Mortgages & Creative Financing

One Real-Life Example of How Creativity Can Help You Find More Deals

Expertise: Personal Development, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice
41 Articles Written
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Many real estate investors miss out on opportunities because they’re not looking for creative ways to structure deals. It may seem that a particular deal isn’t doable on its face, but if you look at it from different angles, you may just find yourself a $70,000 payday.

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The particular investor I worked with on this deal had no experience in residential real estate. His experience in commercial real estate was as a broker, but as you may know, that’s a completely different animal. He pointed out how emotions are involved in residential real estate because you’re dealing with buyers and sellers, but in the commercial real estate work he did, he dealt with cold, emotionless institutions.

I like to remind new real estate investors about this kind of situation any time they think a success story like this can be chalked up to previous real estate experience. In this case, the investor was starting from square one like everyone else starting new does. Take me, for example: I had about 18 years of experience in real estate before I re-engineered my business to do all deals on terms, so it was like learning a new business all over again.

The Deal

This $70,000 payday came from an assign out (AO) deal that the investor found from an expired listing.

He noticed that the house was on the market for $1,475,000, which was higher than he usually took on, but he decided to pick up the phone and call the seller. Things didn’t start moving right away for this deal, and the investor began educating the seller about this type of deal and following up with him for about three months before the home was put under agreement as an assignment deal. Assignment deals allow investors to assign the buyer back to the seller and move on so the investor is not tied to any large monthly payment or other liability. That’s the upside.

Related: 7 Creative Ways to Add BRs, BAs & Other Value-Adds to Your Rental [With Pics!]

We decided with the seller that we would split the down payment of the home 50/50. Personally, I don’t like giving the seller 50% and seldom do that, but this shows you that there’s still plenty of money in these deals when structured properly. We expected to have a 10% down payment.

This deal is in the Washington, DC area, and the investor had noticed that the market has slowed for upper-end homes, which is an opportunity going forward.

We agreed to allow the seller to continue to market while we had it under agreement and agreed to release him from our agreement should he sell on his own so that the real estate agent could promote it on the MLS while we looked for a tenant buyer on our end. After six months, the real estate agent didn't produce one viewing or prospect. Meanwhile, we produced five. Why is that? When you are offering terms, you are fishing in a much bigger buyer pool, and that buyer pool needs you as the investor to get access to the rent-to-own program that eventually puts them on the path to home ownership.

Within a week, we signed a letter of intent for $1,400,000. They agreed on $75,000 down with periodic payments over two years to get the down payment up to $99,000. Initially, we had agreed with the seller to split these payments as they came in, but that changed when the seller agreed to pay the fee for the real estate agent but asked us to front the money for it.

Now, this is highly unusual, but whenever a situation comes your way, it's important to look for ways to "pivot," as I have mentioned in past articles. We wrote the agent a check for $10,000 out of our initial down payment, and the seller agreed to pay us back by changing the terms of the additional payments going forward. Instead of splitting the additional payments, the seller paid us back by allowing us to keep an additional $1,000/month from the payments. This is an additional $1,000/month for two years, for a total of $24,000 on top of the split down payment.

All said and done, this left us with a guaranteed $70,000 on a down payment of $99,000. The agent and seller were both happy, and we made a gross profit of $70,000 on day one. This is slightly under the average for DC area, but it was $70,000 we would have missed out on if we weren't willing to get creative.

Follow-Up Is Crucial

The only reason why this deal came to fruition is follow-up. We started talking to the seller nine months before the sale, but because we continued to follow up and educate the seller, we landed a great deal.

This is certainly not a run-of-the-mill real estate deal, and it demonstrates how valuable creativity and flexibility can be. Had we stopped following up or decided this deal wasn’t possible right off the bat, we would have missed out on a $70,000 payday.

Related: 7 Creative Ways to Add BRs, BAs & Other Value-Adds to Your Rental [With Pics!]

Stick to Your System

The investor I partnered with started his residential real estate career with exactly zero deals in his first six months, and that is not at all uncommon. When you start a real estate investing business, you have to commit to the process of launching a business. It’s not instant, and you have to remember that you’re playing the long-term game. If you truly want to find success, you’ll need to commit to following your system and don’t give up.

Sure, some people can do a deal within their first 30 days, but that’s not the norm. Stick to it, learn from past mistakes, and understand when it’s wise to pivot to make a deal work.

How can you get more creative in your approach to real estate deals?

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Chris Prefontaine is the best-selling author of Real Estate On Your Terms. A real estate investor with over 27 years experience in the field, Chris is the founder of Smart Real Estate Coach and host of the Smart Real Estate Coach Podcast. He lives in Newport, Rhode Island with his wife Kim and their family. Chris is a big advocate of constant education. He and his family mentor, coach, consult, and actually partner with students around the country, teaching them to do exactly what their company does. Between their existing associates nationwide and their own deals, Chris and his family are still acquiring 5-10 properties every month and control between $20 to $30 million dollars worth of real estate deals, all done on terms without using their own cash, credit, or signing for loans.