Rent To Own Project

My most recent project… I’ve got a lot of irons in the fire at the moment, but here’s a sneak peek into my business:

My most recent project that I finished is actually a property that I bought last year. To be completely honest, the reason it took me so long to finish is because I got sick with my Type 1 Diabetes late last year/early this year. Also, I had to learn a few lessons the hard way when it came to contractors, and got screwed over on some foundation work. About $10,000 worth of a lesson right there… But hey education isn’t typically free, right? Right. It was painful but I got it done.

The way I found the deal was SUPER unique. Almost like finding a unicorn on your hike in the middle of the Appalachian Trail kind of “SUPER unique.” The process kind of began early last year when my sister was looking for a house to rent. She called me up to go look at this house because I was in real estate. She wanted to make sure that she was getting a good place to live, and rightfully so. To make a long story short, I ended up building rapport with the landlord and told her that if she’s ever looking to sell any of her properties to give me a call.

Three months later I get a call from a random number. It was the landlord! She told me that she had this property on 41st and Olive in Tulsa that she was thinking about selling. I said, in my mind, “OHH HELL YEAH!” I scheduled a time with her to go look at the property. When I pulled up to the place I was a bit in shock. The place was a huge pile of shit. Overgrown trees, outdated paint, foundation issues, broken windows, etc. I mean, you name it… and it was wrong. I definitely had my work cut out for me, BUT some of the best deals are the ones that need a ton of work!

Before

See The Mess Our Team Got Into!
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The seller was asking $62,500 for the property. Which for what I just explained may seem like a lot, but when I ran my numbers I put the value of the property around $140,000. That’s was plenty of room to make the repairs needed, and still make a profit on the back end! Which is what business is all about. I didn’t even bother negotiating with the seller at all. I just said “Yeah! I’ll give you $62,500 for this property.” Looking in retrospect I should have tried to negotiate harder with them. However, sometime if the seller is asking a price that already makes sense from the get-go you don’t even need to negotiate with them. Just say “YES” otherwise you may lose out on the deal. I know that’s a little bit of contradictory advice, but just trust your gut.

I ended up putting the house under contract with them for $62,500. After I did that I went to our local hard money lender in Tulsa called Sharp Mortgage. They typically finance real estate deals largely based upon the property, but also require a 700+ credit score. I met with them and was approved for the purchase of the property, and the $30,000 renovation that I was anticipating (at the time.) The house got to closing, and everything was finalized. It was GO TIME!

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I started renovations on the property by hiring a “foundation company” that I thought was legit to fix the issues with the structure. They bid me, $10,500 to pour 32 new piers. “Damn that’s a good deal” is what I thought. Turns out I was dead-ass wrong. I hired them, and paid them 50% upfront and 50% after the job was complete. They completed the job and I quickly learned that I got fucked, HARD. As it turns out, all they did was dig holes around the perimeter of the house, and fill the holes with concrete… I can’t make this shit up. That’s what they did. So I was out $10.5k and had to hire a LEGIT company to do the foundation for $13k. Wow… my budget of $30k is dissipating really fast. Well, after doing the roof, and paint I was pretty much S.O.L. I had to sit on the property for several months while I wholesaled other properties to make money to pay cash out of pocket to pay for the rest of the renovations.

I ended up completing the renovation for around $45k. That was a painful $15,000 out of pocket that I had to pay to complete the project because I trusted the wrong foundation company. DO NOT CHEAP OUT ON FOUNDATION REPAIRS. I REPEAT, DO NOT CHEAP OUT ON FOUNDATION REPAIRS. I had to learn that the hard way. Do I right the first time, and you won’t have to hire someone a second time to do it right! I made enough money wholesaling to finish the project. I was ready to sell it.

After

Hard Work And Perseverance Pays Off!
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I was getting ready to list it on the MLS (Multiple Listing Service) when I began running the numbers a little more in depth. At this point in time, since it had been almost a year since if purchased the property; it had actually appreciated by $20k! There were similar properties in the neighbourhood selling for around $160k! Hell yeah, a silver lining to the project taking so damn long. As I ran the numbers more in depth, I thought I could probably make $50,000-$55,000 if I were to just sell it outright on the MLS. That’s really good! BUUUUUT, I ran the numbers for a rent-to-own investment. I found out that I could sell the house on a rent-to-own basis and get $20k down from a buyer. Then I ran the numbers on what I could refinance the property for, and the results were shocking. I could refinance the property for at least $120k. That would allow me to cash out another $30k from the bank to use for other investments. So that would be a total of $50k cash, AND I would cash-flow $250-$300 per month. That is the best of both worlds! So that’s the route I went with.

I hired a real estate agent to help me sell the property on a rent-to-own basis. The agent got the process done within a couple weeks. The next set was to refinance the property with a bank since I was still paying a high interest rate with the hard money lender, and I need to cash out some of the equity I had in the house for other investments.

Now it’s all done. I got the initial cash and invested into other projects that I have going on, and I cash-flow about $300 per month. You really can’t beat that type of investment. I turned a shitty situation of getting screwed over on the foundation work into a VERY profitable investment by the power of perseverance. ANYTHING IS POSSIBLE. You just need to innovate your way out of shitty situations.

That’s all I’ve got for now, and pretty much sums up my most recent project. I will be back soon with and update on more projects that I have going on. As long as more motivation/education. Thanks for reading!

Josiah Dettmann

Tulsa Titan

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