Johnson: [3:32] Yeah. So he was a older gentleman, absentee. He actually lived out of the city. So this deal was out by Canyon Lake and he was in Houston.

Mike DeHaan: [3:42] In Houston. Okay. So older guy and was he like kind of real estate savvy? No. Or was this just something that he ended up with and was just like, don't care.

Drake Johnson: [3:51] Ironically enough, it was actually a home that he grew up in.

Mike DeHaan: [3:54] Oh, really? Yep. Oh, interesting.

Drake Johnson: [3:56] It was inherited to him after his parents had passed away.

Mike DeHaan: [4:00] Okay. Cool. Those are always challenging ones because sometimes they come with some sentimental attachments.

Drake Johnson: [4:04] Is it?

Mike DeHaan: [4:05] Alright. So what's the full story of this deal? Know, I guess how did it come together? What did the negotiations look like? You know, everything in between.

Drake Johnson: [4:14] Yeah, absolutely. So again, it came from one of our offer postcards. He called, I picked up first time. The big thing was I just developed rapport with him very early on. I set expectations. I solidified the fact that we were real, we were in business because a lot of times people get those postcards and the number one thing I hear every single time is, wow, you actually answered the phone or wow, you actually called me back, right? And then by the time you get to the appointment, it's like, okay, this thing is real. Like this guy had drove from Houston all the way to Kenya Lake, which is probably like three hours or so just to meet me for an appointment and he did it twice because the first time he drove up and, he didn't tell me he was coming until until like maybe an hour before He said, hey, can you just come and meet me? And I was like, no, actually I can't. But I can meet you on this day. He goes, well, I'll have to drive back from Houston. I was like, okay, so this guy's motivated. Yeah. The key was too, like with our postcards, we don't lowball people. We put a reasonable number that could go like plus or minus. So we understand we could go, like I always tell them, could go up or we could go down, but it's all just subject to the property in the market. And they're very responsive to that. So I went out, met him and it was very clear, like as soon as we pulled up, like the the awning was like falling down. Was like the gutters around the ground is completely vacant. I actually had to climb up through the attic to gain access to the property.

Drake Johnson: [5:42] So I would say like he knew I was indebted at that point. Yeah. You know, we took a look and you know, I let him talk. So he was like, listen, I know it's old, I know it needs work, I know this, I know that. I was like, okay, well, you know, we're interested. We would love to be able to help you. But you know, we do, I set that expectation, we are investors, we do need to be able to make money on this deal. Are you understanding that? And he was. He was probably one of the easiest people to talk to ever. Built some great rapport with him. He was industry savvy in the sense that he ran a business, so he understood, which I thought was, you know, night and day difference from somebody that had like a lot of sentimental emotional value. And then the fact that the property has said vacant for seven years was helpful.

Mike DeHaan: [6:25] Yeah.

Drake Johnson: [6:26] So I think our offer card was like 160 or so give or take, or it might have been over 200 actually. And our initial offer was about 140. He was very receptive. He took him two hours to respond to our initial offer. He accepted it. We won our contract. This one we actually brought in JV partners because we intended that the best thing to do was actually going be like a hotel or a quick flip. Just given the market. We initially thought that the properties ARV was like $2.20 if we were lucky. So we're like listen, we'll take it down at $140.10 ks in rehab will be good. So we went under contract doing due diligence. We found out that there was lots of issues. Roof was in trouble, HVAC, all your big mechanicals was a problem. And then big thing out here was septic. So we had a septic system out on the property that hadn't been serviced in since the original. Yeah. The original, it was like 1984 built and it was built by his father. So we had plenty of room to say, hey listen, you know, per code, etcetera, etcetera. We actually had to go back and renegotiate, which again, very receptive to. We essentially just did dollar for dollar price reduction based on the fixes that we had not anticipated, which was really the roof and the septic system.

Mike DeHaan: [7:45] Which is a lot.

Drake Johnson: [7:46] Yeah, a 100%. So that was $20,000 that we needed to come off the top of our last bid. He took a very short period of time to think about it and then he agreed, he accepted and we won our contract. We got with our JV partners and then we started to undergo bids and seeing what we could do. So we went back and looked at comps in the RVs and we're like, hey, for some reason there's properties that are similar to this, if not less, they're selling for like $2.40, $2.50. We're like, okay cool, we got some room. So we actually did do some work like we did paint a little bit of paint. We fixed some items and then we just listed it And my phone, because I'm also an agent, my phone just started blowing up. Yeah. Like we had seven or eight showings in the first two or three days. Yeah. And then we had offers coming in and and they just started coming in. Nice. And, within a week we were in a contract at 15 ks over ask. Nice. So we're in a contract at $2.65 within a week of being on market we were just like shaking our heads going like we don't know what just happened, but we're good with it. It was a VA loan, so we had to jump through some hoops. We did end up replacing the roof. We ended up doing like a full bid. We completely cleaned out the septic system and found out that I was Okay.

Drake Johnson: [9:01] There was just some tree branches that were like growing through the lines out to the septic we fixed, you know, so in grand scheme of things we did like punch out items and things that would qualify VA FHA loan, which was significantly better. And the partners that we had on that were very familiar with that because that's all they had done. All in all, we ended up closing and, we actually closed at $2.69 because they qualified for some like Texas land vet program that required like an extra 4,000 in seller incentives, but they just tacked it onto the purchase price. So we're good with it. Yeah, so all in all, we ended up spending I think about 12,000 in renovations. We got the property at 120, put 12,000 into it. We held it for a total of two point five months and we sold at $2.69.

Mike DeHaan: [9:48] It's a huge deal.

Drake Johnson: [9:49] So our gross profit was 96,000.

