Epic Real Estate Investing - How to Make $26,000 with No Money or Risk : Case Study from the Epic Files

Episode Date: April 30, 2012

Listen how a naive newby implemented his real estate investing education and used an REO acquisition with a joint venture "fix and flip" exit strategy to put $26,000 in his pocket on his very first deal. Get your free real estate investing course at FreeRealEstateInvestingCourse.com Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, this is Matt from the Epic Pro Academy and welcome to another case from the Epic Files. Now, this right here happens to be the file of the very first deal that I ever completed. It was a single family residence just east of downtown Long Beach and I found this property by driving the neighborhood. And this particular property was in really bad shape. But it just happened to have a for sale sign in front of it, of which that sign wasn't about the same condition as the property. They looked awful.

They looked like they'd been there for a while. while for sure. And it was very possible that this listing wasn't even an active listing anymore. I mean, that's just how the place looked. And it also had an air of someone tried to do something with the property and they either failed or they quit or they just lost interest. I don't know. It wasn't totally clear. But I wrote down the address and I went back to the office to conduct some basic research and it turned out to be an active listing. I mean, it was over one year on the market and it was just sat there. And it was bank-owned. And after calling the listing agent, I found out that some investors had intended to turn that single-family residence, that property, into a fourplex.

But they ran out of money, and they just bailed. They left the project in that current phase. They were in the demolition phase. That's why it looks so bad. So this deal at this point, it looked like, hey, there might be something here. But the deal got even better as the previous investors had already paid for the plans and permits. They already went through that process. and the plans and permits would be passed along to whoever purchased the property. And if you've ever done a fix and flip, you know that process can take some time, of which when time is money in the way it is with a fix and flip, that time that you have to wait for plans and permits can be costly.

And additionally, the previous investors had left a specific wall of the building standing, of which the plans revolved around. All the plans were centered around this one wall. And why that was special, what that means is, as long as you leave at least one wall standing, the project would be classified as a rehab as opposed to new construction. And at the end of the day, that's a significant difference in cost, a significant difference in the bottom line as well as the tax basis of the property would be left untouched. Big deal. The previous investors had the right idea with this project, but unfortunately, for one

reason or another, they just couldn't get it done. And I thought with such a head start, thanks to them, maybe I could get it done. This was a sweet deal. But with, With a little over a $300,000 price tag on this property, it was over my head. Actually, it was quite over my head. But based on my real estate investing education, I knew I didn't have to walk away from this deal. So I placed an offer and after this property being on the market for a year, my offer was quickly accepted. And that's all I really wanted, just to get it accepted.

And here's why. You see, first, a real estate purchase contract gives me the buyer the legal right to purchase the property for the price stipulated in the contract. within the timeframe that's given in the contract, which was 45 days. I had 45 days to execute this deal. Second, nobody else may purchase this property during the life of the contract without my approval. You see, by being in contract, you block out any and all competition, so you can conduct your own due diligence without worrying about someone swooping in and stealing it away from you.

And third, I would gladly give such an approval for a fee. In other words, I would gladly assign this contract. And by being under contract, that's an option. And in this case, that was actually the goal. So based on my networking up to this point, I had recently met a couple of fix and flippers who worked in that specific area. I called them up and I told them about the deal.

They checked it out. They wanted it. Actually, they really wanted it. And I recognized how excited they were over the phone about the deal. They showed their cards, so to speak. So rather than just doing a straight assignment of the contract, I was able to negotiate a partnership on this deal.

I would get 20% of the equity. And I would have never been able to negotiate that if I didn't have the property under contract in the first place. That's probably the biggest lesson here. When you find a deal, write an offer, get it under contract. And this deal, it turned out to be a real win-win deal for everybody that was involved. I mean, I got 20% of the equity, which came out to about $26,000. The fix and flippers, they got a great project to work on without having to hit the bricks and hit the pavement to go out and find it. And then the end buyer essentially got a brand new fourplex and a really good rental neighborhood.

So here's the bottom line. I did not spend one penny to make $26,000. It was all the fix and flippers money. They brought in all the money. And I didn't have to break a sweat or even lift a paintbrush either. It was all the fix and flippers crew that did all the work. I incurred absolutely no expense and no risk. I mean, in fact, if I had not found a buyer or a partner in this case within my allotted 45 days,

I would have simply evoked one of my get out of jail clauses, one of my contingency clauses in the contract that would have canceled the deal with absolutely no recourse to me. It's a really sweet deal. No money, no risk, and $26,000 profit later. I'm Matt Tereo, and that's another case from the Epic Files. See you next time. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.