How a Rookie Landed a $74,000 Deposit on His First Deal

I'm Zach Beach, CEO of Smart Real Estate Coach. What an amazing first deal that our community member and associate Philip has. I'm going to introduce him in just a second. A $74,000 nonrefundable deposit for your first deal. What an absolute amazing first transaction. I'm telling you, those are things that absolutely builds the confidence. So this is the first time that you have jumped on to Smart Real Estate Coach YouTube channel. Make sure you go ahead and subscribe because these types of deals are happening in our community. Every single week, so you're going to want to go ahead and tap in. What we're going to be explaining here today is how Philip went ahead and purchased a property with no money down using a creative strategy known as a lease purchase, and then exiting to a rent-to-own buyer. We have been doing these types of transactions for well over a decade now. Actually, our community members have over a hundred. Plus years of experience when it comes to these creative financing deals, and this is the channel to go ahead and tap into when it comes to creative financing. So make sure you go ahead and subscribe. That way, each and every Sunday you receive these Deal Structure Sunday videos. All right, before we go ahead and get started, Philip, welcome. I have Philip here out of Connecticut, and we also have his coach Rick. These two structured this deal. But before we dive into the deal, Philip, why don't you go ahead and tell us who you are, what you've done in the past, what you currently do for a living, and then let's dive into your journey a bit.

All right, sure. Yeah. So my name's Philip Costanzo. I am from the New Haven, Connecticut area. I've been in sales literally my whole life, like retail sales, commission sales, that sort of thing. And I just at a live event that brought me to look for other sources of making money above and beyond what I was doing. I went to a CT RIA, saw Zach's presentation, grabbed the books and read them. And once I grasped a small inkling of what he was talking about, I said, all right, let me look into this. And I joined and I haven't looked back. I've just been more and more into it and excited about it as I went along.

I love it. I love it. So what do you currently do for a living, Philip? Isn't it like furniture sales or something? Go ahead. Yeah. Yep.

So commission, it's commission-only furniture sales.

The—

is it okay to say the company?

You don't have to say the company. It just— just giving people a little bit of background because, I mean, obviously if you have commission-only salespeople watching this particular video and now they're seeing your success in creative financing real estate, maybe you could just give some wise words to them that potentially want to make a transition in life. Yeah.

So I can speak to that big time. 21 years with this company, working weekends my entire life since I was 18. So one of the big factors was wanting to get out of the rat race of working every single weekend and spending more time with my family and family events. And I have a child, so wanting to go to things, her things and things that she wants me to bring her to. And besides the money part, it was really the freedom. I saw a path to enjoying my life and my family more.

Love it. Rick, let's have you hop in here. Maybe you can just say a little bit about who you are and then how it's been working with Phillip so far towards— we'll just focus on this specific real estate deal. I know you guys have other ones going on, but we'll focus on this one.

Yep. So I'm Rick Gabbiati, a certified coach with Smart Real Estate Coach, and I've been coaching since May of 2023. Joined the community in May of 2021. And, uh, obviously I've been working quite a bit with Philip, almost, almost daily, Phil, I believe, um, sometimes multiple times a day. Um, and he's been fantastic to work with, uh, hard charging and really going after it. And really excited that he got such a huge payday, one on his first deal. So he's got a lot of other things in the hopper now.

I love it.

I love it.

Okay, so paint us the picture. Tell us about this deal. Maybe even start from the beginning, like where you found the lead, what the type of conversation was like with the seller, and walk us through that process. And then I'll eventually pull up our deal structure board so we can go ahead and work through it so each and every person can see the numbers.

Yeah, sure. So spoke to him through My Plus Leads expired, and he had just taken it because he had a leak in the home. So he wasn't able to sell it for the price he wanted. And then he all of a sudden he had a leak so that he had to have fixed and just started the conversation then. And it was pretty good. He was open to it, which was nice, but he wanted money down like $100K and we got him all the way down to, I think like $50K. And he was just like, he wouldn't budge on that. So I just tabled it. And a month later, you know, he shows up in my follow-ups and I was at Deal Lab and Rick and I called him and just went through exactly what his options were because we do buy a few different ways, right? So we gave him all the different ways and After he was explained through Rick how the lease purchase works and what really sold it for the seller was he got depreciation and for tax reasons. And it actually, I guess he liked also knowing his mortgage would get paid down and help his credit. So those 2 things kind of made it work for him instead of the $50K he wanted down. And we had it signed probably a week afterwards. You know, once he said okay on the phone, they were a deal.

