Creative Deal Structure Breakdown | Win-Win Terms with a Tired Landlord

Hey there, Zachary Beach, CEO of Smart Real Estate Coach. Welcome to another Deal Structure Sunday. We bring on an amazing associate coming from Phoenix, Arizona. And what we're going to walk through today is actually his first deal, but more importantly, how he was able to handle and manage a seller that ghosted him. And then we ended up coming back and getting an amazing about $65,000 to $70,000 Real estate transaction. Now this is going to be Peter's first deal, so this is going to be absolutely amazing as we walk through this at this Deal Structure Sunday. Now if this is the first time that you've been a part of these Deal Structure Sundays, make sure you go ahead and click the subscribe button because each and every week we walk you through a brand new deal in a different part of the country. from somebody just like yourself. Peter, welcome to Deal Structure Sunday.

Hey, thanks, Zach. Appreciate the invitation and glad that I'm here.

Well, you earned the invitation. I mean, the people that get on Deal Structure Sundays are those associates that are doing real estate deals, because if not, then we would have nothing to talk about.

That's for sure. Yeah, thank you.

I love it. I love it. And Peter, actually, we got to spend some time together down in Arizona when I was speaking at the Arizona REIA, and I got to openly have you communicate about this deal as well. So it's amazing when— and you could tell me how you felt, but it's amazing how when you're actually sitting in a group of investors and you're— you've done a deal or you're in the process of doing a deal, I'm sure it was a big confidence boost for you.

Oh, definitely. Yeah, it was on both sides, right? Um, it was good because that brings credibility to, to what you were sharing with the, the whole audience. And also, you know, a lot of people asking me for details afterwards, right? Uh, because they were interested and, and they were hungry for, okay, real experience. Hey, is it real? Or yeah, how, how do you do it, et cetera, right?

So I listen to that. Always, always there to support and help build somebody like yourself as an authority in the markets in which we go down and do presentations. So super excited for you. I'd love to hear a little bit more about your story and your journey in general. So maybe catch everybody up here.

Sure.

On our YouTube channel, you know who you are, where you live, and maybe your real estate journey so far.

Yeah, yeah, yeah. So, uh, my background is computer science, and that's what I study. I am from Costa Rica, so that's what I study in Costa Rica. I worked for a technology company there for, I don't know, 18 years, and then they closed a portion of the business where I was involved in. And so they offered me a position in different places, and I went to Oregon. So 10 years ago, they brought me here, then they moved me to Arizona a couple of years after that. And I've been here in Arizona for 8 years, I think. So because I moved from Costa Rica to here, I was forced to become a landlord. And that might make my first experience in real estate because I didn't sell the house in Costa Rica. I kept the house and I rented it. So that's the initial steps in real estate. I always wanted to do something else. I've been reading a lot, trying to figure out things. Actually, I was in contact with you guys maybe a year prior joining the formal, because I was very hesitant about everything, right? Doubting if this is my path, et cetera. And then eventually, you know, I feel more comfortable and I saw light at the end of the tunnel when I start being exposed to your program. Because I saw, okay, there's coaches helping you on the way. There's a lot of real-time experience that you can start learning from. kinds of hands-on experience, right? So I decided, okay, this is the one. At the same time, the company where I was working for is not in a good shape. So they offered a good package for exit and I decided to take it. And here I am trying to do real estate full-time. I have a couple of other things to do as well, but my main time is now going into real estate.

What I mean, there's a million different real estate niches out there, so I'm just curious, what made you choose to spend now almost like your secondary career in creative financing? Like, what made you decide that was the niche?

Yeah, I'll try. I was trying other, other options. Actually, I get into a couple of different other mentorships with other approaches like multifamily, investments and then long-term rentals, et cetera, right? Which is great. I mean, but it's more a long-term approach, right? I mean, nothing is quick and easy, right? You still need to do investment, but I'm an old guy already. I came to US late in my life, so my 401 is not good. for my age. So I told my wife, we need to do something more radical to catch up or—

Yeah.

Yeah, to catch up. So yeah, that's why I decided, okay, this guy seems to have something that is not short-term, don't— it's not a get rich quick, but it's more You know, approachable for my time span, I would say. Yeah.

