How a Mortgage Lender Structures Deals on Both Sides

This is Zach Beach, CEO of Smart Real Estate Coach. Welcome to another Deal Structure Sunday. In this particular video, we're actually going to walk you through how, if you're currently a mortgage lender, how to be able to actually get access to deal flow, both on the side of acquiring real estate deals and on the backside of actually providing these loans to these end buyers, as well as being a loan or originator, being a loan broker, you have placed yourself in the middle of so many different people, so many different lead sources, so many different types of people that are interested in both selling and acquiring more real estate. We have a gentleman. He is one of our associates. Located out of Washington State. We have Tru along with his amazing daughter here today, and we're going to walk through his current real estate transaction. But before we go do that, Tru, if you could tell us a little bit about yourself, even what you currently do for a living.

Yeah. So I'm in mortgage for 10 years and I've been closing loans like 110 deals a year. But I'm getting tired of doing this because I handle so many things going on. And I think getting into the Wicked Smart team, it's helped me grow and learn a lot of stuff. And it's exactly what I try to do. I transition myself from a loan originator to a real investor.

I love it. I love it. And did you invest in any real estate previously before you started doing crypto?

Yes, I have 2 rentals and 1 primary home.

Oh, got it. Okay. And then you're located up in like the Seattle area, correct?

Correct.

Okay, that's awesome. And out of curiosity, how did you originally get connected with us?

So I go to Rips. Real Estate in Puget Sound. Real Estate Association of Puget Sound.

Yep. Got it. Yeah. Amazing group up there. We have some extremely successful associates, and most people would say that it'd be challenging to do deals in like that type of environment in Seattle. High-priced homes typically. What's your experience been so far in doing real estate transactions up in the Washington area?

So basically this is my first real investing deals, right? Because back then I just buy whatever available on market.

Yeah.

Yeah. But I don't really know how to structure deals and these kinds of things.

Yeah.

Makes perfect sense.

But after I go to your workshop and learn about 3 Paydays, now I've started applying, but yeah, there's a lot of learning.

Yeah, for sure. No, I'm sure we didn't have your coach who helped you structure this, Rick, on here, but he will mention him throughout this, this deal structure as well. And we're actually going to do things a little bit differently this time. We're actually going to pull up the contract. So the deal that we're talking about here is a— I believe that you said it was a previous client. So tell us a little bit of background about this current deal, how you found it. And then also, I believe that you're currently working with her as well on helping her execute another property. Maybe explain that and how being a mortgage lender has been able to kind of set you in the middle between those deals.

So my client, she is trying to buy a new property, and I tell her the current property that you own is pretty hard to sell, being a 1-bedroom, 1-bathroom. And a condo. And condo is very slow in Washington right now. So she put the house on market for 45 days and finding nothing. And even if she put on market, she's going to net negative, not zero, but net negative.

Yeah.

So I tell her, here's the win-win. You go ahead and buy the new property. And I get you her preapproval. And once you're in the new property, we start exercising the lease contract. We start looking for buyers for you, right? And then you still net at least like $30K, something like that. And yeah, it's a win-win for me, for her, and hopefully we can find buyers soon.

No, I love that. So you're able to help a current client that is looking for another property she can't execute. The current deal that— or traditionally right now. So now you're like, hey, look, I have these other strategies to be able to help you be able to move on to that next deal or that next home that you're looking for. I'll structure a lease purchase agreement with you over here. What we're describing is we're doing an AO, which is an assignment of a lease purchase agreement, which is going to allow her to move on and be able to get more profits because Repeating what you said, if she sold traditionally, even if she even had the opportunity to sell traditionally because the condo market's tough in Seattle right now, that she was actually going to come out of pocket or negative. So you're able to create a massive win for her. You're able to get an investment that's going to help you make some profits in this deal, and she's able to get a pre-approval. So simply by having these additional strategies, you're able to execute on a deal that you might not have been able to. Both from a loan origination standpoint, right, as a loan broker and as an investor. So that's really cool. You're putting yourself in this position. So let's walk through the current agreement here. This is what an AO agreement looks like. So to walk you through from start to finish, so an AO is basically a lease purchase, but instead of you staying in the middle, Right. And managing both having a lease purchase agreement with the buyer and a lease purchase agreement with the seller, you're simply going to do the entire process just like a sandwich lease or just like a lease purchase. But at the very last minute, you're going to assign the buyer to the seller, and then you're going to collect some money that's paid for the buyer as your fee. And then you're going to go ahead and step out of the deal. So here's what this looked like. So The original, the purchase price that you're agreeing to with the seller is $214,883. Do you have any recollection of like how you guys arrived at that price?

