Strategy Sessions with REAL agents, How to structure unique contracts

Throwing up softball right now as we got. Getting ready to talk to Connor or Sean, either way. And Connor's deal is, is he's looking at a house that he wants to include in the purchase price, the contractor invoice. And he's want to know how to structure that. So I'm going to go through and show him how to structure that contract. A couple of cool purposes about it is that it does raise the comps in the neighborhood. And what it is, is when you negotiate a net offer, say at $300,000 and it needs $100,000 in renovation, we will borrow $400,000. And in the seller side, they will pay $100,000 to contractor of your choice, which then gets paid out of escrow into whatever contract you choose. Lots of different ways. So don't just take that literally right there. There's just different ways to do that. And what it does is it allows you to do 100% borrow. And there's some advantages to that down the road, especially if you're going to do a rate and term refinance on a rental property. See what Connor's got.

Hey, Steve.

Big Connor. What's cracking with you, my friend?

Not much. Just maybe a new house, new project.

All right. I like new projects. Well, walk me through it.

Yeah. So it's in Glendale, 85303. That's through a realtor that I had met. Family members are selling this house.

Parents passed and the kids building relationships with other agents is where we're finding.

Majority of these properties. So they're like in shock. So, yeah, that can happen. Huh.

Huh.

See that all the time.

I'll tell you what, Connor, the worst one I ever saw was a couple of years ago. Husband and wife had gotten divorced. And I got a call from the probate attorney. She had passed away. And he was explaining the situation that for years the wife and the husband or exes, they would still get together and have date night and he would only. She would only allow him to pick her up in the driveway. And when she passed, it was a couple of days. And I'm telling you, Connor, like the worst thing. Probably 10 years of mail that just got thrown on the kitchen table. Pile wise. Lean Cuisine meals all over the kitchen floor. It was disgusting in the. In the hoarder thing. And nobody knew it. Yeah, nobody knew it. Yep.

Wow. Yeah. This house, it's in an hoa. So we. We pulled up and the front lawns, manicured, cut, it's being watered, exteriors recently painted. Then you go in and Just bam.

Like the Twilight zone.

It's sad, you know.

Yep, yep.

Can you hear me?

Yeah, I can. Yep.

You're good, you're good. Okay. So yeah, we're the first person she called out.

Okay.

And they wanted to sell it quick.

Okay.

And probably like a 10 day close.

Okay.

We're working on. Okay. So we agreed on a 410 purchase price.

Okay.

And I remembered, you know, you do the purchase price, they need seller credits to increase the price for multiple reasons for, you know, you kind of want to not hide but you don't want everyone to know the base price.

Yes, correct.

So, you know, two reasons there. So I. We're thinking about doing something similar. Even though we're going to be using our line of credit for that. So we don't really need to increase it. But I'm curious. So let's say we technically buy it for.

Pause. Pause for one second. Connor, I need to go back one step. I need to know if this is going to be a flip or are you going to turn into a rental? And if you're going to turn into a rental, are you going to do a rate and term refinance once you've added the value from the renovation?

Yeah. The goal is a flip and very minor stuff.

Okay.

Clean it out, clean it up. And then our goal is to sell it quickly.

Okay. Done.

Yeah.

Okay. What's. So walk it through. 410 purchase price.

410. And we're thinking we really just want to clean it out. The pool's green, so get the pool looking good. Clean up the backyard landscape. So not much, you know.

Right.

15, 10 max.

Okay.

You know, we're not like, we're not.

This is where we work through kind of an as is clean out price. You get all the junk out because it looks terrible because people can't see through it. And then we just toss it back on the market.

Roof's good paint exterior. So we're thinking 10 or 15,000 max.

Okay.

To clean it up.

Okay. So we're. Okay, so we're 410net to seller. You're 425 with. With 15 into it. Keep going.

I think it could sell. Sell for. There's comps in the low 600-high-500. But we're obviously not updating it. I think we could sell it around 500 as is. Okay. So I want to get up to like 450, 460, our quote unquote purchase price, you know, after the seller's credits.

Okay.

So then. Yeah.

Okay. So let's let's split this up a little bit. You ready to play the game with, with our commissions, our profits, and kicking. Kicking your cap in the ass. Okay, here's. If we play this game right. Oh, hold on. I like all of where you're going. I just want to help you kind of cut this up a little bit. Let's see. Okay, so you'll have a choice depending on what your agreement is with your partners in this. What I would suggest in your case, any profit you get in this deal that you work into the acquisition commission and the disposition commission so that you can take this one deal and almost meet your entire cap and be done. And then because your, your anniversary date is August 1st with me, so that means you're going to do and follow in my footsteps where your caps met in month one because of a good flip like this. And now everything is just a transaction fee of $300 going forward for the next 11 months. And that's where we just have to hit that, you know, $6,000 mark in the next nine, 10 months so that we can get the award in the elite production of the $16,000 in stock. And you're taxed all the same on the income. Doesn't matter where it goes. This is where we just stop, we pause and I help them understand not just the instant gratification, but the delayed gratification of hitting their caps in real and then getting to their stock award. That's what's dope. That makes sense, Connor.

Yeah.

