In this Deal Structure Sunday episode, Chris Prefontaine walks sellers through three creative‑financing exit strategies for a property that isn’t selling on the open market. He first establishes a baseline by calculating the net proceeds from a conventional sale of a $300,000 house with a $200,000 mortgage, showing the seller would walk away with roughly $76,000 after commissions and closing costs. He then presents two alternative structures: (1) a sandwich lease‑purchase (often called a lease‑purchase in Texas) where the investor contracts with the seller, pays the seller’s equity ($100,000) over a 36‑month term while covering maintenance and expenses, and later finds a tenant‑buyer; and (2) an assign‑out (sign‑out) where the investor finds a qualified tenant‑buyer, splits the buyer’s down‑payment with the seller, assigns the buyer’s contract back to the seller, and the seller captures the full purchase price, principal pay‑down, and cash‑flow spread, resulting in about $113,500 plus ongoing cash flow. Throughout, Chris emphasizes that creative financing solves a seller’s problem rather than “convincing” them, notes the 36‑month cap to preserve primary‑residence capital‑gains exclusion, and provides legal/ethical caveats. He concludes by promoting his Smart Real Estate Coach resources and the 3 Paydays Mastery course, offering a 50 % discount code.
Chapters
All right guys, on this Deal Structure Sunday, I'm going to talk about exactly what and how I outline for a seller, literally with 3 columns, when they are in the bucket of, hey, I can wait for my equity if I got more money, or they're not selling but they can wait for their equity. Because let me just review real quickly here. What are we doing in creative financing? What are we doing? We're not convincing. So many people say to me, yeah, but how do you convince them to not take money down or wait? We're not. We're solving a problem, or sometimes that's financial, or helping them achieve something the market's not. And sometimes that's like a free and clear seller going, I'm okay financially, but the market won't bring me this much and the market won't bring me a nice owner financing deal, for example. So solve a problem or help them accomplish something the market's not. Okay. Now with that as a backdrop, the deal I'm going to show you assumes the seller said, yes, I'm open to hearing about my options. I could wait in theory for my equity. Okay. So I'm going to— I rounded these numbers here on a recent deal, but what I want you to think about is a house conventionally selling versus A sandwich lease or a lease purchase. Now, vernacular, sandwich lease. Can you do that in Texas? No, that's the only place you can't, but that's what we're talking about with a lease purchase. So this is me presenting to the seller their options. And then the last one is AO, or it's called a sign-out, where we procure the same tenant buyer and we take that package with the tenant buyer that's already signed and qualified, and we assign that tenant buyer to the seller. That's an assign-out. I don't want to go too deep into vernacular. What I want to accomplish. Today for you is simple, simple math for a seller who has time. This is a no-brainer. This is why we had some months when I got back into the trenches and had to really start making money like I needed water. This is why these work so well, these types of presentations, literally on a piece of paper. Okay, so let's do it. Let's say they were worth— the house is worth— it was on the market for $300,000. And it didn't sell. Okay. And it was an expired, or you could go with, they're thinking about going conventional and we're going to show them why it's crazy to go conventional if you could wait. Okay. Conventional market. Let's go further and say this seller owes $200,000. Okay. Conventional sale. What happens is, and I tell this to them, so what I'm writing and what I'm saying to you is how I speak it to the seller. Okay, Mr. and Mrs. Seller, you're going to go on the market for $300,000. Your market's getting around 97% of ask right now. Now you can, you can check your stats in your area, check with ChatGPT, check with Google, you'll find out. But I use that a lot, 97, 99.5%. If you sold, Mr. and Mrs. Seller, especially if they're expired, you'd be down to around $291,000. Then you got to pay a commission. I'm going to be conservative and say they charge you 5%. That's $276,450. Okay. That's what they're down to after they pay the commission and the haggle on price. Okay. Now what are they going to do? They got to pay off this mortgage. So they're left with $76,450 before paying closing costs. But with the sandwich lease, they're going to pay their own closing costs also, as well as the assign out. So I'm not