- Secondary Strategy - About two months ago I made my first wholesale deal. In fact not…
- Secondary Strategy -
About two months ago I made my first wholesale deal. I actually did not intend to do it and in general I do not do wholesale. This deal just came to me so I went for it. The deal was interesting, the numbers less relevant (though good…) but the process. You can write a few posts about this deal, and maybe I will write more, but in this post I will focus on a topic that is not talked about much and it is - a secondary strategy.
When getting into a particular deal, always get in with some sort of plan. The simplest example is a flip deal - the plan is to buy the property, renovate and sell. But what happens if you fail to sell for a long time? What is the secondary plan? What is the Dafa (possible course of action) dangerous, as we would call it in the military? Of course there are several options but it is important to plan this in advance.
In my case, I had a property on a contract at a price about 25% lower than the market price. Leased property, good tenants, a yield of about 7-8% and it is possible to increase the rent and improve the yield. After a bit of procrastination, a week before the end of the inspection period, I first posted the property on various Facebook groups and inquiries came very quickly. One face was from a broker who had an interested buyer and she further added her commission on my price. During the signing of the contract with the intended buyer, I discovered that he is taking financing and will not convene on the closing date with the seller. Now I was faced with 3 possible courses of action (there were more but I chose to hesitate): 1. Cancel the deal and get out of it - a great deal so sorry… 2. Talk to the seller and postpone the closing date - she did not agree. 3. Buy the property myself and sell it a few days after that when the financing is received.
I chose the third option and this is where the movie started.
As part of the loan granting process, an appraiser and an inspector came to examine the property. Two main defects were found, the first was a very, very small part of the floor that floated, and the second was a part exposed to electricity. The lender agreed to move forward only after confirmation from a building engineer that there was no problem with the foundations. To check it, it was necessary to lift the floor and check what was happening. There was no problem checking the electricity. In the meantime, a violation was also received from the municipality for tall grass and a broken part of the fence. The breach was quickly fixed and deleted so that was the minor problem.
Suddenly, the hurricane arrived in Florida and delayed the whole process some more. From here and there to do the Long Story Short, the buyer exchanged a loan, and the property was sold after being in my possession for about two and a half months.
And how does this relate to a secondary strategy? For me, if the deal didn't close at the end, I would leave the rental up and leave the property. The location is good, the value goes up, the tenants are good. I would try to sell again, maybe after an even overhaul, later.
Bottom line - that you will always have another DPA, one that may not bring the result you expected, but it will be good enough for you and you can deal with it.
Successfully!
— feeling satisfied.
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Thanks for sharing - very helpful
Definitely important..thank you for sharing !! A wonderful lesson