Monday, June 21, 2010

Do you Quit or Keep on Going?

There have been many times when I wanted to quit in life, but I just kept going -- in the final stretch to get my college degree and on my first completed wholesale deal are 2 big ones.
When I was going to college, I was also working full time while I went to college at night. I was also a leader of our Tony Robbins group in Denver and had a very active social life. Oddly enough, once I could see the end stretch, I lost the motivation to continue. I forced myself to go on & finish. It was very good for me. Just having a degree opened up job opportunities that would never have been available to me without one. And if I hadn't finished that, so close to the end, it would still be haunting me, 12 years later.
The other time that I was tempted to give up, but I knew I had to fight through was when I was doing my first wholesale deal in January. I had a motivated seller on the hook -- he had a property listed at $250,000 and after some negotiations, agreed to sell it to me for $130,000. I thought that finding a buyer would be easy! So, I called someone that I 'knew' could perform & spent over a week working with him -- and a week in wholesale time is a LOT of time! Well, for some reason, he couldn't come up with the money, so he told me to go and find another buyer. Luckily, it was just before one of the REIA meetings that I attend, so I pitched the deal there and got a ton of interest. Did I mention that I raised the price? I was going to sell it to the first buyer for $145,000 -- and when I had to go find a new buyer, I raised it to $150,000.
I showed the house and put it under contract within an hour. The somewhat new, but not totally inexperienced buyer seemed so eager & was working with a hard money lender who was thrilled to lend on the property. Well, the buyer decided that he didn't like some of the verbiage on the hard money lender's contract and backed out. 24 hours before closing. So, I scrambled and found another buyer who had the cash to close. I thought this buyer was experienced, because he lent money through the hard money lender, but it turns out that this was his first foray into buying a triplex. He freaked when he found out that the landlord pays for water and trash... and backed out 5 minutes before the deal was to close. At closing, I had to talk a very unhappy seller into extending the contract, which he did, for one week. It had started as a 3 week contract.
I put the property under contract again with another buyer, who is generally a great buyer, but the owner of the company was somewhere in Central America with spotty cell coverage and was very hard to get in touch with. They were supposed to fund through an IRA... guess what they didn't get in time? I had to ask the seller to extend again. He wouldn't do it.
So, I closed on the property myself using hard money for a week. Well, that buyer had several more problems getting their money and wouldn't pay the additional fees it was going to cost me to hold the loan longer. Therefore, I found another buyer with cash who FINALLY closed on the triplex. Because I was under the gun, I agreed to pay his closing costs as well. In order for the last buyer to close, the other buyer had to release their contract, so I had to return their non-refundable $3,000 deposit to them. On a property that should have been a slam-dunk $20,000 fee to me, I wound up making about $12,000 after all my costs.
It was hard to get that property closed, even though it had an ARV of $300,000 and fix up at the most would be $30,000, so with the price of the property and fix up costs, I was selling it at 60% of ARV, which is an unheard of value in the Denver area. Usually properties go at 75 to 80% -- sometimes more.
But, I persevered and made a nice check which I would not have done if I had not powered through all the obstacles. Wholesaling isn't that hard in most cases, so I had to deal with the worst first. I forgot to mention that the seller's Realtor kept scheduling closings, even though I didn't have the buyer's completely lined up? She definitely added an extra layer of complexity!
Now, time to go buy another house!
Christy Mellott
Millionaire in Training,

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