going to factor that in. It'd be the same for all of them. So their option is go conventional, sell now, get their $75,000 or $76,000, right? Okay. Then I said, all right, I have 2 options with you. One is a sandwich lease where I'm going to step in the middle of this. I'm going to contract with you with a lease purchase agreement that says on or before a set date, we'll use 36 months for our discussion today, which is quite common. I'm going to pay you out the equity that you would have got. If you sold today without fees and other things. And sorry, realtors. I was a realtor for years. I was a broker-owner. But the fact is, if you're looking out for the best interests of your client, you should learn how to do this and you should understand the differences here. Okay? Because this is what you're up against. Creative financing is more in demand now than ever, right now. So here's how it looks on a sandwich lease. They say, I say to them, okay, you were looking for $300,000. You owe $200,000. So if you didn't have fees and not haggling on price, I'm going to, on or before 36 months, lock in your $100,000. In the meantime, I'm going to pay all your expenses, all your maintenance, all your upkeep. Why do I tell them that? Because I'm passing that on to my tenant buyer. Real simple. Okay. Now I make the deal, especially if I'm brand new, contingent upon me finding my tenant buyer. Gives me a marketing period of 60, 90, 120 days? Yes, they do that. Okay. So on this deal, they're just sitting on the sidelines waiting for their $100 grand while we go out and collect our payday 1, our payday 2, and our payday 3. Now you can look at the other deals on this, uh, this PlayStation here for the Deal Structure Sundays, and you can see how the paydays work. For this example, I'm more Focus today on how do I say this to a seller and how obvious it is that we don't convince. We just show them the math, pure math. Okay. Now, uh, let's look so far where we are. They can sell conventionally, $76,450. They can wait on or before 36 months. It might be 2 years and they can get their $100 grand. By the way, side note, why do we say on or before 36 months? Most people are dealing with this as their primary residence, not all, but most. If it's their primary residence, to keep their exclusion of the capital gains, they have to have lived in that house for 2 out of 5 years. Look back, right? I don't want to get too deep here. I'm not an accountant. I'm not an attorney. I'm just giving you basics. So if we go past 36 months and if they had a bunch of equity that was— sorry, a bunch of profit that was exposed to capital gains. Then we're putting them in a bad spot unless we talk about it with them. So morally and ethically, that's why we stay under 36 months typically. Okay. On a grand. Now the AO option, it takes this scenario. So in other words, in this scenario, I go out and find my own buyer and I'm pretty much telling them on before 36 months they're going to cash out. Why? Because my buyer is going to go with their mortgage and my agreement is going to safeguard me on all fronts. But it's going to also protect the seller to get their $100 grand. Okay. And by the way, another side note, our agreements have been worked and tweaked and adjusted and perfected since 2013, 2012. That's a long time. You're not going to find the agreements like we use and the checklist that we use at your fingertips anywhere else. Okay. Yes, I'm a little biased, but it's a fact. Okay. This option says I'll find my same buyer here. But instead of me staying in the middle, Mr. and Mrs. Seller, you're not sitting on the sidelines. You're actually dealing with the tenant buyer if anything comes up. If anything comes up, we ask for 36 months here because we're pretty much telling you that we'll get this done within 36 months. Our buyer's probably going to be earlier. This option, the assign out, works great for them if A, they want a down payment. You're going to see why they don't get it here. I keep all that. It's my risk. B, they want a shorter timeframe. Why can I give them a shorter timeframe when I'm assigning the buyer back to them if it's the same type of buyer here? Because in this scenario, if the buyer defaults, I need time to pivot. Most can get qualified 18 to 24 months if we push them and we have a huge success rate. But what if they have a life event? Well, I need time to pivot, so I give them on before 36. Whereas in this one, I'm assigning the buyer back to them. And it's going to be an 18-month term or 24 months. And if the buyer defaults, they're going to call me to redo it, or they're going to sell it conventionally, whatever they want to do. The fact is I'm not the middle guaranteeing it. That's the big difference. Let's do the math. If