So what we would do on that is just take a bare bones minimum. Like let's just take a quick approach to it. You put it on, you get $500,000 as is no compensation to the other side. It's a net 500 to you, your base, even though you're using it well, you've still gotta pay for the credit line. So let's say your base is 425 and let's just call it 430 with holding costs. So you have a $70,000 spread right now. If whatever percentages, that spread is between you and your partners, take that percentage and split it out in your acquisition in and your disposition out. And why we do that, Connor, is because this is where we kind of build the train track so we have consistent income. Don't take a bunch of it up front because you tend to blow it or you put it in different places. You take a little drip and you know, you put a little, you turn the dripping faucet on in the front end and then let it drip on the back end. So you have some consistent bumps in it.

Yeah, yeah.

And if you care about your transaction count numbers, it gives you one extra in that scenario.

Sure.

And you know my feelings about that.

I do. Okay.

So see, the cool thing is, is I don't really believe in transaction counts. I believe in ways to solve problems and create income.

Yeah. So the other realtor, she's. The parents, obviously, pass. They have a trustee and the trustees down in Tucson, and they don't use DocuSign. So this realtor, she's like, I gotta bring the purchase contract down to Tucson or overnight it.

Well, I mean, that's. That's. I guess that's better than them saying, hey, can you fax this?

Yeah. I mean, there's always worse.

Right, Right.

So.

Okay, well, that's dope, man. So let's just do a quick takeaway here real quick. So you got the deal from an agent that you created a relationship with. Right.

Ten days ago, basically on a cold call.

Okay. Ten days on a cold call just from talking to her about what you do. So this is just like a huge win. As you kind of go through these things and we talk through them. It's like, that really wasn't that hard, right?

No. The best ones are usually the easiest.

Yes. And that's true. And the awesome part is it's just win, win all the way around. And then we get to move on and continue that relationship with that agent and see how we continue to collaborate until you're like, hey, would this interest you over here? This is what we're doing. By the way, we missed you yesterday.

Yeah, I wanted to be there. We had our first full real eviction, so. Ooh, ooh.

Oh, Connor, you gotta remind me sometime to, like, tell the group, like, my worst eviction foreclosure stories. They are some, oh, my gosh. Messes.

Yeah.

Holy.

You just.

You just, like, sent shivers in my spine.

Yeah, it's. Yeah. Next Friday we'll share.

Yeah, that's. That's fun. That's fun.

Yeah. Constable. Yeah, we never. We. This is the first time we've been through a full one. We've had it where the people have left, you know, before.

Yeah.

The first square you knock and gotta get out.

Yep. Dang.

Unfortunately, all the way around.

Yep, all the way around. Never an easy thing.

I plan on being there this Friday.

Cool. Well, we're looking forward to seeing you, homie. All right, brother, talk to you soon. Hey, let me know if you need any help with that. Okay. Oh, and by the way, on this now too. If you're, you know, if they're sending the contract out and you're raising those prices, make sure, you know, if you're trying to get your final sales price with them to be 460, that you're putting in your, your buyer agency compensation and you're putting in your closing costs and you're putting in your repair money to the contractor to work that backwards. And then you need to show them a settlement statement where those costs are just expenses on their side and we're raising the price to get there.

Yeah.

So you're gonna have to do a good job of explaining to it and showing them both ways and it comes out the same.

Yeah. Okay.

Okay.

Got it.

And Connor, if it gets weird and they kind of get squirrely on it with the whole trust and the other things, then don't force the issue. Just go back to the net number and get it signed. Because we don't want to make them nervous and scare them off if the agent can't go through it. So just keep that in mind. We want to do it the way we talked about, but if it starts to spook people, back off.

Yeah. Okay. Yeah. I think the kids are pretty good. The realtor, she's, she explains things well. Okay. But, you know, that's good to know. Yeah, don't, don't push it.

Yep.

Get them to walk away.

But if you've got a good agent and younger folks on the fence. I didn't know if it was older folks kind of going through it, so. Yeah, I mean, you probably have some meeting of the minds and if everybody can understand net numbers, then we'll be good.

Yeah. Yeah. Awesome. Thank you.

Cool. You got a brother. See ya. Bam. So success all the way around here. And it's just a reminder at. Sometimes we try to make the investment in real estate very difficult. And the reality is, if you're approaching it with character and integrity of, hey, you know, like, Connor reached out to another agent, just said, is there anybody or problems that maybe I could look at and help you solve for yourself and your client? She said, well, by the way, I do have one family inheritance. He's like, great. So he's the first one in the door. And now he gets a shot at solving the problem for the family. They don't have to clean the house out. They don't have to deal with it. They get the number that works for them. The other agent makes a good represented commission. See, here's where she earned her money. She just got to go out and go, hey, I have a guy, he's going to buy the house, he's going to take care of all these problems. That's good value for them. So we just continue down the rabbit hole of just operating in abundance and going through the things. And yes, those of us that take the risk when we buy these houses in weird markets and you don't know what's going to happen, you don't know what's underneath the surface, there is some reward to that. And when you risk, there's also some failure to it as well. I've experienced it many times and that's what we take on. You got security. If you sold it that way that you didn't have to mess with anything, nobody's going to come back and sue you. And now I take that risk on and it's a great win win for people. So let's keep going.