The Owner Financing Deal Most Investors Miss

You should be on the market so then you mitigate any, you know.

Yeah.

Just any thoughts on your background, Jeff, and then your experience here so far? We'll jump in on one of your newest deals.

Yeah, sounds good. So I live down in Southwest Florida, Fort Myers area. I've been sort of investing over the last handful of years, but nothing with any real consistency. I did have a day job, like Chris mentioned, as I've been in technology sales forever. Um, and as of July 2nd, they told me, uh, my, uh, my services were no longer needed. So, uh, so that'll free up some time for me to continue on and to Annette's point, have more consistency and build this thing out the way that I want it to.

Jeff, you're saying that with a smile.

Well, it's funny. I was planning to leave in January and they just moved the timeframe up. for me a little bit. My wife's a little more nervous, but it'll be all right.

Well, we need a few more of these, as I texted you, and we're there. Yeah. Yeah, this will be good. Jeff, you came to boot camp just like these guys as an apprentice. What month was it last?

What? It was last August. It was about a year ago. End of August. Yep.

Okay, so you guys have some context if you want to ask some questions about that. This steel, what type?

It was a, um, it's, uh, owner financing.

Is this Ron?

This is Ron. Yeah.

Okay. This is great. This deal started when?

This deal started, uh, my VA talked to him in February and then we picked it back up in April and, uh, Zach actually called him virtually from the bootcamp and started that next conversation. So I had had a couple of conversations, he was open to it, and then Zach helps lock it down at the boot camp.

6 months later though, from the initial call.

Yeah, yeah. And we— he, he tried, he thought he had a, a buyer for it, his neighbor was going to buy it, and then he backed out last second. So he was pretty frustrated, he was ready to do something.

Yeah, so instead of going with Jeff during the conversations, if I remember, Jeff, he went with his other buyer Then had to come call him back.

Yeah.

Okay. So this was expired from your VA?

Uh, it was expired and then FSBO. So either one.

And that started with your VA, then you?

Yep. Okay.

Uh, what, uh, owner financing. Okay. So it was free and clear.

Free and clear. Yep. Okay.

This was the guy's second home, if I remember.

Yeah, it was a vacation home. It got flooded out during Hurricane Ian a couple of years ago. They've rebuilt the entire community, and, uh, but none of them have sold yet, so I'll be the first buyer in there, which is exciting.

Uh, purchase price?

$305,000.

Uh, term?

Uh, 84 months, 7 years.

Nice. I don't remember that one. That's good. Payment monthly?

$350 a month, principal only.

Jeff, you can talk about it, fill in the blanks here. But one of the reasons Jeff got this was— I'll explain it my way. Jeff, you had to live one, and that's how I missed. There's a boat dock in this, so the HOA can be even higher with the boat dock. Now the sellers don't know we're passing that on, right? So Jeff used that to get this payment down. Look, you got, you got taxes, you got the boat dock, you got HOA. Am I accurate?

Yeah, exactly. The HOA costs are really high in this community, uh, $1,200 a month. So I think the rentals are probably— the rental rate's probably $2,500, $2,700, somewhere around there. Um, and so I said, look, I can't, I can't pay much. I mean, with all the expenses including the HOA and the boat is on top of that. Another $150 a month. Um, so I said, look, I could— here's what I could do. And we started a little bit higher, and as we negotiated and I gave some things, he gave some things, we ended up down at $350.

Sweet.

Okay.

Uh, you guys have seen a good mix today though. These are good. And you got this signed, what, 2 weeks ago or not even?

Uh, yeah, like a week ago Monday. So we could go a week and a couple days.

Okay, so you are on the market at what?

Well, not yet. I'm going to close on it on the 20th. Yeah. So this one I'm actually purchasing.

Why can't you start marketing? Why didn't you, Jeff? Maybe I missed that.

Why can't I? Yeah, I guess I could.

Yeah, you should. I can't believe Nick didn't catch that.

You should.

You should be on the market.

So then you, you mitigate any, you know, Yeah, he, he actually called me yesterday to run through the numbers, but I said, uh, I said, yeah, I'll work on that, uh, later this week because I'm not closing for a couple more weeks. I hadn't thought about marketing it early. So yeah, see what I pick up.