they want a minimum of $300,000, I'm going to mark it up to $330,000. And for you engineer brains, no, it's not just 10%. I'm just giving you an example. It's pretty close to what we might do. Might go higher. We'd have to look at comps. You know, is this an aggressive number or, you know, we already pushing it? I don't know. I'm just giving you this example is the one we did. They still have the same mortgage, right? So I go out and I sell this to my tenant buyer for $330,000. What happens next? Well, step 1, tenant buyer puts down $33,000. We're going to be somewhere between 7 and 10. Sometimes you, you luck out and get more, but that's pretty standard. $33,000. Now, now this is where the seller gets excited. So I say to them, but Mr. or Mrs. Seller, we're going to each cut that and we're going to split that. So we're going to each get $16,500. Okay. $16,500 each. So there's your only payday within a sign out. That's the sad news. You got $16,500, but you're gone. You don't capture payday 2, you don't capture payday 3. They benefit from all that. So I explained that and I said, look, you do nothing and you get your $100 here. But in this one, you make more money, but I'm out. I'll help you. You call me. I'm not going to desert you, but I'm out. Okay. So 2, step 2 here. What happens at financing? What do I mean financing? Meaning I go put John and Mary in this house as a tenant buyer. I get all the paperwork signed up with the attorney, everything signed, notarized. I then assigned that package back to the seller. So now John and Mary are dealing with the seller directly. Okay. They go get their financing because they worked with that third party and they got qualified. That's the only way we accepted them. We've set people up to win, not to fail. So I have financing. What do they owe? The seller, they owe the seller $330,000 minus their $33,000 deposit. If I math this correct, we're at $297,000, right? $297,000. But the seller captured already $16,500, didn't they? I took the other $16,500. They get $16,500. So that's $313,500. Okay. That's where the seller is right now. $313,500. Now they owe the same mortgage, don't they? They owe the $200 grand. So after you take away the $200 grand, what is the seller left with here in this scenario? $113,500. Is that better than $76,450? Yep. Is it better than $100,000? Yeah. See how it climbs here? They're going to capture $113,500. You can read my chicken scratch. That's pretty good. What else does the seller get though? So it gets even more exciting for them. They get the cash flow, right? See over here, we're going to pick up the cash flow difference between what we're paying on their mortgage and what the tenant buyer is paying. We get that delta. That's our payday too. And they locked in their $100,000, which means when we cash this deal out, is the mortgage going to be $200,000 anymore? No, it's going to be lower. So we capture all the principal paydown. In this deal, not only does the seller get $113,500 in what we call the AO, they get all the monthly spread. They get all the principal paydown on their own loan. This deal is a lot more lucrative than just the $113,500. And to cap it off, if it's an investment property for them, they also still depreciate it. That goes with this one too. That's why I didn't highlight that. Not sure where to get started? Go to smartrealestatecoach.com/getstarted. Get going 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. If you'd like to dive into not just like how these deals work, but where do we find the leads? How does this look in real life? When the market pivots, what kind of leads do you work? What do you say to sellers? What does not just an AO and a sandwich lease look like, but what is a sub-to deal and an owner financing deal? Super exciting. Free and clear, especially. What do those look like for 3 paydays? How do we get to an average of $45,000 to $350,000 all 3 paydays when it's a 3-payday? This is a 1-payday. Well, all of that is in, uh, 3 Paydays Mastery Course. Now I, look, I could care less if you jump through the course, but I'm telling you, if anything even remotely gets you excited here, I would encourage you to go through the course. And as a gift for watching the Deal Structure Sundays, I'll give you a 50% off coupon. Here's what you do. Go to smartrealestatecoach.com/qls. That's smartrealestatecoach.com/qls. And use this coupon code, TUBE, T-U-B-E. You're going to get 50% off that course. Guys, there is nothing, nothing as robust and complete and instructional And allowing you to take action than this 3 Paydays Mastery course that I'm offering you for half price. This is just a taste for what you can do. We're going to go deeper. I'll see you next week on the next Deal Structure Sunday.
