Turning Real Estate Lemons in Lemonade

real estate lemonsAt some point, every real estate investor runs into a lemon of a deal and while some sour on real estate afterwards, the smart ones turn that real estate lemon into lemonade. The lesson you learn in this training could be worth a fortune to you over the course of your real estate career because it will show you how to overcome the obstacles that a property with undesirable characteristics can present. Despite your best due diligence, sometimes, when you go to sell or rent a house, something pops up that you didn’t expect but can be a huge deterrent to most buyers or renters. Far too many novices simply drop the price drastically and beg for someone to take over their real estate disaster. However, as you will learn from this training, with enough creativity, you may actually be able to turn that problem into a selling point. Here’s how to turn real estate lemons into lemonade…

 

Get Creative With Undesirable Real Estate

 

At some point, every real estate investor runs across a deal that has characteristics that are undesirable to the vast majority of potential buyers or renters. In this blog, I would like to share how to turn those real estate lemons into lemonade. Specifically, I want to share how to overcome difficult deals with creativity.

 

1. Celebrate Your Problem

 

Instead of hiding behind a problem, you must learn to celebrate the problem. This can be done just by the way you describe the property in your ads. Mention in the ad how some of the current problems could become benefits. You can even market directly to people that would not consider the characteristics of the property undesirable.

 

Examples:

 

  • A property near train tracks where a train runs through on a regular basis, would be considered an undesirable characteristic to most potential buyers. If you were to find a great deal on a property that is right next to the train tracks, you could turn the problem into a benefit by marketing the house to employees of the train company. You could also put out an ad that highlights how easily accessible the property is to the train system. Obviously, if you’re in a major city being close to the subway system can actually be a huge benefit. You can celebrate it.

 

  • Another example comes from the book “The Millionaire Mind”. In the book, a real estate agent was trying to sell a property that had an exterior siding of cedar. Woodpeckers would peck on the cedar, making tons of small holes in the wood. For the majority of buyers it was a complete deal breaker. But the agent got creative and sold the property to a lumber company executive that wouldn’t be caught dead living in a brick house. The real estate agent celebrated the home’s uniqueness.

 

  • A common example is when a seller buys a property from a builder and decides to sell it a year or two later. Even if they paid for some upgrades and have a low interest rate on their 97% loan, they’re often stuck. They are unable to sell the property because after they pay the 6% in commissions and closing costs they would be upside down in their loan. This situation is perfect for a creative real estate investor who celebrates the fact that the home is practically brand new instead of focusing on it not having any equity. The investor can get the property structured as a subject-to and sell it on as a rent-to own.

 

2. Overcome Your Issues

 

Another way to handle a property with undesirable characteristics is by finding creative ways to overcome the issues. If we go back to the train tracks example, you could offer a BOSE noise-cancelling headset or HUSH earplugs with purchase. Or on a more expensive note, you could put in special noise-canceling windows like the ones used at airports. You can overcome the problem by fixing the problem. The goal is to use creativity to get the maximum sales price on a deal, without spending a lot of money.

 

Examples of Real Estate Lemons

 

  • Recent statistics have shown poor cell service is one of the biggest deterrents for home buyers. So if you are trying to sell a property with terrible cellphone reception, you might want to consider something called a cell booster. This device can be ordered off amazon for around $150 and will increase cell reception at your property. This is an easy and cost effective fix to a huge real estate investing lemon.

My Real Estate Lemon

  • Another example stems from my personal experience with a deal I am currently working on. I have a property that is made up of two structures, like a duplex. At the end of the backyard there is a huge, three story, concrete brick wall that actually touches one of the structures. The problem with this property isn’t the home itself, but what lies behind that wall. The real lemon is that there is a strip club located directly behind it. Three days ago, I received a full price offer on this house. The people loved the home but were curious what was behind the wall, so a few days after making the offer they drove around and discovered the strip club. Today, I received a cancellation notice I have to sign. Those buyers are running from that deal.

Now, I have decided to try to solve this problem in two ways. First, I am taking the fact that there is a strip club touching the property to an attorney in an attempt to get a variance or a special exception for zoning for use purposes. I could definitely increase the property value if I can change the use of the property. If I have to go in front of a planning committee or even a public hearing, I plan on asking for a show of hands from everyone who has a property that touches a strip club. When only my hand is raised, I will be able to set the stage in showing them that I have a very unique situation.

