How to Structure a SANDWICH Lease Purchase Deal

You guys, as accomplished and as experienced as you are, get in the trenches with somebody, as you point out, like me, who had no real estate background.

Hey everybody, I'm Zach Beach with smartrealestatecoach.com. Welcome to another Deal Structure Sunday. I am super excited, uh, to spend some time here with Ken, uh, Ken, who actually just got his first creative financing deal. It's been quite the journey since I originally met Ken. I know he heard of me on another podcast. So I'm going to walk through that here in just a minute. And we're going to talk about how he was able to right now acquire a creative financing deal worth about $869,000 or plus $1,000 with little to no money down right now. If you are not subscribed to this YouTube channel, if you could go ahead and click subscribe as we have been producing Deal Structure Sundays for years now. where we dial into either our personal creative financing deals or our students or community members. And today we have an amazing ride here with Ken. So Ken, welcome to Deal Structure Sunday.

Great to be here. Never knew on that first conversation we had 4— no, I guess 6 months ago that I'd end up here side by side with you on the video. But it's great to be here. I'm excited.

Awesome, I love it. Yeah, so Ken, tell kind of people who you are, what you do, um, you know, kind of what you did prior to, uh, you know, joining the Wicked Smart community.

Sure, my name is Ken Shires. I'm in Hillsborough, North Carolina, kind of between Raleigh-Durham, Chapel Hill. Um, I'm retired, I've been retired a couple of years, and, uh, to my good fortune, uh, I've run across This wonderful way to occupy myself, have a lot of fun, and hopefully build some things for the family and a legacy. And I'm just having, having great fun. It's exciting. I was actually at the, the very end of my first 90 days when I made the contact with this expired listing down in Myrtle Beach.

Oh, that's amazing. Okay, so, uh, before we dive further into, into this particular deal, which is awesome, you first taken within, uh, within 90 days or at the edge of it, which is amazing. Tell, like, what did you do, uh, for a living before you ended up retiring?

Right, I was an account manager in, uh, IT. I worked for, uh, AT&T, uh, for a number of years, and prior to that I worked for, uh, Sprint, who has sort of faded out of the, uh, the picture lately, but they were real big in long distance way back when and later got more active in the wireless world. But I was an account manager. I called on Fortune 100 organizations and helped them with their telecommunications and their IT needs.

Got it.

Awesome.

So zero to do with real estate. That's what you tell me.

That's exactly right.

And then prior to joining the community, have you Have you had any real estate experience?

No, I, I did decide to, uh, get licensed in North Carolina, but I'm not associated with a broker. And, uh, without being associated with a broker or continuing my education with the real estate commission, I can't really do too many deals under that license. But that's not why I did it. I did it for credibility and for knowledge.

Got it. Okay. Yeah, it makes total sense. You know, just to get some baseline knowledge when it comes to real estate. Um, awesome. So tell me, why did you decide to end up joining, uh, the Wicked Smart community?

I actually had some perspective. I had been looking around for something constructive to do. Um, I looked at a, um, a publishing platform, um, and I looked at 2 other, uh, real estate platforms and, um, Some of the excitement was there, but in, to keep a longer story short, there was just not the support. I mean, they had podcasts and they were kind of generic and there was not what we like to call in the trenches. And that's a big separator for me is that you guys, as accomplished and as experienced as you are, can get in the trenches with somebody, as you point out, like me, who had no real estate background, would have largely wasted a lot of time and energy without the help. And having met you guys in person now, and some of the other associates, and meeting with them multiple times a week via video, it's just an enriching and fun experience.

No, I love it. And you originally joined our Jumpstart Program, which I know you mentioned 90 days, which We have a— we have 2 different tiers in Jumpstart, uh, and it's— it is really to get you acclimated to the community and get your systems up and running and get you some of your first wins. Uh, but as we always say, you know, you got to dedicate the next 3 to 5 years if you really want to master any type of business. So, uh, why did you decide to join that? And then, uh, to add on to that question, you then came up to our In the Trenches boot camp, which is brand new, these events, and you decide to move into our, you know, our most you know, highest tier with High 6. And I'm just curious why you made that decision as well.

The 90-day, um, jumpstart was, um, eye-opening, and, uh, it was, uh, it gave me a lot of opportunity to interact with the associates, hear their stories, hear their deals, hear the input from you and from, uh, Chris and from Nick, Rick, all those great minds, Mike. all those inputs and just see how collaborative it is. And it's constant learning, constant improvement. And then when I had a chance to go up to Newport late last month, meet you guys in person, it was, it was kind of a surreal experience after all the videos and everything. And it just— not that I was doubting it, but it just reinforced the fact that it's real. It's not something that's fanciful and Kind of built out for attention and revenue generation. This is a real learning, a real coaching experience. And moving up to the High 6 was a no-brainer. I mean, I did have to think about it some, but after seeing the path that others had taken, I said, I can't go wrong. And I'm in it for the 3 to 5 years minimum. And, uh, I just had to do it.

