Hi guys, looking forward to passing along some real estate knowledge again this week! This week I’m going to be discussing a deal that I was fortunate enough to be a part of in May. I represented Dave, the buyer, in the sale of five turn-key duplexes that sold for just over $1.1 Million. This isn’t a sale that I, or most Realtors in my area, see everyday – and especially not when the buyer is only 27 years old! How did Dave do this, you ask? Well, he literally did not take “no” for an answer, wasn’t afraid to throw his hat in the ring, and handled every hurdle with poise, professionalism, and a level head. I am proud that I was a part of this transaction and I’d like to break down a couple of the major lessons that I learned during this huge sale!
- Networking is critical. Dave is one of the best networkers I have ever met and that’s ultimately the reason he was able to buy these properties. This was not an MLS sale and had Dave not networked so effectively, he never would have even been aware of these properties! Dave contacted me because we have many friends in common and both love the outdoors! We met to have coffee and Dave was very pleasant and fun to be around. However, we did talk business. Dave told me exactly what he was looking for and that he was ready to buy. I knew he was looking for newer duplexes or four-plexes that didn’t need a lot of work and didn’t have much deferred maintenance. We then turned the talk to canoeing in the Boundary Waters, but I filed away Dave’s investment criteria and let the thought just simmer. One critical thing I would like to note, however, is that Dave didn’t network for the sake of networking. He came off as very motivated, but also pleasant and fun to be around. I liked him immediately. Lastly, he made it clear that having a business relationship with him, would not be one sided. He did a great job of showing our relationship would be mutually beneficial, which made me want to help him! A few short weeks later, one of my brokers brought our office a lead for five duplexes that were only 15 years old in Chippewa County. I immediately knew to call Dave and get him as much information as possible. From there, Dave did his initial due diligence and ran the numbers. The numbers worked, he toured the properties, and the rest is history!
- Don’t be afraid to jump out of your comfort zone. Dave owned a couple of duplexes when we met, but by buying five duplexes or ten units at once, he essentially tripled his portfolio. This was a big change and a huge step forward for him and his family. Was he ready for that? Yes. Dave laid the groundwork perfectly for this transaction. In fact, he prepared his fields for rain, so to speak. He found a mentor to help him prepare for big deals. He built an elaborate, yet efficient spreadsheet template for in depth analysis of properties and a template for pitching deals to bankers and investors. He also cultivated a great relationship with his banker and was verbally pre-approved for a large transaction such as this. He was able to get everyone around him to see that he was capable and serious! That allowed him to take a huge step forward that isn’t always common.
- Don’t be afraid to make “The Big Ask”. This was perhaps the most personally inspiring lesson that I learned from Dave. Bottom line up front – the down payment on a $1.1 million property is expensive. Over $200K. Dave needed to get creative to find that $200K, because like most people in his 20s, he didn’t have it in a shoe box under his bed. So, what did he do? Did he raise investors, take out a high interest loan, max out a bunch of credit cards? No. We talked through his options and decided to ask for the seller to take a second mortgage, which is essentially asking the seller to put down the portion of the down payment that Dave personally did not, and then pay the seller back that money over a period of time, with interest. Is this common? No, not really. Was it likely that the seller would say “yes”? No, not really. But did we ask anyways? Yes. And the seller said “yes”. That was realistically the best and only way Dave could have gotten this deal together financially, and he wasn’t afraid to hear “no”, so he asked. And he received.
- Work with someone who will help you problem solve. This is where I give myself a little credit. And a little credit to my broker, Marty Tauger, as well. We ran into several deal killing issues during this sale and we all worked together to overcome the obstacles. The first major issue was the bank that Dave initially had been pre-approved by, and the bank he was using for some of his other business, said “no” and denied him financing. We then ran into timeline issues by not having a valid pre-approval and having an anticipatory breach by potentially not being able to obtain financing. Luckily, Marty and the seller let us have more time, and Dave applied at SEVERAL different banks for financing. It worked. He was denied again, but he was also approved by a couple banks and we continued on. Then we ran into issues with the wells and septic systems. And again, Dave wasn’t afraid to ask to have it fixed, and the seller worked with us to get it fixed. There were many moments during this transaction that I thought it might not go through, but we explored every avenue and made every necessary request to keep the deal alive. Flexibility, problem solving skills, and a “never-quit” mentality proved victorious in the end and those are the only reasons that we made it to the closing table on time and with happy clients.
This was, on the whole, the one of the most exciting transactions I’ve been a part of and I’m grateful for my relationship with Dave, Marty, and the experience we had. Dave is no doubt going to #crushit in real estate and I’m happy to be a valued counselor. I hope you all can take one nugget of information from this blog post and add it not only to your real estate investing business, but also to your personal lives. I wish you the best.
If you are looking to invest in real estate yourself or sell any of your investment properties. I’d love to get the conversation started. Please reach out to me and let me help you achieve your financial dreams!
~Tim Nelson, RE/MAX Affiliates, 715-529-0239, firstname.lastname@example.org