She Was Told “No Deals in LA.” She Got One Under Contract.

Hey everyone, I'm Zach Beach, CEO of Smart Real Estate Coach. Welcome to another Deal Structure Sunday. We're going to be talking about a deal that is in North Hollywood. I know so many people in the state of California are trying to figure out, number one, how do I actually get involved in real estate investing with price points and, and all the challenges that come with rentals? Um, and number two is how do I actually make money from these actual properties as well? Because usually you get one without the other. So If you're from California, if you're one of those markets where you believe it's challenging to get involved in real estate, this is going to be the episode for you. If this is the first time you've been to our Smart Real Estate Coach YouTube channel, go ahead and subscribe. Every single Sunday we walk through a deal that's happening in our community, the nuances behind it, so that way you can learn from people that are actively investing in creative financing and see exactly how we're creating 3 paydays per deal. On each and every transaction we do. Well, today I have Kirsten. Kirsten from beautiful California. Welcome to Deal Structure Sunday.

I am so glad to be here with you, Zach. It's a pleasure.

Just remind me, where where do we meet again? Because I feel like we met somewhere.

We met in LA at the LA Ria. They were doing an event there and that was your first time in a circus tent.

Yeah, that's right. That was me performing in a circus tent.

We were baking in an oven.

Oh guys, like, let me, I gotta tell a quick sidebar here. So yeah, I go out to speak at an event and I was speaking at events for the last 4 or 5 years on creative financing. And this is the first time that I walked into an event and they had like a giant event that was inside and outside. And I walked outside and they're like, yeah, you're gonna speak in this tent. And I was like, what? I'm going to speak in a tent? But I was able to pull it off. And luckily, Kirsten decided to come and spend time with us here at Smart Real Estate Coach. It was well worth the trip. But man, what an event that was. 90-some degrees in a tent. Thank God we both survived, huh?

Yes. Yes. Here to talk about it.

Awesome. Well, Kirsten, give everybody a little bit of background of kind of who you are, what you do before you kind of met Smart Real Estate Coach, and then how your journey has been so far.

Before Smart Real Estate Coach, I was a real estate investor. I was just getting into it, had done my fix and flip, and was in the process of doing another out of state because I love shiny objects.

Yeah.

Couldn't commit to anything, but I loved the next best thing. Yeah. And that's just how my journey was with real estate investing. Then I went and saw you and I thought, okay, can I do this? Can I plant my flag? Can I finally make a decision and be somewhere and do real estate investing? Because I wish somebody would have helped my husband and I with something like this, being small business owners, with having to have the taxes, having to have your banking a certain way. We've never been traditional with that, with any of that. So it was a struggle. Luckily, we got into our house in Burbank, but it's kind of been back and forth with me as far as investing and making a decision as to what I wanted to do. But I finally made a decision. I've been with you guys for a minute, since the beginning of the year at least. And still working it. So, yeah.

I appreciate that you committed to it. That's good. You are, Kirsten, this is a common story that, you know, I've heard for 12+ years. I mean, it's just the cycle of there's too much information out there. So we believe the next best thing is what's going to actually accomplish our goals. And then we forget that we got to still put in the same amount of effort and start from scratch each new idea that we have. And, you know, we kind of go from there. But I'm so glad you've committed to this process because I think timing-wise, you can tell me if this is true, when we started spending time together, you had some deals that were working, right? And you've been buying out of state, I believe in the state of Georgia, right? From California.

Yeah.

And you were looking at some other alternative exits too. So it was pretty easy, in my opinion, to be able to plug this into your current business model while you're learning maybe the seller side of it, right? Would you say that'd be true?

Yes. Exactly true.

And we'll have to bring you back on so we can talk about a fix and flip that you're doing that you're selling on rent to own via lease purchase in Georgia. But today I wanted to keep it local for you and I wanted to talk about California a bit because I just know there's so many people that I've spoken to, especially from the LA area. They're like, oh, you can't do deals in LA. They're, they're expensive. There's no buyers that are going to be able to afford it or probably don't cash flow or the tenant laws are terrible. Like every reason to not do it. But you're one of the people that said, no, I actually, I want to find a way to do it, which brought you to this particular deal that we're going to talk about here in just a moment. So maybe you can talk about persevering a little bit because I'm sure I'm not the only person that's heard all of those things about the area in LA.