All right, let me take a quick pause here. So, all right, you call the seller, let's say 2 months prior or a month prior, you talk to him, he's going through some turmoil. He's got a property that, you know, just had a leak. He's trying to sell it and unfortunately he's got to deal with a little bit of water damage, it sounds like. And when you presented him our creative financing structures, he said he wanted $100,000 down. Now, this is like a 6 Something high 6 purchase price, and he wants $100 grand down. All right. And then you guys are talking to him, you're having some negotiation or a bit of a collaboration, and he's like, well, I'll take $50. Okay. So then you go ahead and table it. Like, what was, what was the conversation like when you followed back up with him? How were you able to completely avoid a $100,000 original down payment to be able to structure this deal?

So he, I, when I called him up, I said, hey, how are the repairs going and stuff like that? He goes, oh, I'm fighting with the insurance company here and there. And you know, they don't want to give me as much for, I think that was part of the reason he wanted money down. They, he didn't get as much from the insurance company for the repairs as he wanted. And you know, I, I did explain to him that I'm not charging you commissions, so you'll, you'll save that money right there. I said, so I said, that should shake that out. And And explained how he could make more money with me doing this deal with me, with the lease purchase and/or the owner finance, whatever the deals that we were showing him. And the depreciation really was the thing for him, and I didn't want to question it. But he, so he was like, all right, I get depreciation. And you could see the wheels turning in his head and he just went, okay, actually. And he still wanted money down, but I said, well, if we're going to do a lease purchase, I'm not owning it, so we can't do that. But you will get depreciation. So we were going to give him a little money if he did subject to, but he went the lease purchase route, which means I didn't have to do anything. Awesome.

So let's continue to find— continue to dive in here. So just everybody watching, if you're not sure what a lease purchase transaction looks like, It simply means that you go ahead, you agree upon a purchase price with a seller, you go ahead and lock in their equity. You then take over any and all responsibilities of this property— mortgage, maintenance, taxes, insurance— and then that gives you the equitable interest in that property to be able to now go ahead and sell it, which we sell to rent-to-own buyers or tenant buyers, people that are just outside of being able to get financed. And because we're able to go do that now, we're able to create those multiple streams of income or the 3 paydays, which we're going to work through here in just a second. And the reason why the seller gets depreciation is because when you buy a property on a lease purchase, you then have— the title does not transfer. So he's able to still claim that depreciation on his taxes because the property still remains in his name. Rick, anything else you want to add in regards to those conversations that you had with the seller?

I thought he was very easy to work with, you know, aside from the initial, you know, wanting $100,000 down. But we use the standard scripts that we use, you know, and the 4 variables that we have, you know, price, term, monthly payment, and down payment. And just over time, and like Phillip said, just negotiating it back and forth. It really wasn't, and he didn't really need the down payment is what it boiled down to.

Yeah. At the end of the day, most people want down payments, right? But they don't necessarily need it. And it felt as though the seller wanted to sell this property and be able to get a better price more badly, right? If that's a word, than he cared about a down payment. And That's what I really want you guys to understand that you're watching this right now is that your initial conversations with people, they could give you unrealistic, unrealistic terms, right? Expectations. But over time, and Philip did an awesome job of following up, which is, you know, the, the, you know, the money's made in the follow-up. That's a very true statement. So because he was able to follow up, he was able to be there when the seller was ready to make that decision. Phil, before we dive in further, would you say, like, because there's a lot of people that are watching this right now and like, oh, Phil had to go ahead and make phone calls, right? And talk to sellers. Would you say that you were like the, at your absolute best when you were having conversations with the seller?

No, I am as rookie as it gets. So if I can do it, anybody can do it.

So you're saying that like, all right, you don't have to be the absolute best at your scripts, but you can still close deals.

Absolutely.

Yeah. Well, I'll, I'll say Phillip's being a little modest here because he's, he's really good on the phone.

Ah, that was, that took time. I, I would say I'm better now than when I talked to him. And maybe even if you're doing everything that your coaches are telling you to do, uh, you'll get better in even a month's time. So yeah.

During this process, guys, uh, so you made the initial phone call, Phillip, but then did you go ahead and book a 3-way phone call with Rick during that timeframe to move him along? Or how was that process?

Yeah, obviously my initial call wasn't on there, but there was 2 or 3 calls where Rick was on it before the Deal Lab one, before we tabled it for a month. So we had talked to him 2 or 3 times before giving it a month of follow-up.

Got it. Okay. And Deal Lab, for those of you that have never attended one before, is a 3-day in-person event at our office where we literally work deals in the office, everything from day one of making seller calls to your leads, the people that are in the room, to day 2 where we literally deal structure the entire day on a whiteboard, to day 3 where we build out your plan and even now have very intimate masterminds as well. So that way you literally leave with the blueprint or potentially offers, deals, appointments. It's an absolute amazing event through that timeframe. So, Philip, let's walk through this a little bit further on the terms. So we have a lease purchase. We bought it from an expired listing, or that was what the source came from. What was the term on this deal? So the length of time?