I love it. Love it. Love it. What he, what he was, what we were originally discussing was the In the Trenches Bootcamp, which is a 3-day intensive with 15 to 30, uh, 15 to 20 people where we'll literally be making phone calls with you, go over deals, and then create an entire blueprint over 2 and a half days up here in our office. I'll make sure we include a link if you want to go ahead and apply for the In the Trenches Bootcamp. Awesome. Uh, Ken, so let's dive into your deal. Um, I'm going to share just my screen here real quick. So I want to show you guys, uh, this particular deal, but while I'm doing that, maybe walk us through where you found this deal, how you found it, maybe the seller, the seller's motivation. That way we can get some background knowledge on this deal.

Sure. Um, I focus my prospecting primarily on expired listings. Uh, for me, this is somebody that, um, has been interested in selling their property before, and for whatever reason, they didn't get traction. And so, um, um, it seems like a perfect time to, to talk to somebody about an alternative way, uh, to sell their property. So they were an expired listing. They were just on the list of dials that I was doing, um, late in January. Once I established their interest, enlisted my coach, Rusty, to come in and make a call with them. He did a great job. He's very at ease and very as if he were the next-door neighbor kind of approach and also very knowledgeable. That progressed us even further. Before we knew it, The couple was saying, what's our next step? Which, having spent some time in sales, not in real estate sales, when they say what's the next step, that's a green light. So we were excited.

Yeah, so beautiful. I mean, beautiful property. Not our typical, right, as it being a condo, but certainly, I mean, those views, absolutely amazing when it comes to, especially in the the tourist-driven space of Myrtle Beach. Um, what an awesome opportunity here. So yeah, walk us through. So you said the sellers originally tried to sell at some point in time. So is this like a second home? Is this a— is this their main residence? Walk us through that.

Yes, uh, this is their second home. They've had it for something like 20 years, and they have a very nice primary home in Charlotte. I've had the privilege of meeting with them there. Um, but they did try to sell it before, and they did it the conventional way, and for whatever reason, um, they just did not get traction with it, and they were kind of disappointed. And, um, I, I think that was really the backdrop of their interest in trying something different.

Got it. Okay, yeah, it makes a little sense. So they've been on the market multiple times, second home. Um, I mean, great condition property. Did they get any feedback on why it didn't originally sell on the open market? Like—

I'm not aware that they, they got any. I should have, uh, identified what they heard back, but, um, I think they had gotten to a point of frustration. They're not in an especially major hurry, but it was the fact that, um, they, they just simply did not have the, the activity And the exposure, and therefore the offers didn't come. So, but they're great people and it's fun to work with them. Their unit is exceptional. They have taken great care of it. It's beautiful in every way. I'm also trying to appeal to potential tenant buyers based on the fact that not only, as you mentioned, it's a great resort touristy area, Mm-hmm. Included in that, it's a major golfing hub. Their particular unit is within 30 minutes of 9 5-star golf courses. Not just golf courses, but 5-star. So it's a great location, and as you mentioned, the scenery is gorgeous, and they could see from the interior it's very nice.

Yeah, no, it's I've been there, as I was explaining to Ken offline. I've been there at one of my best friend's bachelor parties. Needless to say, I didn't remember too much of Myrtle Beach, but it was a great area. Certainly a great area. I know tons and tons of golf courses. So that's a— it's definitely a great opportunity. So then let's walk through the deal. So the deal type, what type of deal is this structure?

This is a sandwich deal. So I'm going to stay in the middle the whole way as we Uh, take the, um, the lease option and go out and get a tenant buyer, which is the stage we're in right now. So—

Love it. And if, if this is like the first deal structure video you've ever watched, you've not gone through our Quantum Leap system, a sandwich lease is simply a lease purchase agreement. So what you're going to do is you're going to go ahead and lock in the seller's equity or agree upon a certain price. You're going to then take over any and all responsibilities of that property. And then you're going to go ahead and have a timeframe on which you have to cash out the seller. Then the sandwich comes into place because now we're going to go ahead and we're going to be sandwiched between one lease purchase agreement with the seller and then a sandwich and then another lease purchase agreement or rent-to-own with our end buyer. Um, so then let's walk through it. What's the, what's the current debt on the property?

It is $218,700.

$18,700. And how much equity are we locking in for the seller?

$581,300.

So that brings us to a grand total of how much is the purchase price?

I don't have those 2 added together, but they were going to be happy with, uh, $800,000. That's what we agreed to on the contract.

Yep, so $800,000 is what we agreed to, um, and The reason why we lock in the seller's equity, you might be wondering why don't we just talk about the purchase price? Because when Kyle— Ken goes ahead and purchases this property, he's gonna make those monthly payments on the seller's behalf on the mortgage, which we're gonna talk about here in a second. He's getting the benefit of the principal paydown on this deal. So if we lock in the seller's equity, then as that mortgage balance pays down, Ken's the one that's gonna create more profit. We're gonna show you that here in payday 3 in just a second. Um, this property, how long of a time frame do we have?

We're going through the end of July.

As far as, um, marketing, uh, because this, this agreement is contingent upon finding a third-party, uh, buyer, is that accurate?

Yes.

Okay, so that also is a huge point here. So if you don't have your notepad out, when we're structuring these deals contingent upon finding a third-party buyer, it means that when we show you the actual expenses on the property Uh, Ken is not going to be liable for, uh, that payment until he has a buyer in place. And actually, our agreements state that we don't have to make a payment for 30 days after our buyer is in place. So that's how Ken will also be able to structure a, uh, first month's rent out of this as well, which would be a huge bonus when I, when I share with that the numbers here in a minute. But assuming you take on the property, what's the, what's the term For the lease purchase agreement?

42 months.

42 months. Okay. So is that like 36 months with a 6-month extension?

Well, it's actually, it's 42 months with 2 optional 6-month extensions. I've been hanging around Rick too long.

Yeah. I love it. Okay. I'm just curious, like within that conversation, how did you arrive at the 42 months?

I just shot from the hip. I came up with that 48. For some reason, 48 sounded like a lot in this situation, especially with them having been through trying to sell it before. Yeah, so I decided to, to, um, to, to do about the same thing with slightly different language.

Sure. So very scientific, uh, more creative. I love it. Okay, very good. So then let's, uh, these are gonna be all projections. We're currently on the market, and we'll have to bring, uh, Ken back once he goes ahead and closes this deal. Let's see how close we are on these projections. So, um, we'll go ahead and make a projection on the, the non-refundable deposit, which is our paid A1, the money that goes directly into, uh, his, uh, his bank account. But before we do that, what are we going on the market for, uh, with, uh, this condo?

Uh, after a great, uh, consultation with Nick, uh, we decided to go with $869,900.

$869,900 is what we're selling it for.

Sell price.

Yeah. And, and Nick, just so you guys know, Nick, uh, was mentioning Nick Prefontaine, my brother-in-law, but also a buyer specialist. Anytime you're in our community and you get a deal under agreement, you're either going to be speaking with one of our coaches or Nick directly, who sold hundreds of these deals via rent-to-own. So that's exactly what he did, uh, with Ken, because Ken's a part of our High 6 community, which gets direct access to Nick any single time you need to. So they consulted and say, all right, this is the price that we're going at. And then they have a very strategic plan in order to get this thing sold. So with that, then let's walk through our, our current projection. So what do you have down for your projected payday 1 or the non-refundable deposit?

Well, I'm, uh, I'm going with 10%. So that would be $86,990.

$86,990. Okay. Again, if this is the first deal structure you've watched, The non-refundable deposit could come all up front, or it could come over time as well. What it is, it gets credited towards the purchase price that we can help these tenant buyers or buyers at any time in order to qualify for loan eventually go ahead and get the get the homeownership. So that part is credited towards the purchase price. It's basically delayed cash sale. It's their down payment towards purchasing this property. So this could come in the the form of. 5% down and then multiple payments over the course of the lease. Could come all up front. Um, as we have seen, as big a down payment as like $93,000, $95,000 all up front. And then we've seen down payments as low as about 3% as well. Okay. What is the monthly payment due to the seller? Like, what's the principal, interest, taxes, insurance?

Their PITI is $3,563.

Is there any HOA that need to be covered as well?

Yes, their HOA is $950.

$950, which we will pass along to the buyer as well because they act like and are treated like homeowners. They just do not have their loan in place. Okay, what are we on the market for, for rent?

$3,750.

Okay, $3,750. And is that— and then HOA, and does that also include taxes?

No, the tax is $708.

Okay, plus $708. And then did you and Nick also instruct the HOA as well?

Uh, we, we kept that on the side.

Okay.

In our calculations.

Got it. So we're gonna assume that that end buyer is gonna pay the $3,750 as a monthly payment plus the $708. Which will pass along the taxes to them as well, plus the $950 monthly cash flow. What'd you guys have calculated?

Including the tax, um, it was $945.

