$180K Creative Real Estate Strategy

Guys, I want to show you a quick deal that Nick and I are working on. It's not done, so disclosure, I'm still working on it. If you have checked out lately the scripts channel, I posted a sort of a history on it. I posted one of the initial calls, then I posted my offer to the woman. Then I posted, um, the little piece of the appointment call, and then I posted the Q&A call that she had with me. And she's still going back and forth with texting, negotiating, uh, as recent as today saying she might have a cash offer. I think it's just all negotiating. She's overpriced. So I'm going to show you what we did. I'll, I'll do the basics and then I'll be quiet and we'll take some Q&A. Um, Just as a reminder, some of you guys are new. If you look at the metrics, almost every deal, almost every deal, if you write these 3 metrics down, and if you've been with us for a bit, this would be a good reminder for you to maybe perhaps focus on free and clear properties. And that is, if you get a free and clear property and you structure at least a 4-year term with the seller, I'll show you how to get longer by year 1 or 2 out of this, but Um, if you get at least a 4-year structure and the purchase price is $200,000 or more— I'm using round numbers, so most of your markets you can find a home free and clear for $200 grand or more— and your monthly principal paydown, principal payment, or principal paydown if you're doing a little bit of a combo, is like— I'll use a round number— $1,000 or more, you have a 6-figure deal all 3 paydays. 6 figures. So let me show you this deal. Um, again, I'll go through the basics and then write down questions as I'm going, please. And, or you can raise your hand with the emoji and we'll take a breather and, and take some Q&A before I pass it back to the coaches. This is a, um, owner financing. Um, it came from FSBO from, uh, our VA MJ. Um, the lead sheet's posted in the scripts channel. Again, I gave the history in there. Um, 10-year term. It's free and clear, and our purchase price is $780,000. So again, this is not signed yet. This is verbally accepted. Adam, who's on a cruise— he likes to go on cruises, our attorney, during hurricane season. No exaggeration. Every year he does it. So he's gone. But before he left, he sent her the P&S last Saturday during the holiday break. Here's what we structured. Uh, Nick, I'm gonna use, um, I'm just gonna use what you tell me, what you want to use for down payment. Come from you.

Uh, $50,000.

Yeah, I'm very conservative. I think we get more and we'll get it over time, but let's use $50,000. Um, monthly payment, uh, we haven't gone through this, Nick. Uh, regular rentals in that area, um, are Pretty strong. Did you look at comps on this one? If not, I was going to use 20—

Yeah, I did. There's, uh, remember I told you there's only, um, 2 on the market right now and they're both seasonal rentals? They're both, um, yeah, they're, they're both seasonal rentals, winter rentals. One's for $2,400 and one's for $2,000. So the market's wide open for rentals.

And we'd have the only year-round.

Yeah.

All right, so let's use $2,400 for the example. You could take it with any numbers, guys. I'm sorry, we got to do her payment first. So the payment to the seller, 10 years, $1,670 a month, principal only. Payment from the buyer, then we'll use $2,400, uh, $730. Let's use— let's do this. I'm gonna use—

Can I interject something here?

Yep.

So I would say even, even if that— all right, so if that's a total monthly payment That, that means, uh, I haven't even figured out what the taxes are here, um, but we would probably be able to go on the market below that $2,000 a month mark, which I think is where, where we need to be. If, if the market is at $2,000 and $2,400, that's where we need to be for a month.

All right, then let me, then let me just do this to keep it simple because it'd be easier on my brain too. Someone do, um, if we're only doing $2,000 a month Um, I, I don't care what we have, but let's just say $2,000 a month so we get the net. I'm gonna figure for this deal, just to show you guys how powerful the, um, the owner financing deals are when you get longer terms, um, I'm gonna figure 60 months. Okay, and what's— who can give me the spread there? What is it?

Uh, $330?

Someone correct me if I'm wrong.

$330?

$330.

Yeah.

Okay, and what's times 60?

$19,800.

Okay, so being conservative on this and this.

On both. Those are, those are super conservative numbers. Yeah.

Let me give you guys some backdrop, uh, because I'm pretty certain, uh, out of 55 of you, maybe not all of you went to the script channel to look at this deal. Um, she had a renter in there for 7 years. She's a snowbird. It's coming up on fall. The, the renter took off. I shouldn't say take off. They weren't late. They left suddenly for a job change in Arizona. She sat on this since the spring. She started in the high 9s. She's just off the island here and on Aquidneck Island, we call it. She's near the water. You can walk to the beach. She's down to, I think, low 8s. And I came in at 780 only. If she would do owner financing. I told her, you're not going to get that from conventional, but I can go that high if I get my terms. And that's how we cut— that's how we came to all this. You'll hear the, the live chat in or back out at the appointment that I put on the scripts channel. Okay, um, Nick, I put— because you and I didn't go over this yet, um, I put $839,900. You okay with that?

Uh, candidly, I haven't even looked at the numbers.

