In this article I am going to dissect one of our rehab projects that we purchased off the RMLS and managed to renovate and re-sell the for a nice six figure profit! I hear a lot of investors who claim there are no “real” deals to be had on the RMLS since everybody can see them, but to be honest I couldn’t disagree more. My business is now set up to mainly derive our deals from direct mail and online marketing towards motivated sellers, but whenever our marketing is a little slow and we are in need of a deal, the RMLS is always at our fingertips to help fill up our pipeline….but the key is knowing how to farm the RMLS for deals.
I started really ramping up my business back in 2008 by purchasing REO’s when nobody was bidding on them in my market, but since then a lot more competition has come into the market and we have had to diversify our RMLS acquisition strategies. Today we definitely scour all of the REO listings and have relationships in place with REO listing agents, but we also pay special attention to probate deals that ended up being listed on RMLS, instead of having an investor like us purchase them ahead of time directly from the Estate. A lot of times the beneficiaries of any given Estate really want to try and get as much money as possible for the inherited assets, and in order to do that they will end up listing an inherited “fixer” property with a realtor. The property in this case study was a classic example of this….so without further ad-due lets jump into the case study!
I found this particular deal while perusing the RMLS one morning while we were about to run short on rehab projects to keep the crew busy. We had a number of pending contracts in place, but since most of them were early probate deals there was still a lot of court paperwork to be completed before we could legally purchase the properties….so I decided we needed to find a deal fast and the best way to that was to dig around on the RMLS. I spotted this particular property a month or so back since it was in the same area as another rehab project that we had going at the time, and at this point it was really starting to rack up some serious days on market or DOM. Also from the comments in the listing and the fact that the property was vacant I concluded that it had to be a probate deal that ended up being listed. Some of the obvious clues in listings that would show you its a probate property is when the comments say “estate” or “property sold as is” and/or the property is vacant and outdated. Before putting in an offer on the property I pulled the listing history in order to see how long it had in fact been listed and if there had been any sale fails. Both a longer time on market and sales fails generally help allow us to get much better buys on these types of deals….in this case the property had been listed for around 120 days and there had been two sale fails thus far….which made it a great prospect to offer on. The property was originally listed for $299K but over the course of the 120 day listing period they had dropped the price down to $269K. The current list price still wasn’t close to a deal that I would buy, but I knew that the estate was now very motivated from pulling the listing history, and given the right terms I knew they would probably accept a much lower offer.
So I had my agent write up a cash offer of 190K with a 10 day closing….knowing full well that there was no they would accept that price. They had dealt with two lesser experienced rehabber’s that both ended up in a sale fail prior to my offer, so I tried to position my offer as the no BS price in hopes that it would cause them to want to wash there hands of the property and get it sold asap. As I expected they didn’t take my offer of 190K, but they did counter at $210K which was a solid deal for the property. I told them I would accept but only under the condition that there was no oil contamination from the underground oil storage tank in the front yard. I pretty much knew ahead of time that there would be some contamination as pretty much every underground oil tank leaks at some point. Either way the soil samples came back showing contamination and I used those results to negotiate an additional $2K off the sales price….so our final sales price for the property ended up being $208K, which was really a great deal for the property. When we closed on the deal there were a large number of comps within 1/2 mile that showed that a conservative ARV for this property would be around 420K….which would make for a great profit if we could keep our rehab expenses at around 100K. The house was built in 1920 and it needed a total re-work of the floor plan, so this was going to be a full blown gut rehab.
We managed to complete the rehab in just over 90 days that included new everything including a foundation that we originally thought could be salvaged. During some excavating for the new bathroom in the basement one of the foundation walls gave way and the house almost fell over on us…..thankfully we had our lumber package on site for all of the new framing and we were able to built supports for the house that would stabilize it until our foundation contractor could come out and replace the failing foundation wall all the way around the house. With this added bit of drama and expense our renovation budget ended up a little higher than we had originally penciled, but by the time the house was ready to sell “pending” prices in the neighborhood had also gone up compared to what we comped the property for just a few months earlier. So with the upward trend in prices for the neighborhood we decided to list the property for 469K, and within about 3 weeks of being on the market we had two offers on the property. We ended up accepting an offer of 448K even though it was a fair amount below the listed price….we needed to get the property sold and honestly our profit margin even at that price was more than we had originally hoped for, so I decided to accept the offer. We could have held out for a better offer, but there comes a point in rehabbing when you have to be realistic about what you will end up getting for your project and decide how long you are willing to wait in order to get more money.
So in the end we purchased the property for $208,000 and our rehab expenses ended up being approx $120,000. We then sold the property in just over 3 weeks for $448,000 which left a nice six figure net profit.Now we ended up making a great profit on this property, but the finished product turned out amazing and the retail buyers ended up getting a great deal on what was basically a brand new house with an old bungalow style look. Its great to make money in this business, but you also need to take pride in your work and make sure you are offering a great retail product to your buyers. We have built a brand in our market of high quality renovated homes, and that helps us sell all of our rehab projects much faster than most of our competition.
These types of big profit deals are all over the RMLS, the key is just identifying them and then making sure your offer is presented at a time when the seller is motivated enough to give you a deal! Now go out there and start looking on the RMLS for REO and probate deals that have been on the market for a while and have a sale fail or two….as those make the best prospects. Here are the before and after pictures of the project in this case study: