How I Bought a Squatter Camp for $70,000 and Why It Will Be Worth Nearly a Million

I am the proud new owner of a squatter camp.

It is listed as a mobile home park. What it actually is is a junkyard for one guy's stuff while his friends squat in abandoned shacks on the property. I will spare you the details of the condition because some things are better left to the imagination.

But it is mine now. And here is why I could not be happier about it.

The Deal Structure

The deal is complicated but not really. Once you understand the moving parts it is actually a clean piece of creative structuring that protects both sides and produces an outcome that works for everyone involved if the seller does what he is supposed to do.

Here is how it works.

My offer was a set purchase price with enough money held in escrow to clean the property if the seller failed to do so within forty five days after closing. The seller has forty five days to clear his junk and relocate his squatter friends. If he does it the escrow funds go to him as part of the purchase price. If he does not the escrow funds pay for the cleanup and he gets less.

If he needs more time past the forty five days it starts costing him money. Twenty five hundred dollars for the first thirty days beyond the deadline. Then progressively more expensive from there up to ten thousand dollars per month.

All of that is held in escrow. Every dollar of it.

Here is the math on the worst case scenario. If the seller uses every single day of every extension available to him and costs me the maximum in cleanup and extended timeline I will have paid seventy thousand dollars for a property that is worth four hundred thousand dollars as is today.

Seventy thousand dollars for a four hundred thousand dollar property.

That is what creative deal structuring looks like when it is done correctly. Not a screaming deal that fell in your lap. A complicated situation that most investors walked away from because it was too messy, too slow, and too uncertain, structured in a way that protects you completely while giving the seller a fair path to his outcome.

The Repositioning Plan

The property needs work. Significant work. The plan is a two hundred thousand dollar repositioning that addresses everything the current condition requires and brings the property to the standard that justifies the end value.

After the repositioning a cash out refinance at the new appraised value of approximately nine hundred and fifty thousand dollars pays back every dollar invested in the acquisition and the renovation and puts approximately three hundred thousand dollars in my pocket.

Plus cash flow. Forever.

Insert evil laugh here.

Why the Best Deals Take the Longest

I want to make a point about deal structure that most investors never hear because most real estate content is about finding deals quickly and moving fast.

The deals that make real money almost always take a long time to put together.

Not because they are complicated for the sake of being complicated. Because the situations that produce genuine value are almost always messy. Motivated sellers in complicated situations. Properties with title issues or condition issues or occupancy issues that scare away investors who need everything to be clean before they will move. Deals that require creative structure because a standard offer does not solve the seller's actual problem.

Most investors walk away from those situations. They walk away because the situation is uncomfortable, because the timeline is uncertain, because the deal does not fit the standard template, and because working through the complexity requires a level of patience and creativity that the fast deal culture of real estate investing does not encourage.

The investors who build real wealth over time are almost universally the ones who learned to sit with complexity long enough to find the structure that makes it work. Not every complicated situation becomes a good deal. But the best deals are almost always complicated situations that somebody had the patience and creativity to work through.

This mobile home park squatter camp is a perfect example.

Most people who looked at it saw a mess and kept driving. I saw a four hundred thousand dollar asset inside a messy situation and spent the time to structure a deal that protects me completely while giving the seller every reasonable opportunity to meet his obligations.

Seventy thousand dollars. Four hundred thousand dollar as-is value. Nine hundred and fifty thousand dollar post-repositioning value. Three hundred thousand dollars in my pocket plus cash flow forever.

That is what patience and creativity buy you in this business.

The evil laugh is completely justified.

Have a complicated deal or a messy situation you are not sure how to structure? That is exactly the kind of problem worth a conversation.
Schedule a call at calendly.com/jeph-reit or reach me at Jeph@REIGuideService.com.