Cash Flow With Joe

Did I mess up?

Did I mess up?


“I don’t believe this is going to work.” That is what the soil analysis guy, named Doug, told me as we were trapesing through the property we just purchased. And as we walked back, all I could think was, “Did I mess up?”

That’s a sinking feeling.


This house was one I’ve told you about in the past. It was the house that had a title flaw on it and in order to get rid of said flaw we had to do something called a friendly foreclosure.


Let me explain what that is.


We were buying that house from an individual. And when we went to close the house, the attorney found that there was a title flaw that the creator of the flaw would not help us fix. And it just so happened that the homeowner had bought that house from someone who was willing to do owner carry-back financing, which is also known as a private mortgage.


This meant that we could call the noteholder and talk to them directly, which is something hard to do with other mortgages, and gave us the opportunity to get a creative deal done that we probably would not be able to accomplish if a bank was involved.


What we did was ask the note holder if we could buy his note from him for the amount left on the loan. He asked me what the difference between that and just paying him off was. I told him if we bought his note, we would be a lien holder in first position. And if we foreclose that lien, anything that happened to the title after the date his original security deed was filed would get wiped away in the foreclosure and give us a clean title.


He understood and since he was getting the same amount of money regardless, he agreed to sell us the note.

Now, the next thing we did is the friendly foreclosure. The reason this is called “friendly” is because both the seller and I are doing this together to make sure the title is clean. And the other reason it is called friendly is because the foreclosure will not be reported on the seller’s credit.


But it is a real foreclosure. An ad stating the property was in foreclosure is published in the newspaper four weeks prior to auction. And our attorney conducts a foreclosure sale on the courthouse steps on the first Tuesday of the month. That sale goes to the highest bidder. And because of that fact, I needed to show up on the steps because someone else could buy it if they bid more than we were willing to accept.


On the day of the auction, someone bid $21,000 over what we had in it initially. And I had a decision to make — take a quick and guaranteed $21,000, which is an amazing profit that required no rehab, or, take the house back and gamble on doing the rehab that was our original plan.


That was a tough one. What would you do?


Well… we declined the $21,000 and took the house back. Now you are probably thinking that there must be a massive profit potential. We calculated a profit of $45,000 on just that house, which is a good one, but notice the word “potential” next to the word profit. That means it is possible but hasn’t happened yet. And if something goes wrong on the rehab, that number gets cut dramatically. So, you need to know there is a difference between profit potential and a real profit.


The reason I want to point this out is I have seen many people get hurt on rehabs because they figured a profit potential that was too low. Once upon a time, a $20,000 profit potential was a good deal. But that was before inflation hit and the costs of materials and labor skyrocketed. Now, you need to be budgeting in way more room in a deal to be safe.


Now back to the woods.

After Doug said this wasn’t going to work, my mind started racing. The reason we didn’t take the real profit of $21,000 at auction was because our goal was to divide this property and put another house or doublewide on the other parcel which could either be a flip or another rental. And he was there to make sure the ground could handle another septic system. But now that we were out in the woods, and Doug said he didn’t think it was going to work, that saying of “a bird in the hand is worth two in the bush” kept playing in my mind.


I had a $21,000 bird in my hand, and I let it go. (As I typed that I just let out a big sigh!)


As we walked back up to the house, Doug noticed that the property line went further back than what was cleared. And back there, he found an area with soil that was ripe for the septic taking. And my heart was restored.


So did I mess up? Time will tell. Most of the time the bird in the hand is the best way to go. And had we not been able to add the other property, I would have messed up royally. But on this one, now that we have the okay to put another home there, I have a feeling it is going to work out great.


But once again, that is all potential. We will find out in time what is real.


Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to or call Joe at 678-986-6813.


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