Note Date 20170416
On the 13th, we sold a property I thought I paid too much for. It was a good feeling to get that cash wired into my account and call this one done. Just before Christmas, I bought 4 land contracts on duplexes in each of these towns. Grand Rapids, Cincinnati, Dayton and Council Bluffs.
During due diligence, I paid a national valuation company to check out each of the properties. I also hired local realtors or property managers to give me their opinions. The Grand Rapids valuations came back at around $45,000 As-Is from both the national company and the local property manager. I purchased the note for $19,625.
After a few conversations, I came to distrust the property manager. Maybe he's inflating the value. He seemed to inflate his rehab numbers and oversight of the rehab. And I always feel like the national companies are over valuing properties. Now I am thinking I paid too much.
Now that I thought I paid too much for this property, I didn't take on a partner. I didn't want to lose anyone else's money. Maybe I can break even with this thing if I do it by myself. I called another property manager; he said he was commercial only, but he'd drive by and tell me what he thought and referred me to another property manager. He sent me a couple of photos, told me it was vacant and in rough shape, and that without seeing the inside, he said I might get $40-$45k. Cool. I might be OK. Meanwhile, my loss mitigation guy, Steve at Polaris, got a hold of the borrower and offered him $500 to sign a release of the land contract. I thought this deal might go pretty fast.
I talked with the new property manager who didn't want anything to do with it until it was ready to rent, so he referred me to a realtor. She didn't want to do anything until I got the deed recorded. Well hell, it takes two months just to get the deed from the seller. Great, now I'm without representation in Grand Rapids. In the meantime, I hired a national service to secure the property and get a look on the inside. There was an animal in there that liked pigeons, judging by the bodies on the staircase.
So the months go by. I finally get my Quit Claim Deed. I was fortunate to get it recorded electronically. I love the 21st century. Now to get the release of contract the guy said he'd sign. After more phone calls from Steve letting the borrower know that I can give him $500 or I can give my attorney $800, we got the release.
Now to find some representation in Grand Rapids. I called that property manager who had done the drive by and took some photos and told him my case regarding getting help in Grand Rapids. He turned me on to another realtor. She's been great. Allison Koetsier of Compass 101 Property Services. She runs by the property and can't get in. The lockbox code that I requested when I had the property secured isn't working. I'm locked out of my own house now.
Once we get a new lockbox put on, we get inside. It's rough. We listed it for $40,000 and we had two showings on day one. The first individual wasn't interested. The second offered $35,000 using his Self Directed IRA, which I accepted and got it under contract that very same day. Later he substituted another buyer on to the contract and I realized he just did a wholesale with his retirement fund. Pretty cool indeed.
Closing went without any hiccups or retrading. We closed on April 13th and I had $30,361.76 wired into my account. $19,625 was the purchase price of the note. I had a total of $2,388.80 in expenses. Property taxes, cash for keys, valuations and such. $4,638.24 in closing costs. That left us with a net of $8,347.96, which came out to a 42.5% ROI in 3 1/2 months. Let's just call it four months to keep the math easy.
Annualized, that a 127.6% ROI.
Grand Rapids, thank you very much. I'll be seeing you soon.
EDIT: I have a correction. My total expenses were $22,013.80. $19,625 initial investment and $2,388.80 in expenses. Profit was $8,347.96. That's 38% ROI. Annualized that's 113%.