And you, I know you brought up being skeptical. I think I remember actually speaking to you a year or two ago. Then you came and you attended our In the Trenches boot camp where you like, you fly up to Newport, you had to spend basically 3 days with us. I'm curious on how that made you feel from a confidence perspective and maybe how that affected your ability to go out there and get a real estate deal within a relatively short period of time.

Yeah. Wow. No, that's definitely a game changer in the sense that you are right there in a room with other people in my position, meaning learning, but with you, with Chris, and in this case, Rick was there, my coach. So people would experience actually making calls, right? Not only bringing you the whole perspective of how the process works from A to Z, but also, you know, making calls, real calls to sellers, right? So that was a great approach or is a great approach because I can see, oh, okay, this is hard, But these guys are doing it with you, right? Or with me in this case, so I can learn faster.

Awesome. And then you go ahead and you take off from that event, and it's within a relatively short period of time that you go ahead and get your first deal under contract because I remember sitting in the next, in the Transitions Bootcamp, because we host it every 6 weeks. If you want to find out more information about that, we'll include the link here. But then Rick is on the call. Rick, one of our coaches from New Hampshire, who's obviously working with you, Peter, and he couldn't be on this call right now, this recording, because he has some other people he needs to work with. And he's literally live in front of 20 people working the seller and getting it under agreement with you. So maybe tell us how that experience went with that 3-way phone call with Rick and Getting to the— yeah, because then we're going to dive into this deal in a minute.

Exactly. Exactly. So the seller of this house in particular for this deal, right? So I was initially, we contacted him, he was open to work with us. It was funny because he thought that I was calling to rent the place because he, this is a deal that we're going to talk about, right? It was an expire, so he put it in the market for rent instead. And when I called him, he was kind of thinking that my intent was to rent the place. But anyway, so in a short story, I have to talk to this guy multiple times. Once we present the offer, still he disappeared for 4 or 5 weeks. I keep contacting him and eventually he said, no, definitely out of all my options, you guys are the ones that I want to work with. But he was trying to get a bigger down payment and a bigger interest rate, right? So I told Rick, hey, I need your help to talk to this guy again. And yeah, we called the guy. To be honest, I didn't know we were live on the Trenches Bootcamp. I thought it was only Rick and me, right? But yeah, it was a great, great story because other people was able to listen the negotiation point, right? And Rick was a master on negotiations. So we were able to keep the deal as initially was designed. And he understood why additional numbers were not working for us. So yeah, it was great.

Yeah, walk us through the timeline too, because I know when we were talking offline, you were like, hey, I spoke to this guy and then he like disappeared. So maybe walk us through the timeline because it happens. You didn't give up, and that's why you're able to sit here and talk about this deal and get it, you know, and start to get some profits in your pocket here soon.

Yeah, yeah, yeah. So yeah, as I mentioned, right, when I called him, he thought I was calling him to rent the place. But when I was asking questions, he was replying, I feel, oh, something is not right here. And I told him, no, no, I want to purchase the place, right? And that's where we realized that we were off in the conversation. But yeah, so he was open, right? And so I pulled Rick A couple days after to go deeper into the options that we can present for him. And he said, yeah, give me some numbers, right? And that's what we did. We presented some numbers. He was honest in the sense that he doesn't want to become a landlord because he has been doing that for a long time and he doesn't want to continue. And he also was honest in the sense that he said, I have some investors with cash, right? So he was considering us, he was considering other options. I wait like couple weeks and contact him again just to see where he was. He was kind of very slow. And eventually I think I sent him every week, I sent him a little text just to see where he at, he were, et cetera. I don't know, maybe 5 weeks after, that's where he reply and he said, yeah, guys, I want to work with you. The other deals are not good for me, et cetera. You can help me with the landlord part, et cetera, right? And that's where we start landing the plane.

At any point in time, did you think you may have lost this deal?

Oh, definitely, definitely, right? I mean, in the first 2 weeks where he was not, you know, responding at all after the offer. I thought, okay, yeah, the guy just select another option, right? But yeah, no, definitely. I told my wife, right? I think it was a good one, but we lost it, right?