Okay, just since I know, you're gonna sell for how much?

Um, $340,000.

$340,000, uh, monthly?

I'm saying total is $3,000, but I'm going to break it down. The rent would be $1,800 and the HOA would be $1,200. So $3,000 is going to— is what it'll end up to be.

Right.

And remember, you guys, any buyer in any one of these developments that have HOAs, any buyer, when they're looking into that development, they know like they got to pay the HOA, right?

It's just the $1,800. Does that include taxes?

Monthly payments, right?

Are you going to try and tack on taxes? Are you going to suck that up?

I think I'll just accept that. I'll just take that myself. Yeah.

How much are taxes?

Well, it's tough to say because they minimized them because of the hurricane. So it's only $450 a year, but it's probably going to be, I don't know, $2,000 or $3,000 a year, a couple hundred a month. I'd say $200. Yeah.

So let's figure that you're paying that on your dime. So it's $550 a month, right? Is that how you figured this?

Yeah. Yeah. Okay.

Yep.

All right, let's do— you guys have any questions? Well, we didn't talk about why Ron sold. Do we?

We, we hadn't yet. So, um, like I said, went through the hurricane a couple of years ago. He hasn't been able to use it. Uh, the association renovated all the units and that took them a couple of years. So he hasn't been down. He doesn't plan to come down. Um, he tried to sell it. He listed it September of 2024 for $500,000, um, which they had sold for $500,000 a couple of years ago before the storm. Didn't sell, kept lowering, kept lowering. He was on for $350,000 or $360,000 when we talked to him and he was just frustrated. He just, you know, he's just spending all that money every month and he doesn't plan to come back down and use it. So he just— he was ready to sell.

Okay. You guys have any questions about the scenario before we do the paydays or on Zoom? Good.

Okay.

Question about HOAs. Do you have a way to track them, or do you collect the HOA payment and turn it over to the HOA, or does that change deal by deal?

Yeah, I mean, I'm planning just to pay it, and then, uh, I'm, I'm taking that money in from the, the tenant buyer, uh, so I'm just basically taking some of that money and applying it to the HOAs.

Okay, I'd prefer that too, Dan.

Yeah, yeah.

No, okay, let's do the, um, paydays.

Okay.

Payday 1.

Payday 1, $34,000. Unless we do the— do we do the first month here as well or no?

That didn't come up on all these deals. So you guys built into the agreements usually, no matter what agreement you do, we started this way back like 2016. We put in the agreement with the seller that we're going to start our payments a month after occupancy. We get away with it 9 out of 10 times so that when the buyer pays the first month, it's just extra gravy. We're not paying out yet. Almost every deal. Did you do that on any or all of yours, Rick?

Yes, I did. All of them? I believe all of them.

It's just a buddy of mine gave me that little tweak like years ago. Talk about just getting little nuggets, right? And we started doing it. It's found money, you know. Yeah, you got several thousand dollars per deal.

And what I did with this one, Chris, is I told him I don't want the payments to start for 90 days. So I have 90 days, 90 days payments. Um, I wanted the HOAs too, but, um, it was one thing I gave on. He paid them through, uh, he paid them through September, and he's paid the taxes, and he's paid the boat fee for the next year. So he's given on, on his side. So I said, all right, I'll pick up HOAs in October, but payments won't start till December.

Okay. So again, another twist, right guys? I'll stop payments in 90 days. No, it's 100% in your court to negotiate this. So let's not, we don't know if you're going to sell right away, so let's not figure in any extra money, but it's going to be plus the extra months if we can get it sold right away.

Yeah. Yeah.

I love it. Okay, so payday 2 is what? Uh, you really had $1,800 rent and $550 cost, right? Um, yeah, well, plus taxes. He's gonna eat them.

He's not adding. Yeah, my costs are going to be $1,850. $1,200 for the HOA, $100 for the boat. $350 to the owner and about $200, I think, for insurance.

Okay. So what's your payday 2 cash flow?

If we get to $3,000, my cost all in would be $2,200. So $800 a month.

Also, you have play there if you had to.

Yeah. Yeah, I got some room there.

How many months are you figuring this on yours, Jeff? Just for the heck of it.

