Today I am going to talk about the house that I wholesaled. When I say that I wholesaled it, I mean that I was part of the process. I have never done a wholesale deal before, and this one was a bit unusual. I kind of liked it–and I think I’m going to do more.
So, when I say I wholesaled a property today I have to explain a little bit; this wasn’t a conventional wholesale deal from start to finish.
About a month ago, a friend of mine called me out of the blue and asked me if I was still doing real estate–this is a friend who I have not seen in a few years. I had hung out with him a few years back and was telling him about my real estate business. He had been very intrigued and had asked a lot of questions at the time. I hadn’t seen him since. So, I was surprised when I got this call from him; he told me that his mother had passed away a few months earlier and her house had been willed to him and his sister. They had no idea what to do with it and didn’t want the burden. When I asked him how much he needed to get for the house, he told me that he had looked it up on Zillow and the “zestimate” was $30,000. Now, that may seem incredibly cheap, and it is, but you need to know is that this house is located in Detroit–and not exactly the best area of Detroit. Not the worst area, but still, not the best.
I do not buy or sell houses in Detroit. I certainly don’t flip houses in Detroit, and really have made it a policy of mine for the last few years to stay away from Detroit properties. That is with good reason, as I used to dabble in Detroit real estate. It was a huge disaster at the time, and I vowed to stay away. I want to be clear here – I don’t have a problem with people who buy real estate in Detroit, I just decided it wasn’t a good fit for me and my business.
Okay, so my friend had looked on Zillow and determined that this property should be worth $30,000. I told him that that seemed high, but that I would do some research and get back to him. I called the two or three people that I am associated with who have done a lot of business in Detroit and could possibly be interested in the property. They all came back around the same price points: $12,000. I called my friend and told him the numbers that I was finding. I told him that I didn’t think he would be able to get $30,000 for the property. He informed me that he was going to call a realtor and explore his options. I wished him good luck, and told him to call me if anything changes. Like I said, I really don’t deal with Detroit properties as a rule, but I wanted to help my friend out of the situation, and see if there was anything I could do.
He ended up calling me back about a month later and told me that, if I could get him $10,000 for the property, he would be happy with that. Obviously, he had done his research too and realized that $30,000 was too high for this property. I immediately put out my feelers to the people I know and trust who work in Detroit. None of them were interested because, like I said, the house wasn’t in a great area. One individual who I reached out to however said that he would be willing to partner with me to get it sold. He had a lot more contacts in Detroit. He told me that he would market the property to his buyers list, take it all the way through closing, and we could split any profits 50-50. I agreed, and he began marketing it to his list.
There was a decent amount of interest right off the bat. Our asking price initially was $16,000. When people went to look at the house, they all agreed that it was a very nice property–very clean and well-maintained. The issue was the neighborhood and the houses surrounding it. They were badly in need of repair, and generally made the neighborhood look bad.
We were unable to get any buyers at $16,000. Then, over the course of the next four weeks, we slowly dropped the price. The sellers became a bit restless; they contacted me about a week ago and told me they were willing to drop the price down to $7,500 if I thought that would make a difference and help get the house sold. We finally dropped the price down to $12,000, and were able to get it sold as of today. We have not gone to closing yet, and I am not naïve enough to think that there’s no way the deal could fall through. But, this is an experienced buyer who has a good reputation for closing deals–I think this one should be fairly certain.
At the end of the day, this is not the most profitable deal ever made. My partner and I are going to make $2,000 each. But the seller is getting rid of a house that is a burden for them, and I am making a little bit of money for very little work. I literally sent an address out to three people. It is a win-win situation for everyone involved. And the best part about it for me is that I created a relationship with a wholesaler who I had previously never done business with. We have already started talking about how we can work together in the future and about the types of houses that I’m looking in purchasing for my flipping business; I think that I will buy a few houses from him before the year is up.
Even though I am not a wholesaler, I was able to get this deal done through partnering with someone else who had more resources and more knowledge of this area of real estate investing that I have. I really enjoyed this experience and think that I may try to do a few more wholesale deals this year!