All right, let's go $840,000 so my brain can do easy math. So the price premium is $60,000. Uh, principal paydown— who can give me $1,670 times, uh, 60 months?

$100,200.

Okay, so therein lies the power. I'm only doing half the term here, guys, because what might we do later? Might we get this buyer to about the 3-year point And if they stayed on time and everything, and we gave them the carrot to stay on time, and they got their deposit up higher, might we owner finance them for the remainder of the terms? All kinds of things we could do. I'm just showing you a simple 60-month term on a deal that could go a lot, a lot longer than that. Uh, we got to give credit for the deposit here. Who can give me payday? Well, it's 1/10, $200.

$10,200.

Okay.

So if we had that and then I'll stop and we can take some questions. We got 50, we got 20 and 110, 200.

180 even.

180 even. When I got this at this stage, I said to my wife over the weekend, I said, this is a quarter of a million dollar deal. Now that's on a house being bought for 780, and that's if we don't get any extensions. And that's if we just don't even go full term, we'll get it up that high. I'll take a breather there. Does anyone have any questions on the basic structure of this? Because it's not uncommon. It's just the purchase price and the term are better and the monthly is better than the average deal. But any questions on this at all?

Anything?

And no down payment.

No down. Uh, okay, very important. No down payment, but we'll pay transfer tax for Rhode Island. For Rhode Island, this is in Little Compton, a town called Little Compton. And the transfer tax— I didn't even know this, she told me— as of 10/1 in Rhode Island, the transfer tax goes up a little bit. It's not obnoxious, but there's an increase as of 10/1. I said, well, we're not closing at 10/1. Uh, we put a closing date of 10/31. When she was texting me over the weekend, and I'm gonna try to take a screenshot of these texts, you guys, and put them in that thread within the scripts channel so you can see what she was saying to me. But in that thread, I said to her, please understand— among other things I said, please understand, if this keeps going on— because her, her attorney said, well, it's not a true promissory note, there's no interest, which is insane for him to even say that. Tells me he doesn't know what he's doing. But I said, if your attorney's not going to pay your Holding costs while you're in Florida. Um, let's just stick to what we agreed to. Find an attorney that'll support you in doing that. Also, um, from an interest standpoint, she kept pushing, pushing, pushing that, and I said, I can give you interest, the price is going to be dramatically lower, you're overpriced. So I just kept giving her the facts. You'll see that in the, um, in the text exchange. Um, Judy, good point, I missed that.

So you're gonna be in for like, what, $5,000, $7,000?

Um, maybe a little higher. There's another little tax in Little Compton. You know, some towns have like fire and water tax. Little Compton has some education thing, but let's call it 10%.

Yeah, that's a heck of a return.

Yeah, let's— even if it was 20%, it's okay, but it's not going to be 20% right now. Nick and I, unlike normal, might do a little work to this house first. Might. I got to— I got to bring Nick over there. It's dated. There's nothing wrong with it. The tenant kept it up, just didn't improve it. It's a very— it's an oversized 2-bedroom ranch. So we're also going to see if we should add a third. I checked with our realtor who does a lot in Rhode Island with us, and he said if this was a 3-bed, it would have been gone the second you put it on the market. So that's the only thing that's hurting her right now. Steve, is this subject to finding a third-party buyer, Chris, or you just— No, I definitely did not. No, she's a snowbird. She wants out. This is— to have a house on island— she's just off island, but to have a house around here is, um, not easy to find. Definitely not with these terms.

Okay. I don't—

if Nick and I don't feel it right away, I would not be concerned at all. $1,670 and it's all principal, so it's like a forced savings. I'm okay with it.

Okay.

No, we didn't do it, but we can push closing dates, you know. Did she keep title then?

You took title too?

No, no, this would be standard owner financing where we take title. You say eternal. Okay. Now I'll tell you guys that the attorney is pushing back on it, but my attorney Adam knows the attorney Eric very well, he said. So I messaged him before we went on a cruise and I said, well, I'm very surprised that he's clueless on telling him that it's not a promissory note. And he kiddingly wrote back to me, he's a liar. My attorney did. So he doesn't know what he's talking about. That's all. Uh, Van. Uh, yeah, how did you, uh, settle on the $840,000, uh, sold price? That's gonna be Nick and I deciding. Nick hasn't gone nuts with comps. I didn't want to bog him down.

I haven't even looked, uh, yeah, I haven't even looked at it, man.

So where I got it was there's nothing in Little Compton. I know you guys don't know the area, but my brother's been looking for a house here for a year. He just found one luckily last, last week, but In like 6 surrounding towns, it's tough to find a house, let alone find one on terms. I'm usually going way off island to get a house. So, um, I don't think we're gonna have a problem anywhere in the 8s. Nick might say $829,900. It doesn't matter. It's gonna be a great deal either way, you know. Uh, frankly, if it was $799,000, this is a killer deal, right? Because you get the principal paydown. So I almost don't care. Once I get a P&S, then I'll have Nick spend some time What else, guys or coaches? Anything that— like Judy brought up something I forgot to say. So anything that you can think of? The timeframe from lead to appointment is in the, um, is in Slack. I don't know, it's probably because of my schedule, it's probably a month. It was— it could have been a week or two. She, um, has grandkids and the holiday was in there and we just went back and forth on schedules. But she was ready to meet me after the first or second call. We just played phone tag.

What does it look like, your timing for closing, Chris?

I put 10/31, but in that texting— sorry, I got off tangent, didn't finish that statement on that— in that texting back and forth, I said, please understand, if this is not signed this week, no hurry, I'm not pressuring you, I don't care, but it's going to push the closing to November. I know you want to leave. That's what I said, because I'm playing on the fact that she's like, I'm done, I'm done. This house was her parents' years ago, and inside hasn't changed much, but it was in the family for years and she just wants to be done with it. If she lucks out and she does get a cash offer, she'll probably take a lot less at this point. She's spent. But if not, we'll get it locked up. And either way, I'm not attached to it, right?

I— my feeling— I haven't told you this, Dad, but my feeling, um, with her saying she has an offer— her attorney told her to say she has an offer.

I don't think she has an offer. Yeah, and her financial advisor told her she might want to get interest. I said, that's fine, 100% fine. You let me know if you might— if you change your mind. I'll send you guys the texting because I think it's rather comical, the texting that's going back and forth. And please understand, the texting is only because I've met her in person. She's a texter and we have a good, decent relationship now. The texting and negotiating does not go on prior to a meeting. In my opinion.

You have a question, Chris.

Uh, sorry about that. Preston, how you doing, buddy? Doing all right, doing all right. Um, I know it's a long way out, but, um, you had mentioned on exit you may consider, uh, owner financing, and I'm wondering what scenario would you not include that as a, as a strategy for exit?

Yeah.

Um, let me say, let me say what I would include, and I think it'll get rid of the rest of that, what I wouldn't. Um, so Nick and I hypothetically would have a buyer's meeting. Let's just say Judy was our buyer. Judy already reviewed all the videos, what rent-to-own is. Judy already thinks that she's gonna have to get eventually get a loan and fix her credit or have seasoning if she has her own business. So she's in that mindset. She comes in with me, with me and Nick, and if we like her and we end up accepting her for all the other criteria for rent-to-own We then say, hey, good news. If you can get your deposit up to 20% over time, no hurry. And if you do not, do not miss one of the scheduled payments for 12 months, we would consider owner financing you so you can avoid going to the bank and the underwriting and the garbage fees and all that. Because that's, that's, that's an issue right now for buyers. That's why deals are dying. The latest stat was last week saying 15% of buyers are backing out of the table. just because of the exorbitant fees, not because the loan got squished. So we would tell them that and then say, then we would owner finance you. Uh, with the rates today and us having a 0%, we could finance someone at like 4.5%, 5%. Why would they ever want to refi us, right?

Yeah, could I say this? So, uh, Preston, the, um, the other, the other way we would owner finance someone right away is if they have Over $200,000 down.

Oh, day one. Yeah, yeah, gladly. Um, so does that help, Preston?

Yes, thank you.

What kind of term would you owner finance for?

Well, I wouldn't want to be past our term. So if it was— so they, so they get to their goal and Nick and I fell in love with them and all the deposits were there and like everything was perfect, right? In the perfect world. And 2 years in, we say we can owner finance them. And we have 8 left. I'd want to owner finance them for like 6 or 7, probably 7, because we have full control. And if they screw up, we're fine. We own the— they— we— it's like we're a bank, you know? Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that. And you guys start playing with those numbers. I just did 6 months rent to own. You start playing with, you know, 6 more years or 5 more years or 4 more years, 3 more years even. And then you add the delta of 0% to 5%, let's say, and we gave them a great deal. It's fair. It's a win-win. You got a 5% interest rate now accumulating every single month in addition to the extra principal. So, the delta on that's huge.

And they win too, Chris, because, well, I shouldn't say they, it's me. I win too because You know, it would have maybe taken me longer to go to the bank. I may have the money, but yet, you know, my credit blip or whatever was preventing me from doing it to begin with. And it's a better rate, and I'm gonna own it.

Sorry, Judy, go ahead.

And, and I'm gonna own it. Yep, you're owner financing me sooner, so those payments are actually going to work for me.

Yeah, Avi has the same deal. We deal structured at the last, uh, boot camp. He has a 10-year owner financing deal. It's a great deal. So just so you know, so these aren't like anomalies. You can find them if— what if you're in the trenches every day? They come about. I didn't do anything special. I called an MJ lead back. She just happened to say, hey, this is a good one. It's a priority, but just a regular lead for her. So you're going to run into them if you do enough. You're going to run into these free and clear, and you're going to sniff out the motivation and be able to help, truly be able to help.