36 months.

36 months. Okay. So we're buying on lease purchase. So that's why we're separating debt and equity, because what we do is we lock in the seller's equity. We'll also talk about the purchase price too, but Because we lock in the seller's equity, you're going to see that there's additional income on payday 3 because we're the ones benefiting from paying down the debt. So what was the amount of debt on the property? Now, I know that there's a first mortgage, there's a solar lien, and there's a furnace lien as well. So let's just kind of lump those together. Yep.

So the total of those 3 is $444,000.

$444,000.

Okay.

And the amount of equity that you locked in the seller was how much?

$675,000. Oh, the equity is $231,000 is what he's getting out of it.

Yeah, $231,000 is what he'll receive on or before the end of 36 months. So if you actually utilize our agreements, which you can get in our 3 Paydays Mastery course, and we'll have some links in here as well, including the Deal Lab, if you'd like to attend that and really up your game and start moving towards creative financing deals, either your first or next deal, we'll include those. in the show notes as well. But if you're using our agreements, it's Section 13. It says that we are going to buy the property for the exact mortgage balance at the time of financing, which means in 3 years from now, which we're going to pay down the debt plus the $231,000. So that brings the total to, I believe you said $675,000 as the original purchase price. Correct. Yes. Got it. All right. So now we have this property, right? And this is a great property from my understanding. What part of Connecticut is it in?

Danbury, right near Crystal Lake, which is a very popular area, to say the least.

Yeah. So nice house, nice area, right near a beautiful lake. Like, these are places that people want to buy. So when you're talking about these creative financing deals with little to no money down, it doesn't have to be a In a bad area or a bad property. Actually, a majority of the properties we buy are very nice move-in homes in great areas. All right. So we went ahead and we sold this to a rent-to-own buyer. What did we sell it to them for?

We sold it for $745,000.

$745,000. Now talk about this rent-to-own buyer. Like, who are they? Why do you think they needed the program when it comes to these deals?

Yep. This was a family, I believe it was a fiancé or engaged couple, and they just had a newborn and they wanted to move from New York, I believe it's Brooklyn area, to Connecticut because the soon-to-be husband was wanting to be closer to work. So that was the reason they were looking. And the reason they needed the program was because self-employed, the They really didn't have any income to show, even though she was on the upstart and it was starting to be successful. And they had a wonderful mother who was willing to help them out to get into the home.

Love it. Love it. Okay, so now we go ahead and we sell this property to this tenant buyer. And what do we end up collecting for our payday 1, which is our nonrefundable deposit? This is credited towards the purchase price. But that's what the down payment is to getting this property. Tell us what that was.

$74,000.

$74,000. Not, not a bad first payday on your first deal, huh, Philip?

I'll take it all day, every day.

Which was— this is fun. So we were at a recent event, the Deal Lab, and Philip was actually sitting in the front row and he kept checking his phone, checking his phone. So we're like, what's Philip doing? You want to tell us what you were doing?

I was looking to see the transfer come across my bank account, the wire.

And wire that came through the bank account, man. The smile on Philip's face was enormous. How'd that feel? Just quickly.

Yeah, just vindicated. Obviously, if you tell anybody what you're doing, they have criticisms, you know, some out of concern, some, you know, because out of love, they just You know, you sure you want to do this? Blah, blah, blah. So, you know, it verified that the process works and it vindicated me so I could go back and go, look, look what I did.

I love it. Love confidence a little bit more through the roof now.

Yeah, absolutely. Absolutely. Proof of concept, you know.

For sure. All right. So you get a $74,000 check. No big deal. Also, you're using our agreements. So our agreements state that you pay the mortgage, you start making payments to the seller 30 days after the buyer moves in. They're moving in August 1st. Uh, so we end up collecting first month's rent as well. What was the first month's rent? Yeah.

$3,601. $3,601.

These are the little nuances that we do with our agreements and our strategies that generate significantly more profit than Anyone else doing these rent-to-own or lease purchase deals. So he's made an additional $3,600 right there just from that little piece in our agreements. All right. So then our payday 2 is our cash flow, right? So we received some money upfront. We're now going to cash flow this property. So walk us through the monthly payment to the seller.

Yeah. So $2,950 is the mortgage with taxes, and then there is A furnace alone for $75 through his electric company and $159 in solar panel monthly.

And then I believe you also had some insurance, right? Because that's not escrow.