I mean, it happens, right? That's why you keep working more and more your deals and To my understanding, you're working on another one right now that might be coming to fruition too. So maybe we'll have to have you back on.

Yep, yep, yep. We presented the option yesterday and they are ready to sign. Oh, I love it.

I love it. All right, well, we'll bring you guys, we'll bring you back for another one. All right, so this deal, it's in Phoenix, Arizona, right? Yep.

There's a small town called Peoria. Peoria. A bit north of Arizona, but yeah.

Awesome. So great market. So we end up going ahead and buying this property on owner financing. Is that correct?

Yes.

Okay. So this is the first time you've been watching our strategies or in Deal Structure Sunday, we'll actually include a master's class in the link below as well, where I'll actually walk you through all 3 of our strategy, our main strategies, and how we exit through rent-to-own. So as we look at this deal structure, We're going to walk through the type of deal it is, what the numbers may look like in regards to how we acquired it, and then how we go ahead and sell it on rent-to-own. So this is a seller financing deal, which means that instead of going to a bank loan, the seller is now going to be our bank. This was an expired listing. You go ahead and you buy it for $367,000 is the purchase price, correct?

Correct.

Yeah. Zero. So there's no mortgage on originally, so there's no debt. You go ahead and you sell it for $399,900. The mortgage that you put in place— this is what's interesting, and I'm glad that we're going to walk through this deal structure. So we get to payday 2, that's where things get interesting and that's where creativity comes into play. So we bought for $399,000 or Peter buys it for $399,000. We have some projected sales right now because we're still currently on the market. We're expecting around 10% of a down payment from our buyer. So our nonrefundable deposit is either going to be upfront or over time, about $39,000. We then agree to the seller as far as the seller financing to $1,613 monthly payment at 0% interest rate. So the seller is going to finance the entire property at 367 with a $1,613 interest only— I mean, principal only payment for 12 months. So I'm curious, walk us through this conversation where you guys are trying to decide what the monthly payment is, because originally you spoke about and said that the seller wanted more interest and stuff like that conversation. So walk us through that, how that conversation went.

Yeah. So again, this is my first deal and I have low arguments to discuss with this, but Rick, which is my coach, right? Mr. Abbiati. Yeah, he, when we were presenting the numbers, right? We showed him in order for us to, for this to work with, for us, there has to be some, something, some gains as well, right? And we did some numbers and this was the best option for the deal. And he understood Right, that we need to get something out of the deal as well. And yeah, and he agreed, definitely. And he was happy. I mean, because this is free and clear, so every single dollar is going into his pocket.

Oh, absolutely. So you have a seller who's going to be a tired landlord, wants to work with an investor, but wants his price. So throughout the process, Right. You guys were trying to find a win-win. So one of the wins was, okay, we'll get you a decent monthly payment, which is $1,613, but we need the first 12 months to be principal only. That way you as the investor, Peter, or anybody that's watching this, you as the investor now have the ability to pay down a significant amount of principal paydown in a short period of time, which in turn really is acting like a down payment for You're just utilizing the monthly payment to do so. Then after 12 months, in order to satisfy the, the investor or the seller, we then transition to the interest rate that he was hoping for, which is 5%.

Mm-hmm.

So what we do is we take the $1,613 and then we go ahead and transition and make the first amount of money be 5%, which is $1,386. And then the remaining leftover, so that way we don't have to mess with the monthly payment. The remaining leftover amount will then be principal. So it's not a true amortization, it's just interest first, then principal. So then the interest on the property then transitions to going from 0 to 5%. And now Peter is paying $1,386 in interest. So now the seller is is feeling more— is feeling happier now because now he's getting a nice interest rate on his deal moving forward. But Peter's happy because he gets to pay down a bunch of principal upfront. So what that then looks like is $1,613 is the monthly payment to the seller. Then we pay roughly the taxes are like $75 a month and then insurance, assume another $100. So our total out of pocket is somewhere around Like $1,800. So the payment from the buyer, what we're expecting is roughly $1,925. So that gives us a $137 cash flow per month. It's going to vary a bit based upon the projections, but $137 a month. So we'd make roughly throughout the course of time like $6,500 in cash flow. So not a huge amount of cash flow. But we're expecting a large deposit upfront, which makes this deal profitable. Now, what's interesting is what payday 3 starts to look like. We have our little mini investor with us now as well.