On top of trying to change the land use of the property, I plan on “overcoming” my real estate lemon by marketing with flyers and maybe some direct mail to get in touch with the people working at the strip club as well as the strip club owners. There are several strip clubs in that particular area so I am going to do whatever I can to get them interested in the property.
Maybe the owner will want to buy it and then lease it out to some of his workers or someone that works in the area, wants to live close to their job. In a way, I’m just trying to overcome by celebrating the fact that the property exists. Just because it is undesirable for the vast majority of people looking to buy, doesn’t mean I can’t still make full price for the property by using creativity with the constraint of integrity.

Comments

  1. I have a 3 unit triplex that I have inherited and would like to sell. The problem is it is in a bad neighborhood. I have not put it on the market at this time because it has been on the market some years ago and no one wanted it. The units are all rented out. The building brings in $1,306.00 per mon. as passive income The mortgage is $535.00 per month. It has a second mortgage on it of $49,000.00. There is much more to this story but my question to you is what can I do to sell this property and draw out some profit from it.

    • Freedom Mentor says:

      Improve the management to increase rents so that it becomes more appealing to the buying public. I don’t care how bad a neighborhood is, if you can maximize the income potential of a tri-plex, you can get top dollar for it.

    • What can I do about tenants who trash my units when they move out? I use a property management firm to check out new tenants background but bad ones still slip through the cracks from time to time. Should I increase my deposit fees
      to first and last months rent? I live in Greensboro N.C.

      • Freedom Mentor says:

        Hopefully, you had the right and good Landlord insurance coverage on this property. It never hurts to have more deposit money.

        • I”ve never heard of landlord insurance coverage. How much does it run for and how can I check into this.

          • Freedom Mentor says:

            Landlord insurance coverage is offered by many insurance carriers. Call an insurance broker that can write policies for many carriers rather than an AllState or State Farm agent.

  2. Harry Reyes says:

    Hi Phil, My name is Harry Reyes, I got some investors that want to get an apartment but I’ve been trying to get MLS access and because i do not have license i couldn’t so I’d like someone who can help me with maybe that has any good deal that I can offer to my clients. I’m in Houston Texas.

    Thanks

  3. Hi,

    But is that an opportunity on the buying side too? I think there could be a scenario whereby the seller is desperate. So, why not take the approach you just did to an certain extent up to the analysis part and then make a discounted offer to the current seller. I can see scenario whereby you could flip the home quickly. What do you think?
    One persons Lemons is another person lemonade.

    • Freedom Mentor says:

      Absolutely! The “problem” can be a great negotiating tool that you use to get a better deal when you purchase and then you can use it as an “opportunity” when you turn around and sell it.

  4. sherwood sohmers says:

    I find that most of Phil’s teaching videos are very informative. But, this one is excellent. He hit the mark this time and this video is a must to see.
    Phil knows the business as best as anyone can and he thinks out of the box. That is a formula for success.

  5. RICK SHEEHAN says:

    PHIL,
    I HAVE LISTENED TO YOUR TRAINING IDEAS NOW FOR MONTHS.YOU HAVE MANY GREAT IDEAS.I HAVE HAD A REAL ESTATE LICENSE OVER 10 YEARS JUST DOING PART TIME. I HAVE BEEN IN AUTO SALES PAST 12 YEARS .NOT SURE I WILL DO AS WELL AS THE AUTOMOTIVE BUSINESS.
    THANKS
    RICK

  6. George Gandjoulov says:

    Well, Phil, most people will probably stay away from such deals. Whenever I drive and look at properties the first thing I look is what is around. But yes with such properties, creativity is the best way to deal. Use your best asset, your mind!

  7. Royal Davis says:

    Yes I have one of those, Your video is a 5star. My brain started thinking and, wow. I’m 20 minutes from a town where they are building a new hospital. My house has three bedrooms. The buyer can rent them out to nurses or whoever. Yes even though the place is listed, I can get the write-up changed. Thanks, at the end of each of your videos, just in case I miss one!

  8. jeffrey doto says:

    Thanks again,,,this just opens up more properties that one can invest in…properties that most would shy away from !!! Obviously, creativity needs to be nourished, and it actually sounds fun !!! Thanks Phil !!

  9. Peter Benvenuto says:

    Thank you,
    Your the only real estate entrepreneur that give real “meat and potatoes” advice on your videos. Everyone else ” beats around the bush”!
    Thank you

  10. Hi Phil. If I own a home that is upside down in value, what is the best process to deal with this property?

  11. sany hrwtz says:

    Hi Phil,

    What would you do, with an illegal apartment.

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