Short Sale Mentoring Deal Profits $235,000

Dave: I’m Dave Dinkel. Today, I’m here with Zel. Zel is one of our mentor students and just completed a super deal. And I want to sort of bring him in and say hi. Zel is – what country are you a citizen of?

Zel: I’m Croatian.

Dave: Croatian. So he’s an alien in the sense that he’s not a US citizen, but he’s doing deals and this is an example of a great deal that he did. Now, he has some background in real estate investing in Romania but it’s a different world over there. How many Realtors® do they have in Romania?

Zel: None yet.

Dave: So there’s no Realtors®.

Zel: Not yet.

Dave: And it’s pretty simple. So you deal directly with the seller.

Zel: Yes. It’s actually a little more complicated than doing deals with the Realtors®.

Dave: Yeah. Realtors® can complicate our deals needless to say. So let’s talk about this deal that you did. You found out about it. Talked to the seller.  You got it under contract but it took a while to do that too.

Zel: Yes. So someone wasn’t cooperating. He didn’t want to do the short sale. He had different plans and some I know. I managed to tell him all the benefits of the short sale.

Dave: In our state, it’s called a judicial state. And that means that the foreclosure has to go through the court system and it’s not uncommon to be in the property for 3 to 5 years and not make a mortgage payment. So why should he leave?

Zel: Exactly.

Dave: But you did. You finally signed the contract and you went into the short sale negotiation. And into it, after a certain number of months, what happened?

Zel: Well actually, after almost a year, over a year, I actually came to the conclusion with the lender. We were just about to close for $395,000. But what happened is that then the lender informed us, they sold the bulk of loans to different companies in this case. And we had to start the short sale process deal with him all over again. And that’s what we did and it took another almost a year.

Dave: So at one time, you’re willing to pay $395,000 for it.

Zel: Yes.

Dave: Because you knew it was worth how much do you think it was worth at the time?

Zel: Roughly around 600,000 to 650,000.

Dave: OK. However, almost a year later when the new bank goes in there, it came to a point in time where you said, “We got to close this thing.” And you did negotiate a new price, which was how much?

Zel: $330,400.

Dave: So when people tell you they won’t come down in price, it depends on how motivated they are. Now, you happened to, when you did finally get the price and you went to closing, you’ve had a surprise because two weeks before you closed, the seller stuck a tenant in there.

Zel: Yes. Actually, set up a tenant there without me knowing. Actually, I bought the property free and clear without tenant and I found out that a tenant is there a couple of days later when I went to see the property.

Dave: And he signed what’s called in our agenda kind of a sweetheart lease, meaning he rented the place well below market value. But as the new owner, you’re stuck with a lease.

Zel: Yes.

Dave: Luckily, it was only 10 months and not renewable. But at the end of the 10 months, because you’re waiting on him to get out, he’s not cooperative on leaving. He likes the sweetheart lease.

Zel: Oh yeah, he loved it.

Dave: But you were able to get him out.

Zel: Yes. And the end, he came out peacefully and I’m glad.

Dave: So now, you’ve got him out. You’ve already put it on the market just before he left and you had a ton of buyers I would say, right?

Zel: Right.

Dave: But you actually do happen to have a real estate license.

Zel: Yes, I do.

Dave: You happen to be a licensed Realtor®.  Why did you do that?  Just to have it?

Zel: That was a big mistake I think.

Dave: It’s OK. But you did sell it.

Zel:  I did.

Dave:  And what did you sell it for?

Zel: Almost $600,000.

Dave: Just what you thought it was worth in the first place.

Zel: Well actually, I probably could have sold it for a little more. But they said, OK …

Dave: You don’t want to be greedy.

Zel: Yeah. I spend here been here like 4 or 5 months a year and I thought I don’t want to waste my time for big showings and to bring around the …

Dave: Yeah, that’s the other thing I didn’t mention. He’s only here in the United States part-time. He goes back and forth for stuff that he does. And I joke to him about from Romania, Dracula’s castle. And you said I’ve been in there a lot of times.

Zel: Oh yeah, beautiful castle.

Dave: So he’s a tourist too. So when all the smoke cleared because you had expenses and some rehab costs and all sorts of things going on, how much did you net approximately?

Zel: Well, around $235,000 -$240,000.

Dave: OK. So, roughly a quarter of a million dollars. Now, you actually have the money to close, did you not?  To buy it?

Zel: Yes, I did.

Dave: OK. So there you go, guys. Anything else you want to tell somebody that’s going to be a real estate investor? It doesn’t work, right?

Zel: No, it’s really bad, guys. Don’t try this at home. Actually, what I want to say, you know if I can do it and I spend here like 4 to 5 months a year then I have other things to do besides real estate, I think anybody else can. You can do this remote work from being out of the country, living in Mexico or wherever you live and still do the deals in Florida.

And the most important thing is that everything that I learned actually – well, I just want to mention, the reason why I end up with such greats deals because I took the mentorship class with Dave and this was the best thing actually that happened to me and I owe them I’d say, half of these deals.

Dave: Well, one thing was when I started talking to Zel about the deal, I said, “You remember, right? Remember I called you and called you?”  Well Zel, like other students call me and call me and I don’t remember the deal. I remember answering questions for you a lot but that was pertaining predominantly to that deal.

Zel: Right. And actually, what I wanted to tell you that the way that I drop the price down or I negotiate the price down with the bank was using the inspection report.

Dave:  Contractors’ estimate of repairs.

Zel: And it was Oscar’s report and he just does brilliant reports. So with the GAIA company – actually, with that $250 report, I managed to put the price down $60,000. Actually, $59,600 to be precise.

Dave: So what he’s talking about is we have a general contractor. Interestingly enough, 10 years ago, I had a crew of people and one of whom was a guy from Guatemala, off the boat who was homeless. I didn’t realize it at the time except when he said to me, “Do you mind if I stay in the house at night that I’m rehabbing?” Because we’re rehabbing about 3 or 4 houses at the time. And I said, “No, not a problem. Go ahead and stay there.” Well, he was homeless. He had to stay there.  It turns out that about 4 years later, he went on to become a general contractor. Did you know that? That’s who Oscar is.

Zel: Yes I heard the story.

Dave: So now, Oscar charges $250 or $300 depending on where the property is and he generates a true contractor’s estimate on repairs which typically is between 80 to 110 pages. And it looks at every detail of the property with pictures and diagnosis of what the cost would be.  How big was your report? Did you have any idea?

Zel: Yeah, 130 pages.

Dave: OK. What was the total estimate of the repairs? Do you remember that?

Zel: Well, it was probably around $80,000.

Dave: Oh ok. Well, that was one of the lower ones actually. And we don’t expect to get the entire estimate of repairs. I just had one I looked at yesterday was $139,000 in repairs on a $200,000 property. So we ask for some help on the HUD statement with it. We do one of two things. We try not to ask for price reduction. We ask for repair credits on the HUD. That way, the listing agent still gets paid before commission if we’re dealing through a listing agent.  But we’ve gotten some spectacular results from it simply because it’s real. He has a contractor’s license. So he’s going to lose his license if he doesn’t do in reality. But it really does help to get super repairs.

Zel: Yes.  Absolutely.

Dave: Are we all set?

Zel: Yeah. Actually, Dave, thank you very much for putting me through this.

Dave: You’re more than welcome. Thank you.

Zel: Thank you.

Dave: Thank you guys.

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Short Sale Mentoring

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