I did 2 calculations. I did a 7-year And a 3-year.

Uh, let's do both. You guys good with that?

Yeah.

All right, so $800, if it goes to 3 years, how much?

Um, I'm gonna do that on the fly. I got it totaled, but, um, so $800 times 20—

I mean, times 36—

$28,800.

Okay, he has 7 years, guys. There's just a lot of play here. And what if it goes the full 7 years?

Uh, $67,200 just on payday 2.

Okay, so somewhere in between, guys, is reality, right? Okay, payday 3.

All right. So price premium's $35,000.

Price premium, $35,000.

Principal paydown of $350 a month times 84 months is $29,400.

That was which months?

84 months.

$29,400?

Yes.

And what about if it was only 3 years?

That would be $12,600.

Okay. So credit for the deposit of $34,000?

Yep.

Okay. So we have 2 numbers here for payday 3, a 3-year and a 7-year. Way too much math for me, but who has it? You have it, Jeff? Um, well, pay the 3-year is $34,000 plus $2,880 plus $20,600.

Oh, $12,600.

$12,600. Looks like 70-something.

Yeah, I don't have that figured out right now.

Well, someone do it. 34, 28, 12. Just— I'm writing down that $74,000.

Yeah.

So if it's 3 years, it's $74K, and then if it's 7 years, it's $34,000 plus $67,000 plus $29,000. You got to take out the $34,000 though, right, from that $74,000? No, we did it here, didn't we? Oh no, I'm sorry, we didn't.

Nope.

So $74,000 minus $34,000, so you're talking $40,000. On which one? Um, the 3-year one. Stick with the 3-year one.

Uh-oh.

Yeah, I did—

was that 4 years?

Yeah. Okay, so 3-year one's gonna be $40,000. $40K in the 3-year. And on the 7-year? I haven't done that one yet.

Come on, Steve. I had, I had $30K on the 7-year, so we must be doing something different.

Well, on the 7-year, $35K and— You're subtracting the monthly cash flow. You got to subtract that. You're down to $30K.

Yeah, 34 from 35 is 1, right? 64.

I think you paid your 7-year high. 96, I got for the 7-year. Yeah, it's almost $100,000 for your 7-year because here it is, guys. Let's just do the 7-year. $34,000, $67,000. Then to get to the payday 3, because I didn't write it out, we took the 35 plus the 29 minus the 34 deposit. That came to 96. That makes more sense. So 40 versus 96. So Jeff's will be between realistically probably 40 and 75. There's a chance of it going all 7 years with a tenant buyer. It might. But yeah, 35 to 67, the 29 minus the 34. Now, you guys, let me say this because someone asked about evictions. We're going to talk about it after lunch, but the more time, like Let's say this. Rob has a deal that has a ticker going with the seller and he's got to cash out in 3 years. It's a lease purchase. Is he going to be more diligent about staying on top of his buyer, making sure they're doing everything to get cashed out? Yeah, he's probably going to put his thumb on the shoulder a little bit. If Jeff has 7 years, does Jeff have to really bug them? They're, they're supposed to do their own thing anyway. So does he really have to bug them? No. But historically, I'll just tell you from my experience, The more time you give a tenant buyer, the more time life has to happen. Death, divorce, bankruptcy, like you name it. So is there a chance that Jeff could get out to year 6? I'm just making this up. Have a headache. The Florida market came back and he just goes, screw it, I'll sell it. Good. Nick and I just did that. We sold one on payday 3. I told you yesterday it was $231,000. Why? She couldn't get to the end zone. COVID, cancer, everything happened to her. She couldn't get to end zone. She left and we sold it conventionally. That Florida market used to be $500,000 here, Jeff. You said not gonna be that way forever. Never is. Okay, I know we did a double thing there with the 3 and 7 years, but any questions on this one? Sounds like you want this one to go long. Sure, right? Yeah, yeah. Nick, this is Jeff's and he's not marketing it yet. No closing. I said, why did you not want him to?

Which one?

