Chris Preet walks through a six-year creative real estate deal with a divorcing couple. He bought the property subject-to with no cash down, collected a $41,000 deposit and monthly payments, then pivoted to a conventional sale for $579,900 when the buyer defaulted, netting roughly $236,000 plus the deposit.
Chapters
Okay, guys, it's Chris Preet. Welcome to this week's Deal Structure Sunday. I wanted to do something totally different for you guys this week. This is a deal that I've featured in past events that had a very specific 3-payday cash out like they all do. Now, this house is closed, but it took a turn. This particular house, just to give you some backdrop, the sellers were getting a divorce and fighting. It was not amicable whatsoever. And one was on the deed and one was on the mortgage. So we ended up buying this sub-2 and it came from an expired listing. Now, the purchase price was— you're going to see the numbers skewed a little bit. The purchase price was the balance on the mortgage plus some arrears, plus some credit card debt. One of the spouses, I think it was the husband, said, I'm not signing off on this unless you guys take care of the credit card debt, which they ran up to rehab the house. I think too many Home Network channel viewings, maybe. But we— so that's how we structured the deal. It was a little different. No money down, but we had to pay arrears and then quarterly payments. You'll see on the credit card debt. Okay. All right. Now, this took a turn. So, so bear with me. This was the projected deal where we sold it to this woman who was an attorney, went through law school, trashed her credit. We sold to her for $425,000. She put $41,000 down. It was upfront. Payday 2 wasn't overtime. That was a good one. Payday 2 was we are paying 2024 PITI, principal, interest, taxes, and insurance to the bank directly because we bought this sub-2. We do that even in lease purchases. We pay directly to the bank. And the payment from the buyer, I think it went up to $2,297. You're going to see the agreement, I think started at like $2,100 and change. It was very thin payday 2. And then Oh, well, I'm going to save the goodies for later. Okay. So just generally speaking, the numbers, you know, 10,000-foot view, about a $13,000 payday too, if it cashed out in 29 months, which she originally had planned to. Then we planned on owner financing it to where she couldn't get to the closing table with enough money to even buy it owner financing. So this thing kept taking turns. Markup of the house then was $69,000. Principal paydown Not too bad. And in that 2024 payment we were paying, it was $569. And then you minus her deposit at closing if she had closed it out, and that deal would have gave us a payday 3 of $44,000. And you take off the arrears, it would have gave us all 3 paydays of just under $100,000. Now, that's a great deal. And our goal is always— I've been screaming about this for over a decade— to help the buyers get to the finish line. There are just too many educators, frankly, People in my space, a lot more than there used to be, who, who will teach you publicly. I'm not talking out of school about them, that who cares if the buyer qualifies? You can collect another deposit and put another buyer in there. That may be okay legally for them, but it's morally and ethically awful. That stinks. I don't know how they can sleep at night. We have a very strict program for our buyers that my son Nick developed since, gosh, back in 2014 or '15. '14. And it has evolved tremendously. Now the coaches teach it and we walk buyers through a very specific process so that we are dealing with real buyers who can cash out. Now I'm going to show you a deal where the buyer defaulted right here. Why is that? As strict as we are? Well, life happens in 2 to 5% of our deals. You can even say 2 to 10% to be safe. We'll have a headache. Are headaches bad? No. You just have to know how to pivot. That's what we do great in the community. Fortunately, unfortunately, we've been through a lot of different scenarios and so we can help the Wicked Smart community. Let me tell you what this looks like. So in August of 2019, we buy it for around $360,000. I know the numbers are a little different. I think there's some credit card differences on that. The tenant occupied— the tenant buyer moved in in November of '19. Okay. So, so far everything's standard. Sold to her for $425,000. She had a vacate this past April of '25 and we ended up selling for $579,900. Now look at the big difference there. We had it sold to her at $425,000. She had the opportunity to do that. By the time we got to the end zone here in April, it was $579,900. Okay. Big difference. I'll show you what this looked like. So we bought it in August of 2019, purchase price around that range. Again, the credit card thing might have thrown it off a little bit, but we had an existing mortgage of that $346,000. We had arrears and then we had some credit cards. So I think this is about right, this $360,000. And we did it quarterly so we didn't have to come up with cash. And we did it quarterly to coincide. That was to the seller. We did it quarterly to coincide with our buyer paying us. Okay. That was our agreement. These agreements are in the QLS Home Study Program, guys. If you don't have it, go to smartrealestatecoach.com/QLSYouTube. QLS YouTube. There's no reason for you not to have that. It's our staple that's been around for over a decade. It's been updated 4 times. You get all our agreements. Amongst all the training. Okay, so tenant buyer, we use a normal agreement. Just going to show you, it's a long-form lease. And what she did is at the time her rent started at $2,186, a little different than that first slide, a little stronger. Then the deposit was $41,000. And again, the purchase price was $425,000. Now I'll clean up the monthly numbers, but the point is to tell you the story. What happened is Time after time we went up in the rent because at some point in time she became just a tenant, couldn't, couldn't come to the closing table. We were going to sell owner financing. So she became a tenant. And when she became a tenant and acknowledged that, we then took over maintenance and repairs. Technically, she did a lot of herself. And then in April of '25, March or so of '25, we said to her, look, we can't keep going like this. You have an opportunity to close it and the house is super valuable if you can get it done. And she couldn't. So she left. Long story short. We received a full price offer in May of '25 for this house. 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. This was a conventional deal. We give it to realtors and we're going to sell it conventionally. Could we, because we own it subject to with no clock ticking with any seller anywhere, Right. Could we have put another tenant buyer in this? Yes. This was in an older LLC that we wanted to clean up, quite frankly, my son and I. So we sold it off, but we could have kept this. This— we could have kept this for 30 more years. The buyer paid $579,000. We paid the realtor, we paid some closing costs, we paid off the mortgage, which remember started around $355,000. And our payday 3 was $236,000, quarter of a million. Remember, we already got $41,000 payday 1. And we got paid A-2s all along the way. Mortgage with, with tax insurance went up a little bit, but we kept increasing the rent as we went to it because she was just a tenant at that point. Now, this might spark a bunch of questions. Here's the HUD to show you the 236, bottom left-hand corner. This may spark a bunch of questions, but what I'd like you to do is bring these questions about this deal to either a strategy call with me and I'll give you a link for that. Or come to the Wicked Smart Sit Down. We run them every Thursday, and if there's not a guest speaker, it's us. And about once a month we have a guest speaker. Okay, so I hope this helps, guys, to show you not that I don't want to always put these rosy scenarios that every single buyer cashes out. But I will tell you that our default rate is only 2 to 10%, sometimes close to zero if we have a good year. What is that contingent upon? You get really good at screening buyers and putting them through the right process. And that whole process is in the QLS course too, by the way. Right. I just mentioned that earlier, the QLS. So go to smartrealestatecoach.com/qlsyoutube, get 11 mods. Just one is the paperwork, but then you have a mod for lease purchase, a mod for sub-to, a mod for owner financing, and a mod for what we call a sign-out. It's only one payday, but it's a good backup strategy versus losing the deal. There's scripts and dialogues in there. There's live calls, there's PDFs with calls, you know, with scripts on them. Amazing, amazing, robust. Academy for you to go through, and it's a living, breathing thing, meaning we update it constantly. Okay. All right, guys, until next week's Deal Structure Sunday, make it an outstanding week. It's your choice. And we hope to see you at this year's QLS Live event. qlslive.com. It's in Boston. You can have an amazing experience. We'll see you there.