Mike DeHaan: [9:52] 96,000. Awesome. Is that your take or did you split that with your partner?

Drake Johnson: [9:55] No, that was fiftyfifty. So we did JV and, you know, granted we had two or three other deals going on at the time. It was fantastic. And I almost recommend that nine times out of 10, if you have a lot of things going on and you're unsure upfront, we were happy, happy, happy to split that with our partners that we had already done deals with and had great rapport with. It was such a win win. It was really good deal.

Mike DeHaan: [10:17] Did they help like carry some of the labor on that as well?

Drake Johnson: [10:21] Yeah, they did all the labor. Also got lending. It was cake. Like we actually assigned it to them upfront for like a tiny fee, then they put it in their name because they had this huge established rapport with a lender. Got great interest on the hard money. Then we actually even went out and got private money to fund the rehab. So we were both in it for $0 It was all around a great deal. We ended up getting a private investor, a tremendous return. We got him 10% annualized return on his money for three months of whole time. We almost grossed a 6 figure profit on a whole tail that we had for two point five months and we were $0 out of pocket.

Mike DeHaan: [11:01] Yeah. That's great. I mean, that's awesome. I I think that that's just such an important designation when people bring in partners is if you're gonna be splitting something $50.50 though, make them bring some additional value besides just the money. Way that I see so often with like new investors is they're like, oh, I'm gonna bring in this person that's going to like fund the property. I'm gonna give them 50% of it. That's ridiculous. Honestly, that's such expensive money.

Drake Johnson: [11:23] It is.

Mike DeHaan: [11:24] They need to bring some sort of connections, some expertise, some labor. Like, make them earn that extra amount. Otherwise, just go and get a loan, and then find, you know, someone to give you money for the down payment, and pay, you know, your 11 or 12% interest in the hard money, or whatever you need to do. But that's like it's such a big problem that I see where I think new investors kinda shoot themselves in the foot. And where it gets funny too, is I find it's usually with a younger investor where they'll have an older mentor that's like, yeah, I'll buy that house for $200 for you, and we'll split it $50.50. It's like, bro, they're taking advantage of you. They're taking advantage of the fact that you don't know what you're doing and you need to be honest about that. So I'm glad to hear that you at least made them earn that extra money.

Drake Johnson: [12:03] Oh, absolutely.

Mike DeHaan: [12:04] Yeah. That's sick though, dude. So that's a huge deal and that's is that your biggest deal to date?

Drake Johnson: [12:08] Actually, yes. It was absolutely insane. That was we were sitting here thinking like, hey, maybe we can wholesale this for 10 or 15,000 and this just goes to show like, you know, if you have some confidence in running your numbers and you know that the prices are right and you get it at a good price, like you're an investor too, right? So take the risk because a lot of times the reward is there. But you know, the spoils goes to the victors. The people that actually take the risk are the ones that earn the reward.

Mike DeHaan: [12:35] Absolutely. And you know, it's it's it's always a challenge to real estate dukes. It is kinda subjective, you know, the value of the property is. And I remember we had we had one kinda similar 2021 that was a deal that was we didn't really know what our flush was gonna be. We planned to do a larger flip, but then we're like, oh, we'll just wholesale it. And I guess when we first tried to wholesale it, we're trying to get her $15,000 fee, everyone was like, no way. Steal's way too tight. No one would touch it. We closed on it. We literally just did some super basic stuff. Same store story as George, ended up selling it for way over asking price to a VA buyer, and you made like 87,000 on it.

Drake Johnson: [13:11] Yeah. Probably.

Mike DeHaan: [13:12] You know, and it's like no one would buy for the $15,000 fee, they could've just made 60. Mhmm. But instead we made 80, so, you know, I'll take that. Awesome, Drake. Well, thanks so much for coming on and sharing that deal, man. That's a super awesome deal. Congrats on the end result there. If people wanted to reach out to you and hear what you have going on, what's the best way for them to do so?

Drake Johnson: [13:29] Yeah. Best way is to reach out to me at the Drake Johnson, Instagram, Facebook, just Drake Johnson, Steel Capital Investments is the business. And shameless plug, if you don't mind, Mike.

Mike DeHaan: [13:39] Okay.

Drake Johnson: [13:39] We host a real estate investing meetup down here in San Antonio. It is the second Thursday of every single month, eighteen straight months, and we have not missed. It's called Pints and Properties at Weathertills Brewing. It was a spin off of what Shelby's done. Absolutely incredible meetup. We've met so many great people. That's actually how we met our partners on that last deal.

Mike DeHaan: [14:01] Nice.

Drake Johnson: [14:02] So every single month we host it, we have great people that come, we have nothing to sell, no pitches, just value in networking. And our last event, we had almost 60 something people show up. Mhmm. So we almost shut the place down. It's absolutely incredible, and we have not missed. So

Mike DeHaan: [14:19] yeah. Awesome. I love it, guys. Well, definitely reach out to Drake at all of his socials and attend this meetup if you're in the San Antonio area. Whether you're a regular there or you're just visiting, one of the cool things about the real estate community is you can build relationships pretty quickly with anybody because you're all kinda like have a mutual interest. Right? So I've heard really good things about his meetup too. I think you said, yeah, you had like 60 people or something at your most recent one. So it's a really good community growing there. Well, guys. So reach out to Drake. And if you don't mind, please share this with anyone who wants to know what real real estate looks like and the opportunity that exists there. Because Drake just made almost a $100,000 off of one deal. And although that's awesome, it's his biggest deal. The crazy thing is there are people that do that every single month. Right? You know, it's the sky is really the limit once you learn how to do the basic processes. So thanks for listening, everybody. Share this with everyone that you know, and we'll talk to you next week. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.