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My Best, Most Creative Deal Yet!

ryanlake

0
Registered
Joined
Jan 14, 2011
Messages
97
I struggled for a long time watching people buy houses, attract money partners, buy multiple doors in a year while it felt like I was stuck on the sidelines. I never gave up, however. I believe in real estate and I know my numbers. I am from Esterhazy SK and now live in Edmonton AB. I was doing well at 22 years old with 3 properties I thought, then I was 30 and still had the same portfolio due to a couple of main factors.

Finally, it happened. Last October I phoned my dad for a check-in. He had mentioned he had spoken with his good friend Corey. Backstory goes, his brother, my godfather, Kim, passed away 6 months prior. Kim lived very poorly, didn't look after himself, or the family house which he now lived in and had "assumed" ownership of the 3 siblings. Now that he had passed, sadly, they were left what should have been an asset but instead was an emotional nightmare for them.
My father told me of how Corey and his sister Tammy cried when they had to drive 4 hours away to clean up after Kim, their brother, seeing how he lived and frustrated at the state he left the place in. Esterhazy is a one-trick pony, potash. Potash runs everything. So in a small 3,000 population, I had no previous intentions of owning anything where I grew up. Too risky Robert Kiyosaki advised! But....without my father or me knowing I may be interested, he told me Corey mentioned that he does not want the house anymore, he would like $40,000 but would take $35,000. That got me interested!!

Originally I did not want to get involved with family or friends issues, but then I thought, "hey, I am doing him a favor by solving his problem! Why wouldn't he accept an offer, especially from me?" I got the courage to call and I soon got his interest. It would be a win/win.

At first, I considered my financial situation. It's funny, when you REALLY NEED TO, you somehow find a way. First, I needed to know I had someone to trust to do the work. I called 3 new contractors. 1st didnt want to touch it. 2nd wanted 90K, the 3rd only quoted 25k (which I knew was way under budget) and an old army guy (we connected) who had a reputation for speed and hard work. He said he wished he got into real estate at my age after giving me the quote. Afterwards after brainstorming how I am going to fund the total cost, it hit me! I decided to pitch Charlie (the contractor) a deal to give him a base salary of $2,500/m for 3 months, and split the profits 50/50 on the back minus the salary end once it sells. HE AGREED! Perfect! This was beautiful because I live a province away, I needed to trust him, have him accountable. Now if he saves $1 he makes $0.50 and it is way easier for me to budget costs and I don't care so much about the length of time the project costs if I were to pay an hourly wage. I was also in Colombia for the whole month of February travelling so I needed someone who could do it all. He was the first JV partner I needed.

Once I knew it was doable with Charlie, I salvaged $9,000 of my own money, and actually called my grandmother to loan me the rest of the down payment for $8,000, for a total of $17,000 down. I got a private mortgage to fund the reno. Most things came under budget except the plumbing and electrical which I hadn't anticipated doing. 3.5 months and 3 trips to Saskatchewan later, the numbers looked like this:

Purchase: $37,000 subject to the seller upgrading the electrical panel
Reno/holding/buying costs: $57,000
Total cost: $94,000
After Repair Value: $155,000

Conventional mortgage of $120,000 in place which paid out my grandmother, Charlie, and the private loan. This left me with about $30,000 cash in my pocket with $35,000 more in equity and a super happy tenant paying $1280/m creating $400 in cash flow!

I love this deal because it was my first flip, I had a plan B which was to rent it (it sat on the market for 3 months, rented within 1 week), it was my first JV deal with both a family member who I never in a million years lend me money (my grandmother) and Charlie. This is the best performing, best quality house now in my portfolio that cash flows very nicely and I have an amazing tenant. Patience and persistence really pays off!!

And my father regretted telling me about it because he thought I had "too many houses!" HAHA. Showed him.

http://www.ryanlakerealestate.ca/fix-n-flip/ <====check out the photos here!!!
 

Remi Noel

Contractor, Renovator, Developer & Investor
Registered
Joined
Feb 24, 2016
Messages
22
Nice work Ryan


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