Holy granite, Batman!
This deal came to us through a personal contact whose father, a master mason, recently died. The estate was defunct, meaning it had no assets, owed lots of money, and the bank had begun foreclosure proceedings against the home (this one as well as a second home, which will be coming in a different post). Our company took over the short sale negotiations, and I put in a bid to purchase the home to stop foreclosure proceedings.
We analyzed the property as both a renovation and a full tear down, seeing where we could make the most profit. The biggest issue was a by-product of the father’s career — he had dismantled both the Lowell and Manchester county courthouses with all of the large granite fascia and steps, and had decided to keep them for “potential, future use” and stored them in the back yard, where they still sat collecting dust (and leaves, and dirt, and animal droppings). We put the stone removal out to bid and got one bid for $30K to clear the lot and take the stone, which doesn’t even include taking down the house. And on top of all that, there were literally tons of masonry bricks and stone throughout the rest of the yard.
So we thought — “Hey! We can sell this stone!” and listed the items on Craigslist prior to purchasing the property, but soon got frustrated with all the tire-kickers who called and never showed up. In the meantime, we were hard at work getting the bank to understand that the homeowner was deceased and the estate had no assets — a process that required approximately 8 months while the estate attorney simultaneously worked to get the assets through probate court and obtain the necessary licenses to sell. The upshot is we were able to purchase it at a price that we projected would result in a $50K profit, more if we were able to subdivide the lot.
We explored the possibility of subdividing in a conversation with well-respected attorney in the town, and it went like this:
ATTY: “Who would be applying?”
ME: “My company.”
ATTY: “As you probably know, the second lot doesn’t meet the lot size requirements. Are you the current owner with a hardship?”
ME: “Well, no, I’m a real estate company, but a friend of the deceased.”
ATTY: “You’d have better luck building a tee pee out of sand.”
Good thing I ran this thing as a teardown and reno, and didn’t rely on that to make a profit. I did learn that if it was still the father and son owning the building, we would have had a better shot at getting the permit to subdivide (seller partnerships, anyone?), but as the evil developer, there was no case for “due hardship” and would have just served our purpose of making money, so it was a no go. Go figure!
We closed on the property, making the seller happy to be done with the headache and emotional stress of the bank and other creditors calling. The day after the closing, as I’m about to call our engineer to begin the permitting process, I got a voice mail from a man named “Joe” who said he was interested in purchasing the lot we just bought. He turned out to be a builder/developer who just bought the neighboring home through an estate sale, and he wanted to buy this one as well so he could control his build timeline, appraisals and resale numbers for both homes (smart man!). We struck a deal where AARE would make exactly as much money by selling this property wholesale as we would have if we held it, torn the house down and built new construction.
A side note — a lot of short sales these days are requiring resale restrictions as part of the deed and this one was no exception. The deal included a 90-day deed restriction requiring us to hold the property a minimum of 90 days before we could resell it. During this time, the new buyer began his engineering and permitting for the new home he planned to build on the property. When this builder/buyer came on board, he would not put a lot of money down (smart for him, bad for us), so we agreed to a trade-off where we would own his engineering and permitting if he walked away from the deal. He agreed and this allowed us to not waste any time by holding out the 3 months without getting anything done.
Funny Story #1:
This is where we found Jen’s truck — cuz what good husband doesn’t spot an older model truck rusting behind a vacant home and immediately think, “Hey, wouldn’t this be great for the missus?” Regardless, Jen and the seller struck a deal where essentially she was all in to the truck (after work done) for about $3K and now Jen’s got a functioning 2006 Ford Explorer and no car payments! Sweet deal, huh? And I have a truck I can borrow — a lot — to transport drywall, drain pipes, trim, etc. A win-win-win!
Funny Story #2:
Since we were still working with the original owner, we let him know when the subsequent closing was scheduled because he still wanted to take some belongings and appliances out of the basement. The day of the wholesale closing, he finally got over there to remove the dryer. As he was pulling it out of the back steps on a 2-wheeler, he heard an engine noise. Then he wheeled it around the front of the house to his truck, only to see a dude in a bulldozer, preparing to tear the house down! “Hey, bud.” He calmy said, as he got the appliance in his truck, and drove away. Talk about a legit close call!
As I’ve noted in other posts, the market is very hot with builders — hot enough for us to make money on the wholesale deal and for the builder to turn a profit when he sells the completed house as well. Here’s hoping he meets his numbers — for now, the investor with the DEALS wins, as buyers are a-plenty, investor cash is plentiful, but DEALS are tough to come by.
What are YOU doing for deals? And don’t you dare say MLS, because that’s the bottom of our rehab barrel — sellers are getting multiple offers out there, for homes that are financeable.
AARE will pay you CA$H for your leads — send your off-market leads to our e-mail address!
Gotta run — we have a Rehab Chronicles to film! Peace, Love and Meth be with you all.by