And yes, $175 in insurance separately.

That brings us to a total of how much is the monthly expenses?

It's $3,359.

$3,359. Okay. Now we go sell it on a rent-to-own buyer. What are they paying?

They're paying the $3,601.

$3,601. Okay, so we take the $3,601, subtract it from the $3,359. What do we got for cash flow?

$242.

$242 a month. Now we'll go based on the 36-month term, which gives us how much cash flow during this time frame?

$8,712.

$8,712. So he's received $74,000 plus first month's rent already. Now he's going to receive $242 every single month. Now this buyer's in the property, goes full term, he's going to get $8,700 in cash flow. All right. So then let's look at the payday 3, which is this buyer's working towards becoming a homeowner. They're going to eventually qualify for a bank loan. Once they qualify for a bank loan, there's typically profits at the end of this deal. So let's look at that as well. So we bought it for $675,000. We sold it for $745,000. What's the total price premium on this?

$70,000.

$70,000. All right. My pen would work. There we go. All right. Then we got principal paydown. So every single month we're making that mortgage payment, right, on that $2,950. How much of that is going towards principal?

$641.

We had $641.

All right.

Multiply that by 36 months. We get—

$23,076.

$23,076. All right. Now that's the principal paydown, $23,076.

Yes, correct. $23,076. $23,076.

Okay.

All right. So we already collected our payday 1, which has to be credited towards the purchase price. That's why that buyer can go ahead and present to the lender that they put down a certain amount of money. So we have to go ahead and subtract that. That's the $74,000. All right. So our backend profit, if we kind of work through this, is we had $70,000 in premium plus $23,000 of principal paydown, and then we have to go ahead and subtract the $74,000. So how much money are we going to have left over when this deal closes?

$19,076.

Love it. All right. So let's add up the whole paydays here because that, that face of yours, I'm sure, is extremely excited when you got the first initial check. But you're also starting to create that, that cash flow. And in the future, you can count on this deal cashing out. So let's add the payday 1. So the $74,000 plus the first month's rent. Let's add the $8,712, which is your cash flow, and let's add the $19,076. Give us our total profits here.

Which is $105,389.

$105,389.

That's sweet.

Well, Rick, I mean, any comments on this deal? Because you're usually the guy that creates the 6-figure deals and now you're creating a 6-figure— they're helping. Too many members. Great 6-figure deal. So thank you. Give us any comments about this deal.

Yeah, I think all in all, between you had a good seller to deal with, you had really good buyers. In fact, the buyer came through the screening with flying colors. They'll essentially be mortgage ready within a year. So it's— it was a really good situation. And the mother was extremely great to work with. Helping her, her daughter and son-in-law-to-be and granddaughter. So that was wonderful. It was just a real pleasure working this deal.

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. It was one of those— the deal came together perfectly. Great property, great seller, great buyers. And it's going to be an amazing story now that Phil has available in his back pocket now to go get more real estate transactions. So now that you've kind of made it through your first deal, Phil, any thoughts, ahas, any words of wisdom on now that you're kind of on the other side?

Trust the process. It sounds like a sports quote, but it's just do the steps. It's so laid out for you. I've never seen a roadmap so clear in my life when it comes to real estate. And this, I needed it because I didn't know a thing. I didn't know what equity meant. I mean nothing. So this program is everything I hoped it would be and more. And I'm just getting more confident and leaning on the coaches. And just the more you do it, the easier it gets. You just gotta— that confidence, man, that came with that deal to see it. It's— I can't even put words to it that will really describe the feeling. Just definitely stick-to-it-ness. Your confidence will come if you don't have it. Everybody's got a different skill set. I've met so many people from the community. Some people, one thing they're weak in, another thing they're strong in. So just build off what you're strong in and just go from there.

Yeah. And I'll add that it was a— as always with everybody, it's, it's a learning process. And Philip, you know, now that he's done this one, that the future deals will be easier because he's gone through the process once and it'll just build upon his confidence the more he does it.

Many more. You got many more coming, Philip. Those of you who are watching this, if you want to know exactly the blueprint that Philip's talking about and get to your first or next creative financing deal, We'll go ahead and add it in the show notes in the description below. Just go to smartrealestatecoach.com/strategycall and we'll walk you through exactly what that is. And if it's a great fit for you, then we'll go ahead and help you get to that first or next creative financing deal. Phillip and Rick, awesome job, guys. Quick 6-figure deal. Good way to— good way to start the summer. Now let's go get some more. You guys, thanks for coming on Deal Structure Sunday. If you haven't subscribed yet, go ahead and subscribe, and we'll see you next Sunday.