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The Sixteenth Week – Frustration House Under Contract

Home » Blog » 34 Weeks Flipping Houses » The Sixteenth Week – Frustration House Under Contract

These are the results of the Sixteenth week of opening up my house flipping business for you guys to see how my wife and I are building back up to 30 deals a year. If you missed the first post explaining what I am doing, please visit This Post.

These are the things I did this week:

Def Leppard House Rehab Still In Progress

The rehab on the Def Leppard House is being wrapped up and should be finished next week. It’s taking a little while longer as we’ve had problems with the stupid Home Owner’s Association hall monitor guy. My contractor painted the front door a nice deep red to make it stand out and the hall monitor (what I call the guy from the HOA) got his panties all in a bunch. It appears that the color needs to be approved before we could paint it. You should have seen it before. It was so ugly that I am now assuming the previous owner was trying to get back at the HOA!

I’ve put in a call to the hall monitor and he has not returned it. If he doesn’t today, I am giving the go ahead to give it a second coat and put on the new hardware. I can’t wait around for this guy to come by and bless everything. Gotta love flipping houses.

Historic House Wholesale Is Under Contract…To Be Sold!

I am very excited to say that a couple days after closing, I was able to sell the historic house to the first person I called. That was quick. Maybe I should just wholesale from now on…nah…there’s too much to be made with rehabs. I will certainly share the details after all is closed and the check is in my hand. Sorry to keep you waiting…

Probate Letters Are Ready For Mailing

Probate letters were stuffed into envelopes and hand addressed. Just need to stick them in the mail. I hesitate to put too many letters into the mail all at one time because part of me feels there is temptation for the mailman to think it is junk and throw some away. I don’t know where that fear came from, but it’s there.

Hidden Iron House Closing Ran Into Snags

I should have known things were going too smoothly for the Hidden Iron house closing. We ran into a problem with the FHA loan the buyer is getting. Being that we have not owned the house for more than 90 days, they needed to make sure that we were not making more than 20% profit. This drives me freakin nuts.

Of course, we are making more than that and so have to work on getting the contract rewritten to show that it was contracted after 91 days and have to get a second appraisal to make sure we are not ripping anybody off. This is just plain ridiculous. Just more hoops to jump through. We’ve had this happen many times in the past and it has never killed a deal, so we are not really worried about it. It’s just the hassles.

Got The Frustration House Under Contract (and then Frustrated Again)

The house from the other week where I talked about having the frustrating morning with the seller that didn’t show up for the first appointment and then met with a different seller that had called back in January. We had sat down to sign the contract and he told me he should have waited to call me (even though he waited 6 months already). Well after questions from him every couple of days (even calling one evening at 8:30), he finally called to see when I could come by to get the contract. This time, I made sure that his wife had already signed before heading over.

The visit was pleasant and all went well. Receipted the contract this morning. Then….the dreaded call this afternoon where he was saying he wanted to net more money. I told him it was pointless to talk about net as we weren’t sure of what it would be exactly until the numbers were worked out. Trust me, I tried to be as polite as possible and I hope the true level of aggravation and frustration I was feeling didn’t show through.

This sort of situation needs to be nipped in the bud as soon as it shows up. If I were to give in and give him more concessions, after we’ve signed the contract even, he would just keep asking for more. I am keeping my word and closing the deal at the agreed upon terms and I expect him to do the same. Period.

Marketing

Total Leads This Week: 7 🙁

  1. Bandit Signs – No bandit signs put out for about a month. Will do more soon.
  2. Yellow Pages – For a picture of my ad, visit the ‘The First Week’ post.
  3. Buying Website – 7 – For a link to my site, visit the ‘The First Week’ post.
  4. Drive For Dollars – Mailed about 50 out 3 weeks ago.
  5. MLS – Did not look at any listed properties this week.
  6. Wholesale Deals – 2-3 – I think there was another but was not doable.
  7. Referral – Nothing
  8. Probates – Mailing out tomorrow.
And A New Feature – Total Leads To Date [221]
This is the total number of leads for each source since I started posting about the leads.

