The Duplex We Should Have Never Been Able to Buy

We recently acquired this duplex on market here in Cincinnati, OH. Originally listed for $155,000, the property resided in a booming neighborhood, and we knew the property would be bid up close to $200K if we didn’t act fast.

The Offer

Our agent, Rob Speckert, wrote an escalation offer up to $180,000 on Saturday with a closing date for the following Friday (6 days). We just had one contingency… our offer expired at 10AM the next morning (Sunday).

This meant that they had to accept our offer prior to their next showing began at 10AM or else our offer was gone. At 9:55AM the next morning, we received a signed purchase agreement and the showings were cancelled.

As I previously stated, the property is easily worth $200K in its existing condition. Had it been listed another day; it most definitely would have fetched that. In addition, because we were able to close quickly, we beat out other higher offers that required more time to close.

The Financing (Hard Money)

We used hard money from our own company to take this deal down and that played a vital role in the offer and got us the property at a discount to its fair market value.

Our plan is to put $35,000 into the property. Our scope of work covers fully repainting the interior of the house, redoing the kitchen and bathrooms, adding a bedroom and central air as well as a few other items.

In total, we will be all in around $215,000 before financing costs. We estimate combined rents at $2,600 per month and we are shooting for an appraised value of $260,000 or just north of that. It should be a cash flowing deal in a great area (high appreciation).

If there is one thing that got us this deal (besides price), it was time to close. Every experienced real estate investor knows that speed matters in this business.

The longer it takes to close, the more time there is for the deal to go sideways. And they do go sideways.

So… why I am telling you about this deal we bought?

Why The Landlord Didn’t Need to Sell

The seller of this property ran out of funds for the rehab of two other properties. The idea was to sell this one to liquidate the equity and use the proceeds to complete the other renovations.

But… here’s how the investor could have used hard money to hold onto all of the properties, while still finishing the renovations.

In total, the investor needed about $100,000 to fix up all three properties (light cosmetic across all three) and the investor owned this duplex free and clear of any liens or mortgages.

With the existing property at $200,000 in as-is value, we could have done a 12-month term cash out refinance of $100,000 on the duplex.

Interest would be withheld from the loan amount so the investor wouldn’t have to worry about missing a payment. Some proceeds would be dispensed at closing while the remaining funds would be held in a construction holdback.

This would have given the investor access to tap into their equity on the property they sold allowing them to fix up this property along with the others, raise rents, and refinance the property to get us paid back.

It’s a win for everyone involved – lenders and investors.

While we were happy to pick this property up, our passion is helping investors use creative financing to build their real estate portfolios.

If you’re trying to source capital for your next real estate deal, we’d be more than happy to educate you on the creative solutions that hard money can offer!

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Grant Smith

Grant has written over $5 million in residential notes since 2019 and manages 80,000+ square feet of self-storage. He is an alumnus of the University of Cincinnati (2018). Graduate of the Lindner College of Business Analytical Finance Academy Program.

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