Yeah. I started to buy into all that. Yeah, oh my God, is it going to be too hard? Oh my God, it's doom and gloom. Oh my God, can I do this? But I really don't think even if I was in Utah or Montana, or I really think you're still going to hear the same stories, and people are just going to try to put the fear of God in you and deter you. I think it's it's just them. Projecting their own fears.

Yeah.

It could be, sure, it's a buyer's market. Sure, it's a seller's market. What kind of market is it? Can you really predict it? I mean, it's what you make of it. Are you making the phone calls to sellers? Are you making the phone calls to your buyers when leads come in? Are you getting out there? Um, what are you doing to try to navigate what the market supposedly is saying? Um, I, I don't know. I can't predict that. Sure, our prices are expensive here. I think it's crazy, some of the prices here, but it's no different than selling a house in, in Florida or Georgia. We— they have the same markets, the same situations going on. The same people. I don't know. I stopped buying into the BS because it was frustrating. And so, I just tuned it out because I've lived in LA all my life. So, I have to tune it out, all the BS, otherwise, I buy into it.

I love it. I love it. And like previously, before you even dive in this deal, I know you guys came from Especially your husband. I believe you guys are like in the show business space as well, right? Not like you guys came from a big background in real estate investing. Is that accurate?

Yeah. Still, I mean, that's my other business. That's, you know, is in entertainment. That's one of the reasons why we're here in LA. Funny enough, none of our deals that we do for entertainment are in Los Angeles.

Oh, no?

No. We got China. We got Sweden. We got Japan.

All beautiful places.

You know, but it's kind of good to be here. We're central to, um, to where the action is, to where hopefully they're going to start filming again. So it's, it's good, you know, it's a good location to be at. Yeah,

I just want people to hear that because we have so many vast of different backgrounds, right? Different backgrounds, different places in 80+ markets, anything from engineers to Being in entertainment, and if you just work the system and put yourself in a position to win, and if you just show up in a tent where I'm speaking at, then we can figure out how to do these types of real estate deals. All right, so let's talk about this deal in North Hollywood. This is an AO. So what we're going to talk about is you only get paid one time on this particular deal, but it's a great starter, right? When it comes to this business model, and actually the first, I think, eleven or twelve deals that my father-in-law did that started the business was these AOs. It's Way to make some capital without actually needing to commit to a long-term deal here as well. But also, it solves a lot of problems for people that are already in the real estate space. Meaning, if you can walk us through the motivation of the seller. But I believe this seller is a real estate investor herself. Is that accurate?

Yep, she's a real estate investor herself. Yeah, she's got a few properties in LA. Just FYI, she got tired of Los Angeles. She moved to Utah a few years ago.

Oh, got it. Well, makes sense. All right, so you got tired landlord, um, in this particular— and this property still has a tenant in place, which we'll, we'll talk about things in a moment because this deal also like has a lot of factors that could be challenging to, to sell it. And I know Kirsten's still plucking away at this right now as well. But, um, so this lady moved to Utah. Does she still— the rest of her property still in the LA area?

Yes. Yes.

Okay. Awesome. Let's get this one done and we'll get the other ones under—

And just as a sidebar, this particular property has an ADU in the back.

Okay.

Now the situation with the ADU is that the owner will maintain the ADU and have the ability to rent it out until the sale finalizes. So that's— I don't want to say that's another issue or something, but it is something that people do, that potential buyers do look at. Now, if they want to rent it out, they're more than welcome to pay the additional for it. So there's some give and take with this particular deal.

Yeah, it's not cookie cutter, right? So you gotta— I think it's at $2.3 million. In, uh, so 2-bedroom, 3-bath, if I just looked up correctly online.