I see.

Said, my dad bought me this stuffed animal because of this real estate deal.

My daughter is here.

Love it. We have a future investor. I'm surprised my kids haven't popped in here yet either. All right. But this is where it gets interesting, right? Because of the transition of interest from 0% to 5%, this is what it starts to look like. So we bought it for $367,000, sold it for $399,000. So that means we had a premium of $32,000. I mean, we bought it for this price, sold it for higher. Our principal paydown looks like this. In the first 12 months, we have $19,356 of principal paydown. So that's what's really hammering down principal. And then it transitions to in the next 36 months because now we have $227 in principal paydown, $8,100. All in all, really good principal paydown. So we already collected $39,000. So we have roughly $20,000 on the back end when you get cashed out. So Peter's expecting $40K upfront, $6,500 over time, and then when the deal cashes out, another $20,000. That's a total of Roughly $67,000 on a short-term seller financing deal. And that doesn't include all of the benefits of, you know, writing off the interest or depreciation of this property as well. It's certainly an amazing opportunity to pull your education forward by working with Rick and getting this deal under agreement to then go ahead and sell it. Anything that I missed that as we were walking through this deal, Peter?

No, fantastic. I think you got it. Every number is right there.

And now that we're— so we're currently on the market and you've got your first deal under agreement. I'm just curious, like, now how is your confidence level? How is your approach now that you have your first property under contract?

It's fantastic, right? Because it's You know, one of the things that you guys preach a lot is trust the process, trust the process, trust the process, right? Because, you know, transitioning from a technology company where technology was the day-to-day to something radically different, right? Where you need to start, you know, talking to people, presenting, you know, solutions to them. I have a lot of doubts, right? Hey, am I doing this right? Built for this. And so being able to do a deal and even, I'm going to be very honest, right? My English level is not perfect and my structures sometimes are weird, right? Because I learned English when I was a grownup already. So I don't have all the words and the structures and the accent, et cetera. So that's a big frustration sometimes. And I was always thinking, hey, am I really going to be successful on this? And, you know, this deal gave me a boost, right? I'm able to do it. I have a proof, right? I have a proof already.

I love that.

I love it.

You're like a prime American dream, you know, story here, which is absolutely amazing. Just final question for you. You know, now that, you know, you're in the trenches getting deals done with us, you know, somebody's on the outside looking in. Any thoughts in regards to, you know, getting involved in creative financing or even potentially joining our community? 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.

I was hesitant, you know, by nature, I guess, or maybe risk-averse. I don't know. I need to dig a little bit deeper in myself. But yeah, I was hesitant. But now I think, hey, I should do this earlier in my life, right? Because of all the opportunities it presents itself. I mean, you're learning a new skill. Just because of that, that's enough, right? But there's a world of new opportunities on the skill that you learn, you know, talking to people, listening, and presenting solutions, right? So definitely, it's a good community. It's a great community because there's multiple people on the same route or on the same path, and you can learn from each other. You can ask questions. Someone has answers. And then the magic is that you have access to the coaches, right? And it's not that the coach is gonna tell you something for you to go and tell, right? The coach can be on the phone with you, and that makes a big difference, right?

Totally.

And so, yeah, this is a great way to learn.

Love it. There you have it. You got Peter coming, born in Costa Rica. Secondary language is now English. Getting his first creative financing deal and generating right around $70,000 on all 3 paydays. Certainly, if he can do it, you can do it for sure. If this is the first time you've been watching these Deal Structure Sundays, go ahead and make sure you click that subscribe button and go ahead and check the links below because we'll go over our 3 distinctive strategies How to buy cash without credit, without cash or banks, and how we create 3 payers in every single deal, which we do. Just go ahead and click the link below as well in those notes. And we look forward to seeing you at another Deal Structure Sunday next Sunday.