I once had a student at a boot camp jump out of his chair and yell out, “Why would someone sell a $150,000 house for $50,000?” It made no sense to him. And it probably doesn’t make sense to you as a new investor either.

So let’s break down that exact house that I was referencing. It was my first rental property, and it was damaged from Hurricane Frances. The owner of the property had been given a trailer from FEMA to live in since he couldn’t live in his house because of the water damage. A branch from a tree had collapsed and hit his roof, which in turn led to water entering the property and water damage.

Even though he could not live in his house, the bank still expected him to make his mortgage payment. Did you know that even if your house is hurricane damaged and you cannot live in it you are still required to make your mortgage payment?

The owner of this house saw a yellow bandit sign (from a wholesaler) that said “We Buy Houses For Cash,” and he called the number on the sign to inquire as to how much he could get for his house. The person who comes out to the house (wholesaler) offered the seller $34,000. This owner had originally made an insurance claim with Citizens and was told that he would be getting $45,000 from the Insurance.

In the seller’s mind, his house was only worth around $80,000 because that is what the wholesaler told him. In reality, the house was worth closer to $120,000. The seller figured that $34,000 plus $45,000 (from insurance) was a good deal for him, and he agreed to sell the house to the wholesaler.

The seller was MOTIVATED to sell the house because his PAIN POINT was that he was living in a FEMA trailer, and he was still making his mortgage payment every month. He wanted out of the trailer, and he wanted to rent another house. He needed money to do that, and selling the house was the easiest way for him to get some cash in his hand and solve his situation.

The seller did not know that the guy purchasing his house was a wholesaler who planned on flipping the house to someone else. Many sellers are unaware that the person offering to buy their house is actually a wholesaler who wants to flip the house for a profit. In this case, the wholesaler flipped that house to me for $50,000 by assigning his contract.

I purchased that house with no money down. I borrowed the entire purchase price of $50,000. My mentor’s partner’s dad lent me the money. I also borrowed the $25,000 in repair money from my friend’s mom. I paid 10% interest for both loans. My monthly interest payment was $625.

The house had a front house, which was a 3/2, and also a back unit, which was an efficiency. I rented the front house out for $1,200, and I rented the back unit out for $600 to my handyman. My total rental income was $1,800 per month. My monthly interest payment was only $625, so this property cash flowed almost $1,000 a month.

When I got the house appraised, the house appraised for $163,000, which was substantially higher than I anticipated. It turned out that the appraiser valued the front house at $120,000 (which was our estimate) and the back unit (which was a legal unit with its own electric meter) at $43,000 for a total of $163,000. That’s $88,000 higher than my purchase price!

I refinanced the $75,000 private lender loans into a lower interest rate conventional mortgage. Based on the appraisal, the bank was willing to lend me 70% of the appraisal, which was $114,100. I used that money to pay of the $75,000 in loans, and the rest of the money I put in my pocket! That was my first rental property that I purchased with NO MONEY DOWN. This was my first Buy, Repair, Rent, and Refinance property. And ever since then, I have focused on finding houses like this that I can purchase with no money down and refinance using the BRRR Method. I have taught thousands of students how to do this.

As a new real estate investor, the concept of understanding why someone would sell their house for 30 cents on the dollar is a very important concept to understand. I purchased this house for just $50,000, which was 30% of the appraisal value. And that is what that student at my boot camp could not understand. But once I explained the background of the house, then he understood.

To buy houses at a discount, the seller has to be MOTIVATED. The concept of motivated sellers and sellers who HAVE TO SELL THEIR HOUSE FAST for cash is an important concept.

As a real estate investor, you need to market to and find motivated sellers.

Here are a few examples of motivated sellers:

*Hurricane Damaged, Fire Damaged
*In Foreclosure or Pre-Foreclosure
*Probate/Inherited Properties
*Tax Delinquent Properties
*Vacant Properties

I teach my students how to buy houses with no money down using the Buy Repair Rent Refinance Strategy at my Buying Rentals and Building Wealth Boot Camp.

If you would like to learn more about my real estate training program, call (561) 948-2127 and speak to one of my Student Support Managers. To apply for my real estate training program, please complete an application at https://www.lexlevinrad.com/application