Well, the main house is a 2/2. The ADU is a pretty, pretty big studio. It's got a separate bathroom, separate kitchen area, separate living area. So that's how it's kind of laid out. I mean, or structured a little weird on the verbiage. So yeah, it's— you technically, you could call it a 3/3 if you wanted to.

Yeah. Okay. Makes sense. And this is almost like the same way we would treat like a duplex or, or yeah, like an ADU scenario, which is you got— you have options, which is really good. So when you're having conversations with buyers, it's not always so straightforward because you say, look, you can do this with the main house and this is what it looks like, or you can take on the entire property and this is what it looks like as well, which again just gives you flexibility, which also is the reason why so many properties have challenges selling, because if they're not perfectly cookie cutter, And they're not absolutely beautiful, then they sit on the market. So it gives you a unique opportunity to find the right buyer here and actually be flexible with the seller as well.

Yeah.

Awesome. So this is an AO, a sign-out deal, and you found this, I believe you said, from an expired listing?

Yes.

Got it. Okay. And out of curiosity, and you might not know this answer, do you know why it expired? Like, did she not get offers? Was it because there was a tenant in place that it was challenging or? Any feedback from there?

She wasn't getting the price she wanted.

Got it. And she's pretty stuck on the price.

She is stuck on the price.

Okay. And based on your conversations with her and comps, everything, yeah, we can sell it on Redstone and get her probably a better price. But is she overpriced at this point or unrealistic?

Unrealistic? I don't think so. I think it might be slightly over.

Yeah.

But the condition of the home is great. It's move-in ready. She did a great job with the renovations. Once, once the sale goes through, that ADU does make some very good cash flow.

Yeah.

So I think possibly a little, but nothing that warrants not doing the deal.

Yeah, got it. Okay, so no, no, for you, I mean, it'd be great. I'm thinking like a traditional investor, just, or traditional, um, buyer. Um, are you guys seeing the same thing that most markets are seeing where there's a lot of properties on the market currently?

Yes.

Yeah, yeah, creating that buyer's market. That's exactly why we're buying more real estate transactions, uh, than ever right now, which is Absolutely amazing for our community. Okay.

Yes. And I think people, people can do these creative deals and sellers can get the price they want.

Yeah,

they should be. They should be running to us.

Don't worry, they will. They are. So again, AO, it's an expired. We're going to try to cash her out within 24 months. So then we went ahead and we purchased this property for or put under contract for what was the price again? So 1.24?

Yes, you're right, 1.24.

Got it. Okay. And then we have it on the market for tenant buyers for 1.32, right?

Yes.

Got it. Okay. So we go ahead, we put the property under agreement for 1.24 and a certain monthly payment. We then take it to our market. We then capture all the tenant buyers. Currently, Kirsten is having people walk through the property, She's getting next step forms, which are like after somebody views the property and they understand the rent-to-own program, they then put like their application per se that we start working them through. So she's working through that process and they have that purchase price of $1.32 million. So when this goes through, right, as this continues to go through, we're projecting to have $132,000 nonrefundable deposit. Right, which is credited towards the purchase price. And Kirsten, you said you were doing a 50/50 split with the seller?

Yes.

Okay, so then that's $66K. So I'll just break this down just for you guys. And she's— they're currently on the market for a payment of $4,000. Does that give the buyer or the seller a break-even, or are they making money still on the monthly payment?

She currently is at $3,024 a month, and her taxes are $805 a month.

And is this $4,000 plus taxes?

No, no, it's not.

Okay, so let's just say she's maybe at a break-even, uh, but what she's gonna end up netting here, right, is $1,240. Uh, let's see, so we have $1,320 So that's $66K for her.

And don't forget, she can still cash flow that ADU.

Oh yeah, that's right, because that's not in addition to— what's the cash flow on the ADU?

Depending on, you know, what time of year, she charges anywhere between $1,200 to $1,500 on that.