$945.

Uh, awesome.

$945 times, uh, we'll base the projection on 36 months. $945 times 36 is how much in cash flow over the course of those 3 years?

Let's see.

Um, you need a calculator?

I've got one here standing by.

Not only do I have to— we got to help you structure these deals, I also got to show you how much money you're going to make. Uh, it's $34,020.

Okay, thank you for that.

Oh, you got it. I'm just— I'm here to help. Uh, all right, so the price premium on this property was $69,000. $990,000. Uh, how much of the $3,563 is principal?

Ah, let's see, $2,000.

Wow, what's the interest rate on this thing?

It's low, it's down in the 3s.

Oh wow, okay, uh, this is gonna be a great deal. Yeah, get this thing done. That's gonna be $72,000 And principal paydown. That's nice. I want, I want these deals all the time. You have been hanging out with Rick. So Rick Abbiati is one of our coaches, uh, and I mean, he's averaging roughly $100,000 per real estate transaction that he is doing, uh, which Ken is about to, uh, enter into that space for his average being his first deal. Uh, we had a non-refundable deposit projected at $869,990. So our cash out payday 3, if we go ahead and add these up, so you have $69,990 plus $72,000, uh, equals— that's $141,990. And then we're gonna subtract that $86,000 because we already collected it. So our payday 3 is roughly $55,000. So with that being calculated, if you see it, all I did was take the price premium, add it to the principal paydown, subtract the non-refundable deposit, and that's where I ended up with $55,000. So let's add this all up. So you take $55,000 as your payday 3. Let's add it to payday 2, which is $34,020 plus $86,000. 990 equals $176,101 for a condo in Myrtle Beach. If you see, just every deal that we do is different. But if you look at the major factors on this deal, yes, we had the ability to increase the price premium. Even if the price premium drops, like over the course of the time frame, if the price premium drops, Even if the monthly cash flow drops, uh, where you're not acquiring $945 a month, there's a lot of things that would need to happen as far as through our marketing process. And, and if we had to decrease the price and the monthly payment, it'd be— a lot of things would need to happen in order to make this deal not a 6-figure deal over the course of 36 months. Because if you're looking at this, the principal paydown on this thing is $2,000 a month. That's a major— Benny on this deal. That's why anytime you can go out there and acquire real estate deals right now today, With low interest rates, it's very hard to not turn those into six-figure deals over the course of three to five years. So amazing job, Ken. Anything, any ahas or any learning lessons or anything like that since you know now that you're now you're on the the side of a taken, which is a property under agreement. Now you have a property under agreement. Any lessons learned that you know you want to kind of give to those out there right now watching this video?

Certainly have to take hats off to Rusty for giving me so much solid insight on the front end. He, as I mentioned, he spoke with the sellers with me on a call. Rick stopped, you mentioned the boot camp, the first one back in September, he actually stopped while he was in the middle of those 3 days And called my seller as well, which was positive. But a lot of things lined up for me, as you can see, that they did not have to worry about where they're going to go after they sold the home. It was an expired listing. They were already sort of queued up to sell it. There's a little bit of reluctance, I can tell, in letting it go, but they've decided it's the best thing for them. Just the in-the-trenches from you guys has made a big difference. I love it. Love it.

So over the course of this deal itself, and you've been with us for a short period of time, you had one coach that walked you through and helped you acquire this deal or getting on the phone with the seller in order to push this deal forward. Then you had another coach be able to jump on a phone call while he was at another event and push this deal forward. And then once you had the agreement, deal under agreement, you then had another coach be able to analyze how you're actually gonna go ahead and sell This, uh, and that's just all in a day's work.

That's, that's right. I've become accustomed to the hands-on, and, um, even though there's a vast difference in, in my experience and my learning and the skill sets which I'm developing, uh, between me and you guys, uh, it's, it's as if I have those, uh, skill sets at my disposal, readily at my disposal, because you guys are So available.

Well, I'm absolutely looking forward to seeing you go ahead and close out this deal and to create your first deal, but not only your first deal, but your first 6-figure deal. Uh, and, uh, and looking to seeing so much success with you here as well. Each and every one of you guys, thanks for joining us, uh, here on another Deal Structure Sunday. Again, if you are not subscribed to this YouTube channel, go ahead and hit the subscribe button as we will keep deals flowing to you each and every Sunday. I did include a couple links at the bottom. Certainly, if you want to meet people like Ken or many more of our other community members, we have our upcoming event, QLS Live, which will be hosted in Boston, which we'll include the dates in the links below as well. Ken, thank you again for this awesome Deal Structure Sunday, and congrats on your first deal.

Thank you, Zach. I appreciate it. It was fun.