Lead Source Total Leads To Date
Buying Website: 111
Bandit Signs: 44
Yellow Pages Ad: 25
Driving For Dollars: 15
REO Realtors: 6
Absentee Owners: 5
Wholesalers: 4
Realtors: 3
Referrals: 3
MLS Search: 2
Probate Letters: 2
For Sale By Owner: 1

Leads Analyzed

  1. Seller Will Explain[Source: Website]

    Homeowner wants to sell a 4 bedroom, 2.5 bath, 2000 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price: $125,000
    Amount Owed: $115,000
    Repairs: $minor (unconfirmed)
    After Repaired Value: $130,000
    Max Offer: $85,000 – repairs

    Seller will explain was what was left in the field for reason for selling on the website. They did not pick up the phone when I called them so this is all I have to go on as to why they are selling. They owe too much so I will pass this one on to whoever wants the lead that can do things with low equity deals.

  2. Belongs To Estate[Source: Website]

    Family wants to sell a 2 bedroom, 1 bath, 900 sf house in a not-so-good neighborhood.

    Here are the numbers:

    Asking Price: $25,000
    Amount Owed: $0
    Repairs: $unknown (unconfirmed)
    After Repaired Value: $40,000
    Max Offer: $15,000 – repairs

    The house was inherited and the family wants to sell. The area is pretty…rough. This is ideal for a landlord so I passed on the lead.

  3. Lost Second Source Of Income[Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1500 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price: $125,000
    Amount Owed: $105,000
    Repairs: $minor (unconfirmed)
    After Repaired Value: $115,000
    Max Offer: $75,000 – repairs

    Seller lost his second source of income and his main job reduced his hours to where he cannot afford the house. This deal is too thin for me and most houses in the neighborhood that have sold were sold below my ARV (which I thought was conservative). Next.

  4. Tenants Left The House All Tore Up[Source: Website]

    Homeowner wants to sell a 4 bedroom, 2 bath, 2200 sf house in a bad neighborhood.

    Here are the numbers:

    Asking Price: $75,000
    Amount Owed: $75,000
    Repairs: $a lot (unconfirmed)
    After Repaired Value: $90,000
    Max Offer: $58,000 – repairs

    Seller had tenants in the house. They recently moved out and tore the place up. The neighborhood is of newer houses, but is next to one of the worst neighborhoods in San Antonio. The bad neighborhood is called Sunrise and I recently heard it called Gunrise. Not interested. Next.

  5. Moving Out Of State[Source: Website]

    Homeowner wants to sell a 3 bedroom, 1 bath, 800 sf house in a bad neighborhood.

    Here are the numbers:

    Asking Price: $40,000
    Amount Owed: $0
    Repairs: $not much (unconfirmed)
    After Repaired Value: $45,000
    Max Offer: $20,000 – repairs

    Seller wants to move out of state. This neighborhood is pretty rough and really just good for rental or owner financing. I’m sure there are other investors that will pay more than me for this one, so I passed it on in hopes of getting a bird dog fee. Next.

  6. Behind On Payments, Moving to Colorado[Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1500 sf house in a not-so-good neighborhood.

    Here are the numbers:

    Asking Price: $76,000
    Amount Owed: $64,000
    Repairs: $cosmetics (unconfirmed)
    After Repaired Value: $70,000
    Max Offer: $45,000 – repairs

    Seller wants to move out to Colorado and is behind on her mortgage payments. Unfortunately, there is just too much owed. This would be a good short sale for someone interested in the area. I am not. Next.

  7. Horrible Property Management[Source: Website]

    Homeowner wants to sell a 3 bedroom, 2.5 bath, 1600 sf house in a decent neighborhood (don’t you love my flipping houses neighborhood ranking scale: horrible – bad – no-so-good – so-so – decent – good – great).

    Here are the numbers:

    Asking Price: $Make Offer
    Amount Owed: $90,000
    Repairs: $mostly cosmetic (unconfirmed)
    After Repaired Value: $100,000
    Max Offer: $65,000 – repairs

    Seller is in the military and has been transferred. She allowed a local property management company to manage the property and did what most will do, stuck bad tenants in the house. Several times she’s had to evict people and the house has been trashed every single time. She is sick and tired of taking leave to come back and dump tons of money into the house so that the next tenants can tear it up all over again. It just blows my mind how people can have no respect for other people’s property. This is also why I don’t really care for rentals. They look awesome on paper sometimes, but the reality of bad tenants and headaches can quickly turn you sour.