Let's just assume this during the 24 months. So You got that minus 1, 2, 4. Okay, so that's $80,000 from that standpoint. So she's going to net over $1.24 million, which is what she was hoping for. She's actually going to net closer to $1.26 or $1.27 on this. Plus she's got $1,200 a month in cash flow times 24 months. That's another $28,000 in profits that she's going to make. And I don't know if we know the principal paydown on this, but I'm guessing $3,000 a month. Do you know the interest rate on her mortgage payment?

Her interest rate is 3.375%.

3.375%. All right.

So, and her principal is $1,305,000.

$1,305,000. This is unreal. All right. So I'm gonna walk you guys through this. So we bought it for 1.254, right? We sell it for 1.32. Kirsten's gonna get 66K from the deal. The seller's gonna get 66K. So if I take the 1.32 minus Kirsten's payment, which is coming from the buyer, she's actually gonna net 1.254 million, which is above what we originally Stated, right? Then she's going to make an additional— this is the agent. I mean, this is the investor. I want you guys to hear this because this is such an easy pitch for people. You're going to get— she's going to get higher purchase price than she anticipated. The seller, she's going to get $66,000 roughly upfront, right? It's like 5, 6%. Then she's going to get $28,000 in cash flow during that term. Plus she's getting principal paydown on this. So let me just walk through this real quick. So that is $13,005 times 24. That's another $31,000 in principal paydown. So if you just take the $125,400 plus $28,000 Plus $31,000 principal paydown, the seller is going to net roughly around $1.313 million from this deal. And I don't know what she expired at, but I can guarantee you that she had an agent which was going to be 3 to 6% off the top closing costs. This seller is definitely going to net at least, I don't know, 10, 15% more than what she originally did on this deal. So Kirsten makes some quick money, great little deal, and then the seller gets to be extremely happy because you know what's going to happen next is that she's going to then present you with her other options and her other deals that she has to get out of being a landlord and to net more profits on that deal.

That's the idea.

I love it. I love it. Well, Kirsten, as we wrap up here, just You got somebody that has shiny object, right? Somebody just like yourself, they're trying to really cement themselves in real estate investing. You now are starting to— you now work in the system, you're getting close to some deals here and getting some cash in hand. Just so we can kind of help lift the veil a little bit for some people, any thoughts or comments to those investors out there so we can help them get to their first real estate deal?

Um, find, find your, find your people and find your, your niche, right? You can spread yourself to wholesaling, you can spread yourself to flipping, you can do this, you can do that, but at the end of the day, when you're just starting out, like, keep it simple. Like, stop, stop learning all this stuff and actually apply it. What is it? You know, knowledge is power, but applied knowledge is the true power, right? You can keep doing it over and over, you know, and unless you actually start sitting down and making the calls, getting hung up on, getting yelled at, like doing the stuff, doing the monotonous stuff. Remember, the monotonous stuff is what makes you money. And just kind of staying away from everybody's quick fix. We all know it's, you know, easy choices, hard life, hard choices, easy life. And that's just how it is. Kind of put your head down and then stay around the people that, one, know the business that you're doing, and two, that are supporting you, right? And calling you out on your BS too, because it's always, you know, good to be around those people because they reel it in and bring you back to civilization. And I think that's really what I've gone through for, for years, like years of banging my head. And when it just came down, it came down to, um, making the calls. And settling on one thing rather than trying to do 5 different things mediocre at best.

Well, you heard it directly from Kirsten. Kirsten, thank you so much for being on. Again, you guys, if you're watching these Deal Structure Sundays, we have them every single Sunday where we're doing deals and presenting these deals from within our community with our investors all across the country, 80+ markets, all different backgrounds. Helping them get to their next or first creative financing deal. Go ahead and hit the subscribe button so that way you're notified exactly when the next Deal Structure Sunday comes out. If you want to find out exactly how you can work with us just like Kirsten, go to smartrealestatecoach.com/advisorysession. That way we can share with you exactly that pathway, find out exactly where you are today, where you want to be, and help you bridge that gap. Everybody have an awesome rest of your day. Uh, and we will see you here next Sunday.