We sent him the pictures and told him that we were thinking of selling the property for $105,000. He asked us why we had chosen that particular dollar amount and I honestly didn’t have an answer for him. We figured that after all the expenses and closing costs we would be in the property for about $85,000. So if could sell it for $105,000 then we would make $20,000.
Well to our surprise, he told us that the 3 properties of the same type of house that he knew of across the street from ours had sold in the last 6 months for $130,000. Hearing this gave us renewed hope in making money in this business. He told us to sell higher as properties in that area were selling very quickly.
So we listed our property at $135,900 and within the first weekend we got about five offers, all of them at asking price and all of them from first time homebuyers. We needed to pass some inspections to ensure the place was in great shape, and after we made a few more repairs that the inspector required, we ended up closing at $137,000!
Our total expenses into the property were about $87,000 and we had to pay about $13,000 in closing costs, commission, taxes, insurance, etc. So our final net profit was $37,000 on our very first deal on a property that we thought we were only going to make $5,000 or $10,000 on.
The biggest lesson that we took from this, and that you should as well, is to not look for money, but look for a property that has a good spread, and to do your due diligence in knowing exactly how much you are buying it for and how much you can sell it for. The better you become at estimating your repairs, the easier you can bring it up to an excellent condition and sell it immediately.
So with this deal we not only were able to pay back all of our investor’s money that he put into the deal, but we also split the $37,000 profit, with 50% going to the investor, 25% to my dad who was my partner at the moment, and 25% to myself. This is when Cash Flow Properties started!
Now, right before the meeting with the investor ended, our lender wrote out two additional $5,000 checks and said they were for our next one or two projects—to use for deposits or down payments for the purchase of our next deal or next two deals. He said he wanted to keep doing this with us because obviously this one had worked out well for all parties. Want to learn how to invest in real estate? Check out our free training video www.cashflowpropertiesacademy.com/Training/
Within three weeks of that meeting we found two deals on the same day. We already had the deposits, so we got the agreements and gave our investor a call. We ended up doing five more deals with him, all with great success.
After doing these deals we now had the money that allowed us to buy the first property of our own with our own cash. We soon brought in some additional partners and at this point Michele came into the business with us.
The biggest lesson we learned from all this is that if we can find the deal then the money will come in. So if you can find the deals, the money will come in for you. Once you do enough deals and have enough capital you can reduce the number of partners needed to do the deals and you won’t have to split profits with anybody. That’s when you maximize the profits that you can start building your rental portfolio.