    This one owes too much for anything to really be done. She is not behind on payments. I’ll just have to move on to the next one.

Summary

Slow week, but it was fourth of July weekend. I’m sure next week will show a decent increase in leads again. Have probate letters going out. Will try to put out bandit signs. Will undoubtedly have to push to keep the Frustration House going to closing (set for two weeks). Will be closing on the expensive house tomorrow. The sellers needed a temporary lease back while they moved out. We are giving them until the end of the month. One of the ones that I was going to buy but could not get them quite low enough is going under contract soon with an investor I worked out a deal with. Should make 3k on that one for birddogging (actually did a little more in that I had to negotiate with the seller).

Plans For Next Week

  • Call Follow Ups
  • Mail Letters
  • Get Def Leppard House Cleaned and Start Staging
  • Try to get Bandit Signs Out
  • Close The Expensive House
  • Line up financing for the Frustration House

Conquer your fears. Otherwise, your fears will conquer you. – Yet Another Fortune Cookie. Mmmmm Chinese food.

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Comments (22)

  • Pete

    Look at the Yellow Pages ad….25 leads. Most investors think sellers don’t look in the phonebook. I’m pretty sure that’s one of the first places they look!
    Nice work Danny!

    • Danny Johnson

      Thanks, Pete.

      I was actually thinking that was a little low. I’m working on a new ad for the new book. It’ll be interesting to see if this improves.

  • Mike G

    I like the new feature – the table on the Total Leads to Date. It would be great if you also included how many deals you actually obtained from each source. In other words, you got 44 leads from bandit signs, and how many of these 44 turned into deals for you…

    I love this blog – thanks for keeping it going!

    • Danny Johnson

      Thanks, Mike.

      Great idea. I’ll try to remember to add this for next week. I was afraid someone would ask for total cost spent also, which I think is a good idea, but would be a lot more work. Maybe I’ll include the cost quarterly or something.

  • Bill Kirkpatrick

    Danny, sounds like you had a fun week dealing with ‘frustration’ on all levels! FHA, HOA, and a contract issue?? Well at least you had a Wholesale deal go through without a problem!

    I hear the 90 day rule may be going away, at least in some areas…that would be one step in the right direction! Thanks again for another great post!

    • Danny Johnson

      Thanks, Bill.

      Now that you mention it, this week really did scream frustration! There was a lot more in the way of small things today with contractors, stained carpet, etc. Just talked about the main points. Frustration and elation are two very real parts of this business. Need the balance to shift to more elation. Things really are going great though.

      I was hearing something about getting rid of that rule also. Maybe then did and then decided to bring it back. Don’t remember now. I really wish it would go away.

  • Pete

    The other thing I noticed….you get quite a few leads in “rough” neighborhoods as you call them. Any particular reason?

    • Danny Johnson

      Pete,

      I think there just tends to be more people in those areas that face financial difficulties and have houses that they cannot afford to fix or hold on to. Also, they have less options when it comes to what they can do with the houses. There are not a lot of qualified buyers for those houses and many of the houses are in bad shape that banks refuse to lend on (not to mention being difficult to insure).

  • Pete

    Not much action in the REO area or from wholesalers. Are you just concentrating on other lead sources? It’s good you have multiple lines in the water though….Dan Kennedy says the worst number in marketing is “ONE”!

    • Danny Johnson

      Pete,

      Exactly. There is so much competition for listed properties here lately that my time is better spent on the my own motivated seller marketing. I am really surprised at the low wholesale number as well. This I attribute to me not networking much and I also did not tally up some of the deals that I came across because they weren’t worth much attention (emails with 7 wholesale houses at one time, all of which are not deals (for me at least) etc.).

      Gotta love Dan Kennedy. I need to use that picture of him sitting on that longhorn as the next post picture. 🙂

  • Mikey

    Thanks for including my suggestion for the “total leads to date” feature… you’re so inspiring! I’ve only closed 2 deals this year, but I think I’ll try setting up website leads next week and see if I can get more leads… By the way, have you ever considered selling your “bad” leads to real estate agents?

