Video tutorial by Jonathan Cronin explaining how to structure a Letter of Intent (LOI) or offer for apartment deals. The speaker walks through a practical LOI template (non-binding), key clauses (purchase price, earnest money, due diligence period, closing timeline, financing), and process advice (call broker/seller first, protect time, avoid bad deals).
Hey, what's up, guys? It's Jonathan. Today I want to talk to you about how to structure an loi, a letter of intent or an offer for apartments. Okay. If you've been following us, you understand we generally are talking about larger apartment deals, but it could go across the board. So in this thing, in this video, I'm going to actually break down an actual LOI template or an offer and show you exactly what we put in ours. Of course, we have several different versions depending on really what kind of deal and what you're looking at. But there's a simple standard one that I want to break down for you, but also kind of like how the process works. So let's get into it. And one of the big things here is if you do this wrong, you can risk basically the person not taking you seriously, the broker, the seller, whatever it is, or, you know, you could just miss opportunities because you just structured it wrong and you could have done it better and get, get a yes or get, you know, closer to the top or you could get yourself into trouble. Right. So there's many reasons why you need to be very careful at this stage and make sure you're doing this correctly. But second, one of the biggest points I'm going to preference this with is, is. And you understand, if you've been following us for any amount of time in this channel, you understand, one of my biggest points is not wasting your time on bad deals. One of the biggest issues and mistakes I see rookie investors do is spend too much time on deals that aren't going to work out. You see, as a real estate investor, your most valuable asset is your time. Okay? You've got to learn how to sort through deals. And a lot of this is going to come through market knowledge as well. So the more you know your market, the more you know what the area, the, the faster and the more knowledgeable you're going to be about the price ranges for deals and the faster you're going to get. Right? But it's important to understand, like, I'm not even going to create an LOI and create an offer like an actual structured document, more formal offer, until I've, you know, heard from the broker that I'm in the range or from the seller that I'm in, I'm close to the, to the right price, you know, or they're going to even entertain it. Because if they're not even going to entertain it, yeah, it's cool to get your name out there, but you also have to be very protective of Your time. Like, I'm not going to go work up a deal. Even though it's. It's not going to take that long to create an loi. It's just you got to be protective of your time as you move through the process. Because typically what we teach is your NAC analysis into a deeper. And then if it passes that stage, it goes into a deeper analysis called the deal Analyzer. And you can check out our past videos where you can see more on that. But all that to say, first thing, call the broker, call the seller, see if you're even within the range, it's even worth submitting an loi. Okay, that's going to do a lot too, because you don't just want to shoot an LOI out there and then think, all right, yeah, well, will have a good running. You know, you kind of want to get a hold of them, kind of talk about your experience or talk about your partner's experience, whatever you're doing. If you're part of our mastermind and, you know, you typically, our members typically are talking about, you know, the. What we've collectively done, what are, you know, what the leaders have done. So then it kind of gives them an advantage in there because we will partner up if we need to. Like, we are a team, right? And that's what we love about apartments, is we are a team. And so that's. That's a amazing advantage. But let's just jump in. I'm gonna share my screen and show you exactly what an LOI template looks like that we use. Okay, so first off, this is called Letter of Intent to Purchase Real Estate. Okay. This is what the name of the thing is. This is a standard offer. We have other templates that we'll use sometimes depending on the situation. Like, we have one template that gives the price that we're going to offer, but then it also gives. If the seller's willing to do seller financing, we'll make this offer. Right. Because you can generally offer more if the seller is willing to do some type of creative financing, some type of seller financing or something. So based on you carrying back this much, I can give this. Based on the seller carrying back this much, I can give this much. So. So we have different standards and one more lengthy for maybe bigger deals that are more sophisticated in a sense. But typically, you know what, what me and Larry, my partner, are going to recommend is the simpler, the better. Okay. And probably even most of your brokers are wanting the same thing. But either way, buyer, put your name, put your group Whatever that is. This is a letter of intent only. It does not create a legally binding obligation on the parties of their broker. So if you don't so even a preference, this, like this is a letter of intent. It doesn't mean that you are stuck at this price or you know, you've got to sign a legally binding document. Like the next step after this is where you actually sign purchase and sell agreement or the contract. Right. This letter of intent is subject to an agreement between the parties upon a formal written purchase and sale contract containing the terms and conditions the parties find acceptable. This letter of intent sets forth some of the general terms and conditions for a purchase and sale transaction to be entered into concerning the below property described. So then you put the property address here. Property price, earnest money is typically 1% earnest money of the purchase price after receipt of all requested due diligence items. And then you put that number, what's that right there? What is, what is 1% of the purchase price? So $5 million. You know, what's that? $50,000. So, so, and right here, you know, it says upon receipt of all requested due diligence items. And what that is, sometimes you hear people say, sometimes these things will be like 10 days after the agreement sign after the PSA, but here, it's just, it puts it on the seller. Seller's got to get you the due diligence items. Right? So, and then the next one is contract closing date is 45 days from the end of the due diligence period. And all these are just kind of templated. It could be 30 days from end of due diligence period. And due diligence period could be 30 days. So it could be a total of 60 days. Financing buyer will have 45 days from receipt of all requested due diligence items. So that's typically the same thing as the contract closing date. 45 days from the end of due diligence period. Right? Due diligence period. Oh, well, 45 days from you. Yeah. So due diligence period is 45 days and then you have 45 days to close. Okay. So that's 45 days from receipt of all requested due diligence items. And then additional clauses just vesting to be determined upon close of escrow. Buyer will either be getting financing hard money loan or cash purchase. Okay. So I hope that helps. And then you put your name and the signature. Okay, I hope that helps. That's a template. If you need this template, let us know. We're, we're, we use this in many different transactions. And we've, and this has been kind of the simplest, best one that we have so far. If you want more complicated or more, you know, like, seller finance options, let us know. But hope this training helped and we'll look forward to seeing you in the next video.