This is the one with Ron Brooks, the owner financing one. Go ahead, Walter, nice and loud so they can hear. Oh yeah, after the principal payment. Yeah, but I got lost on the— what's the minus 7? Yeah, sorry. Uh, this is, uh, price premium, and this is principal paydown if it goes 3 years, and principal paydown if it goes 7 years. We did 2. And then the last part, uh, minus the $34 deposit that they paid. I know it's got tricky down here.

Tricky, huh?

End result is all 3 paydays between $40 and $96.

Uh, oh, great.

I think, uh, Jeff, is this the— is he on here?

Yeah, yeah, bottom right.

Bottom right. Oh, hey Jeff, is this, um, is this the one that we're a long way from being able to get someone in there?

Well, this is the one that I'm closing on in a couple of weeks. So I wasn't pushing to, like, I got to get these numbers to you, but this is not the one that has the tenant in it that we're trying to get out. So to Chris's point, I guess we could start marketing it before we close on it. I hadn't thought about it.

I would say, give me the, give me the numbers on this one so I can help you with it. Yeah. If you're closing in a couple of weeks, I'd rather us have someone lined up, at least have it on the market by the time we close rather than—

And Nick has 90 days for us to pay to sell us. That's more reason to let's get it sold.

Yeah. Side point, like sidebar, I have asked for it, but—

Yeah, he did. He did. He was, he was pushing me for it. I just, I hadn't got to it yet and I'm trying to get these appointments for Thursday.

So— Yeah. He's pushing to get Zach in town. Legitimately, after Zach leaves. Hey, Jeff. So if you and Nick in theory pop this in August or September, you're only out of pocket for 90 days. Is this HOA?

Yeah.

So you'd have $1,800 a month for a few months. There's incentives.

Yeah, yeah, right.

Nice. That'll pay for your BA for a year, probably.

Yeah.

Yeah. I thought, I thought this is one that—

No, it's not the girl that's in it. He has to be back.

No, this is This is the, um, the one with the HOA and the condo development and the boat dock and all that. Yeah. We've already talked about this. I think, I think combining the HOA with that low monthly payment and just having one monthly payment.

Yeah. And that, you had a question, sorry. Yes. My question for Jeff is, so Jeff down there, are you buying absent owners lists or did this come from like a canceled expired?

Yeah, it was just, it started off as an expired and then he put it on for sale by owner. So it was a little bit of both, but no, we didn't pull a niche list. This was just off of My Plus Leads.

But nature of the market, Annette, is he's running into a lot of this, right? Because a lot of second homes.

Yeah.

And the market's shit in the bed. So he actually just has to be careful picking what he wants because a lot of leads there. No pressure, Jeff. You got to fill Zach up.

Yeah, one thing I want to point out is real quick is all these people we have on here so far are President's Club or I6, and you'll notice the interaction between them. And it's not just their interaction with the coaches and all of us, it's interaction between each other. So that's one of the things you get When you're at the associate level rather than apprentice. So—

Oh, it's nonstop.

I—

yeah, some of you guys asked me that. We'll talk about this afternoon just so you understand the differences. Jeff, I remember, and you may not, I just thought of this as he said that when you and I talked, we hadn't met yet. It was before you came to boot camp. You said something along the lines of, I'm trying to get my, my head wrapped around actually doing deal splits with you guys because you were doing some deals. Do you remember that?

Yeah. I had done some wholesale deals. I started getting into creative stuff and started talking to some sellers on my own, realized that one call with Chris would've made me an additional $18,000 had I closed that deal that I was talking to before jumping in the community. But yeah, I had started doing some and at least talking to some, but I said, man, I'm going to be up in Boston soon. It's too bad you guys don't have something going because Love to stop up. And he goes, well, we got something next week. Come on up.

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. He was going to a fundraiser in Boston. So it just worked. Everything for a reason. Do you guys need pictures of this? Oh, question. Uh, what's the Usually check out the total payout. What's the— yeah, if it's 3-year, it's $40,000. If it's 7-year, it's $96,000. That's all 3 paydays.

Okay. Did you just sort of round those last 2 numbers?

Yeah, yeah, yeah. Because it— and that's picky, but yeah, I think the 7-year is like over $100,000. That's why I have the range, but I'm sticking to my calculation over here. Yeah, I like it.

I like it.

Yeah, that's fine.

Yeah, we try to be conservative.

That's fine.