    • Danny Johnson

      Mikey,

      Thanks for the suggestions. Congratulations on the 2 deals. That’s a lot better than a lot of people. With the website, just make sure that you understand that it takes time to start getting steady leads. Don’t get frustrated and give up if lots of leads don’t come quickly, like a lot of people do.

      I’ve considered it but get busy and just forget. Thanks for reminding me. I do send a lot of leads to other investors as a bird dog though.

  • MortgagesByMark

    Nice work on the website leads. Are you advertising online to drive traffic or are those leads coming from organic search traffic?

    • Danny Johnson

      Mark,

      Yes. I use adwords and get leads from organic search results. Best of both worlds.

  • Pete

    How many REO properties do you look at every week? Also, when you make an offer on a property do you keep making an offer til you buy it or it sells? Just curious how you work your REO’s.
    Later

    Pete

    • Danny Johnson

      Pete,

      I have not been looking at REOs lately. The competition in San Antonio has become crazy. It was turning into a huge waste of time. I am now focusing on direct marketing to homeowners only.

      When making offers on REOs, I do keep making offers every 3 weeks or so, until I either get it or someone else does. If someone else does, I try to remember to check and see for how much and who it was. If they paid more than you were willing to, you may have found someone to wholesale properties to. 🙂

  • Jonathan

    Very cool to have someone in SATX willing to help us new guys out! I am also in SATX hoping to jump into the fix and flip game here by Oct 2011. I have personal experience fixing and flipping my childhood home that sold super quick in 2008 and have been wanting to get into the REI biz since…

    I am doing tons of research online learning all I can via internet. I want to have a decent team estabolished as far as hard money lender, contractor, RE Agent, possible wholesaler or bird dog to help find deals and so on… I will cont to follow your blog as well as all forums and local SATX REI websites for a few months and possibly get some one on one coaching before pulling the trigger…

    Anyway! Thanks for the blog!

    • Danny Johnson

      Jonathan,

      Glad you find the blog and good luck getting going. I hope you find some inspiration and guidance from this blog.

  • Doug

    This is one great blog! All the steps you do I have done to some extent but was not sure about whether or not the results warrented the effort. From your blog I see the kind of reponses I was getting from probate and driving was just a bit off from yours. It is most interesting the analysis you give and the number of responses you skip over or give the lead to someone else rather than try to push a questionable deal. That must come from the persistent prospecting and knowing the one you discsard today will be replaced with a new possibility tomorrow.

    Thanks,
    Doug

    • Danny Johnson

      Doug,

      Thanks. You are absolutely correct. Doing things this way allows me to focus more on the big picture and having the time to properly handle the great deals that come along. If I chased after all of these marginal deals myself, I might miss those opportunities. Pretty much what you said.

  • Jordan

    Danny,

    Great blog! I discovered your blog last weekend thanks to Bigger Pockets and have really enjoyed catching up on your progress. Your lead manager software is excellent as well. Thanks for your generosity.

    I’m a fellow investor in the Houston area (rehabber/landlord/lender) and have a question about the leads you pass along to other investors. How do you keep track of these to see if they have any success? Do you talk with the respective investors often? You must be an excellent source of leads for them. Do they simply notify you if they make a deal out of one or do you sign some sort of agreement with them? Just curious…

    Looking forward to more success stories!

    Thanks,

    Jordan

    • Danny Johnson

      Jordan,

      Glad you found the site and thanks for the compliments.

      These are same great questions regarding my birddogging. I’m thinking about doing a post describing my whole process. There are only 3 investors that I send most of my birddog leads to. They know that I provide a steady stream of leads and don’t do anything to disrupt that (ie, not tell me if one closed). I do randomly make calls to sellers to check statuses, but this is just periodically.

      As far as which leads go to which investor, embarrassingly enough, I have a PostIt Note on my desk for each investor with the addresses of the leads I’ve sent them and closing dates, if put under contract. With one investor we have a shared google spreadsheet that gets updated. Probably not the best system, but it keeps the list in front of me at all times.

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