A Busy Week Shows the Power of Cooperation

     We, in Southeast Michigan, are fortunate that there are many REIA groups with frequent meetings. It would not be difficult to attend a meeting every week, even a couple if you are willing to travel a bit. I am finding that more of my deals are coming directly from members of these groups. Much of my business consists of structuring deals or helping with funding so I often see both sides of the deal, buyer and seller. These transactions, with professionals on both sides who are acquainted with each other, and have done several deals before the current one are among the easiest, stress free transactions I see. They can be downright fun. They strengthen relationships and finances of all parties and make the next round of deals much more likely.

     This was an unusual week for me. Several deals were presented to me and I had resources available (time and money) to help facilitate them. I did not solicit any of them. I merely let those in the groups in which I am active know I am available as a resource and let the deals come to me.

     The first was a deal I had known about for weeks. This was not located in an area I am familiar with but I was very familiar with the borrower, having completed deals and many enjoyable planning sessions with them. The deal was easy to evaluate. I was providing funds for a purchase. The comps were strong, the borrower was providing their own funds for rehab (since the seller was a friend of theirs, they had been doing the rehab before completing the purchase and were nearly finished), and the borrower has high integrity. In my process, the latter point may be paramount. I rarely work with people I don’t trust. There was a problem. I knew the closing was approaching but I did not have all the details I needed. The seller was under stress and wanted to close Tuesday—I learned this Monday. I had planned to fund this deal through my SD IRA and it can be difficult to accomplish that next day. I might not even try this for a new partner. I was provided all the information I required, documents were drafted (some had to be notarized and returned to me) and I submitted the funding request to the custodian late Monday night. I was pleasantly surprised that this transaction funded in time for the Tuesday closing.

     The second deal was presented to me for advice in structuring and to gauge my interest before it was under contract. The seller was distressed. She had not paid her property taxes for three years and those from three years ago were going to the tax sale—soon. As is often the case with distressed sellers, she signed a sale contract well below market value. The wholesaler (with whom I have worked frequently) planned to charge a significant assignment fee but did not wish to disclose that fee before closing. He contacted me to see if I would provide transactional funding so he could purchase the property and resell it in a subsequent, separate transaction. I had provided that service to the wholesaler before and was happy to do so again.

     The wholesaler posted the deal on social media and within minutes I received an e-mail from an investor summarizing an action plan and inquiring if I would be open to funding the deal. I had not worked with the investor but I was familiar with their business and some of their deals. (They have been attending several of the REIA meetings I do for years.) I was more than happy to fund the deal—we came to terms for funding quickly. I advised the investor to work out the terms of purchase with the wholesaler. (When I have inside knowledge of a transaction and am working with both buyer and seller I will not reveal that knowledge.) The wholesaler also received an inquiry from the investor. When the wholesaler learned that I was willing to fund the deal we changed the structure to eliminate the expense of the second closing. We thought that this investor would be able to handle seeing the assignment fee and were correct. (Folks, if you are offered a great deal don’t worry about what the other guy is earning or you may not see such a deal from that source again.)

     I will touch upon the third and the fourth transactions (purchase and sale) briefly as I intend to write this type of deal up as a continuation of my land contract series (the series begins with this post: Don’t Hire a Property Manager. Sell Your House To One). This investor had a property that was titled in the name of his partner’s company. There was an underlying loan that was coming due. The investor wished to retire the loan and free the equity for other projects. We structured a deal where my SD IRA purchased the property and then immediately sold it to the investor’s company at a stepped-up price with land contract terms. (I had previously completed a somewhat similar deal with this investor though the initial purchase was from an unrelated party.)

     The week closed out by coming to terms to fund the purchase of a house by an investor I have funded before from an investor I have worked with many times. (The investor on the sale side is acting as a wholesaler in this transaction and assigning their interest in the purchase agreement.) This will be the second time I will be in the middle of a transaction between these two investors. It will close whenever the title work is completed and it is convenient for all parties. There will be no false urgency. Everyone is getting a good deal.

     A full week of transactions and none of them were solicited. Every transaction should raise the likelihood of working with all the players involved again. There is power of cooperation.

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