So I run some comps and I go through my mentor, Rick.

Yep.

And then we go over the comps and then we figure out this is the correct number.

Okay. So this is based upon like current properties that are selling. Got it. Yeah. And then, then the second piece of this deal, right? You have the ability to market the property for the next 90 days. And really what this piece of paper does is gives you equitable interest in this property, which allows you to go find a tenant buyer without ownership. Now we have 90 days. So as soon as we have the buyer, then the— we'll go ahead and start the process. The expiration on this, right? If you don't find a tenant buyer within that 90 days, then the contract's null and void. Here's what this then broke down. So we bought it for $214,883. We're going to sell it for $235,900. The expectation is that we're going to collect roughly $23,590, which is 10%, which is that on number 2. So that's the total down payment. That will include both True's fee and a portion of the down payment to the seller. We're also marketing the property for rent at $1,700, which True is going to get access to the $1,700, which means that's going to be part of his compensation. The assignment fee expected to True based on the $23,000 down, he actually— him and Rick, his coach, negotiated and they're getting 70% of the down payment, total down payment. So that's $16,513. And then the portion, the remaining portion to the seller is going to be the other 30%, which is $7,077. But here's really, here's the cool spot, right? So the seller in this circumstance is going to net $219,000, which is above and beyond what you guys originally agreed to. This is why this is so impactful for sellers, because they're getting a great price. They're getting some money up front. They're getting a buyer in the house so they don't have to be a landlord, right? Dealing with tenants, toilets, and trash. So they're going to start getting cash flow and they're getting the depreciation still on the asset and they're getting the principal paydown on the original debt, which is really what True was stating originally, which is a win-win-win. He was able to help the seller. Get a new loan. He's able to get profits in this and he's able to help a buyer that can't qualify for a bank loan get through this process. And then, of course, at the end, Shru, my guess is that you may have the opportunity to provide that bank loan to that tenant buyer once they go qualify. Would you, would you agree?

Yes, for sure. I get a loan for the seller. I get a loan for the buyer.

Yeah. And you get paid for finding the buyer right throughout that process. So—

And my seller is really happy.

Yeah, I love this. What's really cool for being a mortgage lender, right, is that you have the ability to create future profits for yourself by simply placing tenant buyers in the house because you're the one that's going to help them qualify for that bank loan, which means you're going to get a piece of getting the mortgage, getting the mortgage in place, plus you're getting the exit on the sale as well during that timeframe. So you're actually able to double dip per se in these real estate deals because you're able to provide multiple loans. You have a really cool opportunity here because you also have leverage. Like just talking about this, you also have leverage where you may be able to help sellers be able to get into other properties as well if one of their concerns is they need to get another loan. My guess is you can help them do so, just like you helped this particular person as well in certain circumstances. So you almost have like 3 income streams in addition to your 3 paydays on these strategies. Was that your original intent when you started to look at selling on rent to own and doing creative deals?

Well, originally, I don't think that's possible. I have no idea what I'm doing. Yeah, but yeah, now, now I see the whole picture. Pretty much.

Yeah. What's like a learning, maybe an aha now that you've kind of made it through one contract and maybe it's not enough yet where you're like, you know, it's all clicking, but any like ahas or anything else that maybe you, some insight now that you've gotten your first property under agreement and you're working through the process?

