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I sold a Property!

January 17, 2014

So I did something over the Holidays that was certainly not in my playbook for this year – I sold one of my properties. My tenants in Property 4 have asked no less than 5 times over the last 2 years if they could buy my rental. I kept telling them I would think about it and continued delaying. They have been with me for 42 months since I moved out of this old primary home. If you recall from my earlier posts, these are my refugees from Iran and very good tenants. My original plan was to keep all of my rentals for the long term – but I love to make a deal.

So why did I sell?

The property did not fit my model. Property 4 was purchased in 2007 before the minor downturn that we experienced here in the Dallas area. I bought the place as a primary and was not into investing like I am today. I was feeding it each month but only to accelerate payoff, otherwise it was close to breakeven. Many of our other properties that we purchased in the 50-75k range and rent for 800-1000 per month are a much better use of our capital.

The property needed some updates. The home was built in 1976 and was all original to that era. From the 4 inch bath tiles, kitchen cabinets, countertops, marble seashell bath sinks, worn out fence, aging roof, etc. The place was tired. It needed updates to draw full rent. My refugees were ideal for this place as they were not expecting much compared to where they have come from.

front brown wide

I was going to lose them as tenants. It was apparent that my tenants wanted to quit throwing money at rent and purchase a place. I was already running the plan in my head that they might move. If they did, I would have needed to put at least 10-15k into the place to attract a decent tenant or 20-25k to sell it. These improvements would have allowed me to charge another 150-200 per month in rent however.

I have a buyer. When you have someone wanting to buy one of your properties – you have to think about it. Many times people want to sell and they can’t find a buyer. When you find a buyer you have solved one of the toughest barriers to selling a home. Oh…and of course you pay no commissions. The final tilt in the decision was my buyers had some cash.

Seller financed note with a large down payment. With my buyers being refugees from a foreign country they were still establishing credit here in the US. They have a large family with lots of various hourly jobs between them. They would not look good on paper at the local bank. However, they did have cash and this is the only way I was comfortable with an owner financing deal given their situation. I ended up with over 20% down and a large 6% note for over 10 years.

Timing was right. I did not want to sell earlier, but it’s hard to turn away a willing buyer. I was happy with the price and very happy with the terms. It was also nice to get it done right at the end of the year. I was earlier concerned about getting the owner financing done before the whole Dodd-Frank thing screwed it up for me. But I won’t do more than 3 or 5 of these per year and the rental history was essentially the credit check.

At the end of the day, this was a win-win. I have monthly payments continuing for many years without the maintenance and headaches. If they do falter for some reason, I have the house as collateral. They are getting the American dream of home ownership that would have been tough to attain given their situation.  Their whole family was at the Title Company and we just closed with both parties together. It was great to see how happy they were. They invited Valerie and I for dinner this weekend at their new home.

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2 Comments
  1. Nice story, love the win-win for everyone. Real estate gives a nice opportunity to make a real difference in people’s lives.

  2. Thanks for the comment AJ. It was a very satisfying experience. Their story of what they went through to get here to the US is amazing. I took a chance on them when they first approached me to rent my place years ago. I could tell they were getting lots of rejections with their green cards, lack of full citizenship, spotty employment, etc.. I could just sense they were genuine. I have been burned before giving someone a chance, but this one is going to pay off.

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