I heard about some apartments for sale in July and I almost walked away from them. Really for a 1st deal I am looking for a 2br/1ba or a 3br/2ba, something “easy” for a 1st time deal and a novice investor. I went ahead and did a drive by, saw that they were two 4 plexs not some large “Lindsey” style apartment complex. After the drive by, I went to the courthouse and pulled the property card, and saw that the county had the last appraisal (from 2 years previous) at $221,746.
I called the Company that owned them and made an appointment to do a walk thru. I met up with the president of the company at the property, walked thru them, and LET THE MAN TALK. The more he talked the worse he thought of the property, and the better off I was. We walked through all 8 units, stepping over trash, clothes, and furniture. Finally he asked me how much l would pay. My response was, “let's see, you're asking $150,000, and as you yourself have said, they need ALOT of work; I will have to get back to you with a figure. For now, I think they need about $50,000 worth of work. I called 2 weeks later with a low-ball offer: (County appraisal [2 years old] is $222,000 (as is), Company is asking (150,000) I took the $150,000 subtracted $60,000 for cleanup and rehab, also $6,500 for realtor fees, (would have to be paid by seller anyway if property was listed) for a total offer of $83,500.
The CFO (Chief Financial Officer) checked with the owners of the company and called me back within 10 minutes, with a counter offer of $90,000! I agreed, 2 days later we signed an Option to purchase contract for 3 months with a 30 day extension (Total 4 months). After price and length of time were negotiated, it came down to earnest money. He asked how much; I said (1) one dollar; he said O.K. For one dollar, I tied this property up for 4 months. Within minutes of getting the price locked in at $90,000 I had an investor wanting to go to the bank. All in all I had 20 hours wrapped up in this deal; some more walk throughs, meeting with contractors for bids, etc…
At the end of my contract the full 4 months, my investor and I did an assignment of contract. He bought the apartments for $90,000, paid me $20,000 for my contract and my company, which was actual purchaser/buyer on the contract. After all was said and done; from Aug 20th to Dec 19th I had 20 hours in the deal, and walked away with a check for $20,000 that's $1000 per hour. The investor, that bought them from me, spent $90,000 for the property, $20,000 assignment fee, and $90,000 to rehab. 7 months later that investor sold those apartments to an end buyer for $320,000; a total profit in 7 months of $120,000. WIN/WIN/WIN deal.