Buying & Selling Houses

How We Found an Extra $400K on Two Properties

Expertise: Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Personal Development
44 Articles Written
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In this roundup of different deal structures, market pressures and liens brought the sellers to us and our due diligence paid off.

Here I’ll review different ways a property can come to you and how you can navigate exceptional circumstances to favorable terms.

These two deals were instances where motivated sellers benefited from non-traditional deals and terms—perfect examples of ways you can pivot from standard procedures and structures.

Related: How Pivoting Allowed Us to Find an Extra $195,000 on a Deal

Buy the House, Not the Liens

We’ll start with the eyebrow-raiser first.

For this property, the homeowner had two home equity loans, which were discharged when he filed bankruptcy and would be written off after 15 years. The owner was still tied to the property for another five years under that state’s statute of limitations.

Getting rid of the house enabled him to move on and retire in Florida. Meanwhile, we could sell the house, knowing that we could wait out the five years and our underlying debt would be minus the two liens. Win-win!

When structuring deals, my company and I create three paydays. On their own, those paydays would be a good deal in this instance—even if we had to pay off the liens, which is why we were able to make the decision to go forward.

In addition to that—and we knew this was a good possibility—the liens totaled about $195,000. We wanted to negotiate that down to something like 30 cents on the dollar. I was pretty confident we could get it done.

In the meantime, we had an attorney do some digging. They discovered the statute of limitations on the liens was less than five years from expiring. Those were attached to the house but not to us personally, as they stay in the sellers’ name and would go away with some help from our attorney.

So, with an additional $195,000 tacked onto the eventual paydays, this deal just got a whole lot better.

The Three Paydays

Payday #1 – $30K (bought for $361K, the amount of underlying loan and 2 liens)
Payday #2 – $60K (easily $1K a month with such a low loan-to-value
Payday #3 – Before the liens, he had about $33K

If we go five years, that’s $63K in the first and third payday and $60K in payday No. 2. Therefore, prior to adding back in the $195,000 in liens that will expire, it was $123K. Good deal, right?

Now, add the $195 and we’re over $300K on a house that’s selling for $400K because of the terms, loans, and expiring liens.

Related: How We Pulled a 6-Figure Profit from an Owner-Financed Deal: Case Study

Capitalize on Slow Seasons

The second property was more of a ham and egg lease-purchase deal, meaning pretty boilerplate.

The property owner called in after being reached by a sly broadcast message as part of our “expired dialing process.” The owner had sold the home; he had a buyer with $100K to put down and pre-approval from the bank, but the deal died.

We talked to him about the deals we structure and how we handle non-conforming buyers. The owner said he understood all too well. He had a non-conforming buyer that caused the deal to die, so he took the house off the market.

The fall season was approaching. When this happens, people tend to panic if they’re in an area where weather can affect selling and other areas of the market. This can result in a lot of new properties listed. Our associate, for example, had taken on five properties in the previous 45 days.

The owner of this one was asking $520,000 and owed only $290K. They were sitting on a lot of equity.

We structured $230,000 and payoff of their loan on or before 36 months. Provided they could wait for their equity, this is a great setup for them.

The Three Paydays

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Payday #1 – $40,000 down!
Payday #2 – $800 x 36 months = $28K
Payday #3 – Approximately $26K, calculating the principal paydown and markup
Total: $ 94,000

In two deals, we found nearly $400,000. One was a highly rare transaction and the other a more routine one, but both came about through months of following our systems.

Would you structure a deal on terms? Why or why not? 

Comment below!

 

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.

    Kristopher Devers from Kailua Kona
    Replied about 2 months ago
    I’m having a hard time following where money is coming from and going to who how exactly did owner get paid and how you got paid? Any suggested reading that may help? Mahalo
    Derek Schlicker Rental Property Investor from Seattle, WA
    Replied about 2 months ago
    I’m not following the math at all.
    Christina Morgan
    Replied about 2 months ago
    Glad I’m not the only one that didn’t understand these 2 deals. I’m new and I understand these are complex transactions, but I can’t follow any of it. Can you break it down some more?
    Account Closed Specialist from Middletown, RI
    Replied about 2 months ago
    Hey Christina – sounds like you may be new to the TERMS business. Start with our free webinar http://www.smartrealestatecoach.com/webinar/ and our two best selling books https://www.amazon.com/New-Rules-Real-Estate-Investing/dp/1733860606 https://www.amazon.com/Real-Estate-Your-Terms-Continuous/dp/1599328194 and we’d love you to come to our annual QLS Live Event http://qlslive.com/