Hi I’m Phill Grove and I’m here checking up on one of my renovation projects.  What was interesting about this particular deal is this was an equity partnering deal, which is one of the 12 strategies that I teach when I teach real estate.  We bought this house actually for $42,000 and we even bought it subject-to the existing loan.  What does that mean? It means that the owners only owed $42,000 on the mortgage even though the house is worth about $120,000.  Unfortunately the owners were just hours away from being foreclosed so we did an equity partnering agreement.  Which means I agreed to catch the payments up, which cost me about $9,000, and then I made the payments going forward for the couple of months it took to get this house remodeled, back on the market, and sold again.  And then I agreed to split the profits with the owners.  So we’ll meet you back when we close this thing and tell you how the numbers and the profit finally worked out on this.  But this is again, just checking up on a little remodeling project we just finished up.

Equity partnering is a very interesting strategy.  It allows you to pick up homes potentially very inexpensively. It really does mitigate the risk, because your cost basis is so low that whatever profit you make you get half, and it’s very likely that your going to make profit.  The other really fascinating thing about an equity partnering agreement deal is that the more the home is perceived to be worth by the homeowner, the more likely you are going to be able to get the deal done.  In other words, the more the homeowner thinks that their home can be sold for, the more profit they think that they are going to get and the more willing they’re going to be to sell it to you.  So sometimes you get into a situation, pretty often actually, where the homeowner thinks that their home is worth more than it really is, and in this situation with this strategy you can actually use that, to a degree, to your advantage. So anyway, we bought this thing for $42,000 and then we turned around and sold it for $133,000 after fixing it up and we got our check from the title company.  This is the closing H.U.D. and the title company.  You can see the check here is for $73,848.30.

 

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Renovations, closing costs, the payments on the loan (carrying costs), the whole thing was less than $30,000 out of pocket to me. This is approximately just under $50,000 in profit of which I get a little under $25,000 and the homeowners get a little under $25,000.

So $30,000 made me a little under $25,000 in profits in less than 90 days, which is a pretty good little deal by anybody’s measure. So, I’m Phill Grove, talk to you later.