Multi-Family Terms Deals That Create 3 Paydays

Most investors think lease purchases only work for single-family homes, and honestly, that thinking alone is keeping people too small. Because if you're only looking at single-family deals, you're missing a potentially massive opportunity literally sitting right in front of you. We show people all the time how to pull 3 paydays from single-family homes, from 2-family properties. What if I told you You can sell a multi-unit building on a lease purchase and create multiple income streams all at once. And I'm not talking theory. I'm not talking YouTube fluff. We've done this in the trenches. And today I'm going to break down exactly how it works, when it works, and even touch on a real deal my son Nick and I did in a second deal, generic deal, just so you can get an idea of how the numbers flow. So first, let's fix the biggest misconception. A multi-unit lease purchase is not one tenant to one buyer. If that's how you're thinking about it, you're already way off. There are 3 ways that this gets done. Okay? Number one, you sell the entire building on a master lease purchase. So one buyer controls all the units. That's exactly what Nick and I did. Number 2, you sell to an operator or investor, not a tenant buyer, and that operator investor come in and control the property. Now, this is where most people get crushed because they're trying to force a single-family strategy onto a multi-unit deal and it just doesn't work that way. Number 3 is a bit of a hybrid. You keep the tenants in place and you sell control. You step back, they step in and run the property. So you're not selling to a tenant, you're selling to an operator who wants to control without going to a bank. Now, if you understand that one shift, You're already ahead of 99% of the people watching this. Now, when does this actually work? Because not every deal should be sort of forced into this multi-box or this exit that I'm talking about. Ideal scenarios look like this. The seller owns the property free and clear or has low debt. And by the way, if it's free and clear, we prefer owner financing. And more on that a little bit later, because we could pay way more and still win on the deal with all or mostly all principal paydown. on the seller note, and that squishes the need for a bank as well. Now, another one, the landlord is tired, they're burned out, they're done dealing with tenants. The property cash flows, but it's not optimized. And you can clearly see that. Simple example, we increased income on one of our properties just by adding coin-op laundry. Now, I know that's basic, but it's a value add. Another one, we knew rents were all below market and we could increase as they turned over. And/or as time goes on. Nothing fancy, just simply paying attention to the math. Now, or another one is the property is tough to sell given the tenant mix. And let's be real, because this is where people get in trouble. 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. Here's what's not ideal: tight margins, heavy deferred maintenance with no upside, or seller needs all cash immediately. Of course, they all would prefer that. And I'm going to say this straight: if the deal doesn't have room for what you want, don't force it. If your goal is to hit all 3 paydays but the deal doesn't support it, walk away. There's always another deal. And I can tell you what I would prefer— you don't drag yourself down with a deal that's not a great fit. And then you just cloud your focus for other deals. Now, how about deal structure? This is where people either make money or make a mess. Step 1, you control the property. You do that with a lease with an option to buy, typically 3 to 7 years. You don't need to own it. You need to control it. Step 2, you build in your own spread. You create a gap between what you're paying to the seller and what the property produces for income, and you lock in your back-end equity for your exit. Step 3, you exit to your buyer. You sell your position to an investor or an operator. They step in, they take control, they execute. Now let's talk about what everyone actually cares about, right? The money. This is where this model separates itself. We call it the 3 paydays. Surprise, surprise. We've trademarked it. Payday number 1, your upfront assignment fee or option fee that comes from your investors stepping into the deal. Pity number 2. Well, that's your monthly cash flow. That's that spread between your payment and the rent roll. Pity number 3, your back end when your buyer refinances, sells, or cashes out. Now you anticipate in that equity at the end. That's why it's such a cool payday. 3. This is why we call it 3 paydays, even though it's not a single unit or a 2-unit, which is our basic model we run on. Because if you structure it right, It's the same thing. You get paid now, or you can, you get paid monthly and you get paid later on.