So I try cold call. It's really tough.

Okay.

But talk with the buyer, talk with my borrower. Very easy. Whatever I say, they think it's correct. Even I don't learn the script at all. I don't use the script at all. It still works because they have trust built in, right?

Yep, for sure. Well, what's really cool, and this is, I'm glad you brought this up, is we all have skill sets, networks, you know, superpowers that we already have that we can bring to this business. And what you're doing is you're like, yep, I understand that communicating with sellers and calling on expireds, FSBOs, things like that is a part of the business. So still working on that communication, but I also have a network of people that I can tap into immediately to get amazing results. And you then were able to do so because you already have trust and leverage in that industry. What is your— I'm just curious, like, and I have my own predictions, but How many, like, real estate transactions do you think you do per year just leveraging that network?

Oh, you mean for the creative financing or just normal mortgage deals?

Well, I'm saying like your mortgage lending network, like if you look at your deal flow from there, where do you see the opportunity where you can and how many deals you think you can put together just simply tapping into that network?

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 think probably at least 2 deals a month.

That's amazing.

So, because I do see my client cannot sell their house and still want to move to a new property very often. Yeah. So deal like this is similar to this. There's There's a lot, but yeah, I need to do more calls and then more connections.

So, well, 2 deals a month, I mean, that's a pretty significant impact considering most deals, even just use yours. I mean, that's $18,000 you're going to take home on that particular deal. 2 deals a month, I mean, that's anywhere from $30K to $40K without even being, without even fully investing yet, just using that strategy. That's pretty significant impact. There as well. So the, so you stumbled into, I should, I'll say this lightly, into a really cool business model that you can create multiple income streams from in a market that people are having challenges selling. Out of curiosity, I know you know these numbers. What is the, what's like the default rate In regards to people closing right now, the fractured closings, like people that want to move and they think that they already sold but then can't sell because somebody fell through financing. Do you have that number?

I don't have that number on top of my head right now.

I think it's— so I'm guesstimating, but I believe it's somewhere around like 30-plus percent. I could be low on that. So even if that's the case, you can save 30, 40, 50% of people's deals That they still want to move, but have that fractured closing. So that's another potential opportunity for you there as well.

But I know for a fact that there's a lot of expired listings. I mean, too much to handle.

Yeah, that's for sure.

I love that.

We're going to be helping you build a pretty significant team there and here in the future and help you reach those goals. Any Any additional thoughts or final thoughts here for, you know, people trying to get involved in creative financing or even lenders right now that are looking for additional income strategies and getting on the investment side?

I think it's not easy because you need to build brand and you need to build trust. And building trust, you need to understand almost everything. If they ask questions, you need to confidently tell them the light in the end of the tunnel, right? Otherwise, of course, they're going to have doubt, right?

Sure.

So yeah, a lot of learning so far. I'm still learning.

No, extremely true. How about, has it been helpful to have your coach on the line with you in order to bring that confidence and that credibility Day one, so you don't have to know everything.

Yeah, I don't think I can build everything on my own at all. Just simply buy REI Black Book. I thought it's just a subscription and optional, but no, it's not an optional. It's a must, right?

For sure.

And the coach is a must, of course, because deal structure, figure out all the numbers and everything. I don't, I I don't think I can do on my own. Yeah.

Well, I'm super excited for you, Tru, because now you have the right systems, you have the right people behind you. You got your first deal underneath your belt right now. You have an amazing business model that I can't even tap into because I'm not a mortgage lender. So I'm super excited for your success here. I appreciate you hopping on a Deal Structure Sunday and continuing to provide some motivation, inspiration, and some proof. of the current deals that you're doing out there in Seattle. If you guys are listening right now and you're interested in learning more about creative financing, more about how we help people create these types of repayment structure and buy deals creatively, let's go ahead and book a strategy call. There's a link down in the show notes. Everybody have an awesome rest of your day. Thanks again, True, and look forward to your next deal. See you guys.

Thank you.