Short Sales – A Great Source for Rehab Inventory

Posted by on Jun 27, 2013 in Blog | 0 comments


FrontBefor&AfterWhen I first started investing in short sales, I had one basic strategy.  I would tie the property up with a 1-year option contract that gave me the right to market and re-sell to a 3rd party, and I would then list it on the MLS to find an end buyer who would pay more for the property than I was purchasing it for.  After coming to an acceptable agreement with the short sale lender, I would do a back-to-back closing using transactional funding, and pocket the difference between the two sales.  My average profit on each flip was somewhere in the neighborhood of $7,000-$10,000.

That was a VERY successful strategy for me, and not only helped me survive the real estate crash, but actually helped me build up a substantial little war chest to begin funding my own deals (without transaction funding) AND start acting as a transactional funder myself for other investors in my area.  IKitchenBefore&Aftert wasn’t until the market stabilized, and prices begin to increase, that I began to see how short sales could be an incredible lead source for renovation properties…and with MUCH larger paychecks than just same day flips.

The first short sale deal that I converted into a traditional “fix & flip” property was located in a little patio home community on the North side of town, that is known for elderly residents, which of course means….CASH BUYERS.  The property was owned by an elderly couple in their 90’s, who had since moved to Mississippi and could no longer afford the home.  We started out with the same old process we had always used, and tied up a $95,000 cash buyer to flip it to, while we negotiated an offer in the $70k’s with the bank.

At some point in the process, the buyers went back to the property to walk through it, and felt like it was just too much work for them to take on and decided to back out of the contract.  Typically, we would have just re-listed it back on the MLS, and waited for another buyer.  However, by this time I was hot and heavy back into the renovation game, and this one was a perfect fit for a fix & flip.  The average days on market in the neighborhood was less than 30 days, while the rest of the area was still over 150 days, and so I knew this would be a home run.

MasterBathBefore&AfterWe ended up settling with the lender to purchase the home for $72,500 (on a balance of $150k) plus we had to pay off a junior lien of $3,000, so we were into the home for just over $75,000.  After about $18,000 in repairs, we turned around and sold the property for $129,900 (full price offer) after just ONE DAY on the market.  After closing costs, holding costs, and real estate fee, we made a profit of $25,038.47.  Not bad for a couple months worth of work!

This deal marked an epiphany for my business, as our strategy changed permanently to no longer viewing short sales as only a same-day flip strategy, but rather as a stream of steady deals for our renovation business.  We no longer even pursue an end buyer for a traditional A-B-C short sale flip until we see if we can make the numbers work as a renovation, and the success of this paradigm shift has been remarkable.  Our last 5 or 6 renovations have come directly from short sale leads, and we are closing on another short sale deal this Friday.  You can expect to see that one added to our list of “Success Stories” in a few months!

Check Out Some More of Our Success Stories at the Links Below!

Big Profits from Ugly Houses

Flipping Houses You’ve Never Seen?

Replace Your Income Renovating Homes

For More Real Estate Articles & Advice (Plus 2 Free Gifts), Click Here to Subscribe!

No Responses to “Short Sales – A Great Source for Rehab Inventory”


  1. Sell the Sizzle, Not the Steak | Professional Investors Guild (P.I.G.) - […] Short Sales – A Great Source for Rehab Inventory […]
  2. Vampire & Zombie Foreclosures – The Spooky Side of Real Estate | Professional Investors Guild (P.I.G.) - […] —>>>  Short Sales – A Great Source for Rehab Inventory […]
  3. Don’t Let Appraisals Derail Your Sale – 5 Keys to Getting the Contract Price | Professional Investors Guild (P.I.G.) - […] Short Sales- A Great Source For Rehab Inventory […]
  4. A Rehabber’s Dream? – Virtual Reality Rooms Coming to Lowe’s | Professional Investors Guild (P.I.G.) - […] Short Sales – A Great Source for Rehab Inventory […]
  5. How to Find Real Estate “Hot Spots” | Professional Investors Guild (P.I.G.) - […] majority of the buyers pay CASH because the neighborhood appeals to an older demographic.  The last renovation we did in…
  6. Distressed Homes Discount Averages 37 Percent in September | Professional Investors Guild (P.I.G.) - […] median price of distressed residential homes, which are those in foreclosure or owned by banks when sold, was reported…
  7. Short sale tax break signed into law. | Professional Investors Guild (P.I.G.) - […] who had short sales in 2014 can now breathe a giant sigh of relief, as the Mortgage Debt Forgiveness…
  8. Motivated Seller Gold Mine – Targeting Niches for a Higher R.O.I. | Professional Investors Guild (P.I.G.) - […] fee.  On a rare occasion, you will come across an overleveraged probate property that will require a short sale…

Leave a Reply

Your email address will not be published. Required fields are marked *

Powered by WishList Member - Membership Software