Starting out - get a quick start this spring doing terms deals

Starting out - get a quick start this spring doing terms deals

Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes

i'm starting this thread and I'm going to try to make a post every day on how to get a quick start this spring.

For 30 years I've done my best to give us our two offers a cash offer in terms of. Terms offers a more attractive because the seller generally makes more money. But Sellers need to be creative.

How do you find sellers that are willing to be creative?

I think the easiest way is to either find properties that are for sale already with long days on the market or DOM or look for expired listings

These people are trying to sell and they're not having a good time doing it the traditional way

So what do you do?

If your license, you can't really go after long days on the market folks because it goes against your ethics as an agent

But if you're not licensed, you can knock on their door and say I understand your agent as Mabel to sell your house in a while, would you be interested in doing outside the box and getting a possible solution to your house problem?

Now I know some of you might think you're interfering with a listing agreement between the seller and the agent. If the seller is not performing, getting a cash offer that's acceptable to the seller, then perhaps the seller can work out arrangement with the realtor

If it's an expired listing, I don't know if people realize this book many new agents go after expired listings, and they try to convince the home seller that their company or their marketing ability is better than what they had tried and they want to relist the house

If you are licensed, and you have a list of expired listings, you can knock on their door, and say, I understand you tried to sell before with an agent it didn't work out? Would you be open to a creative idea? It'll take me about 15 20minutes to go over it with you. Boom you're in the door.

Now  what kind of solution are you going to talk to him about?

Well the existing financing is high in the loan-to-value was high 95% loan to value, every little equity, and the cost to sell the house including the commissions, closing costs, sellers concessions, spruce up costs and holding costs, all these add up to a good amount of money to be taken out of the proceeds of the sale

So for number sequence it's 100,000 and you show the seller that it's going to take about 1012% of the value of the house if they owe 95% and they got to pay to get rid of the house

So what's the alternative? Well selling on terms entails, if you don't know, some going to rent to own arrangement, or rent them purchase arrangement, or some kind of subject to existing financing, or some kind of wraparound mortgage.

So for us in equity, you going to basically look at everything, the condition, with the sellers need, the urgency for the sellers, existing financing, their comfort level with the due on sale clause with such two in the wrapper on my goods, the lease to own, etc.

To ease for you to profit with no equity deal on the following:

One is you can lease with an option and then assign the deal for a fee. No lease options have different rules in different states. So you should have an attorney that knows lease options really well.

Secondly you can look at subject to existing financing or wrap around mortgages.

To show the difference what I usually do is roll I know y'all up and show the sellers that what's in it for them on the lease to own arrangement and what's in it for them on subject to, the lease to own their going to have to turn into investment property and get landlords insurance and they're responsible for maintenance, and they have to follow the state laws as far as being a landlord

I'm subject to, you buy the property subject to existing financing, and your exit is generally a lease to own or renting it out. Because the due on sale clause, I recommend that you try to get a quick sale within a year to be able to satisfy the existing financing being paid off in full

The nice thing about helping sellers of every little equity is that you don't need to get a bank loan to make some money, and you don't need great credit to be able to run a business that helps seller solve problems, especially Low or No equity.

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Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
11y

@Brian Gibbons   I enjoy your posts....could you make them more lengthy? I tried to print them but ran out of ink.... WHEEE!!!!! :)

@Tim Macy LO's are alive and well in TX...but none knows it...(can you say opportunity!?!?!)

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  • Contractor · Columbia, SC · Member since 2014 · 241 posts · 68 votes
    11y

    @Brian Gibbons

    To start off, I'm currently rehabbing a house 3 doors down from the subject property. I watched the rehab about 2 1/2 years ago as one of my brothers live in this same neighborhood. This street is the main entrance. The area is industrial with the Amazon distribution center, the local power company's main headquarters, rock quarry, and a new pharmaceutical manufacturing facility in the works, all within a mile or 2 and 2 major interstates. Just to paint a picture.

    Wednesday I called the realtor from the sign in the yard, mainly just to poke around and compare my project. Setup a meeting thursday morning. Did a little research, house was on market for 295 days. I get there and he never shows and the sign is gone, but there is an older lady walking around the yard. Introduced myself, told her I was supposed to meet the agent for a showing. She tells me she just released him. Through a casual conversation I get this info:

    She bought the house 3 years ago from a rehabber for her Marine son, he gets deployed a year ago April with no signs he'll be back anytime soon and basically stuck her with it. She lists for $89,500 per her agent's recommendation. 

    Comps are $80k for 3 bed 1 bath ( I'm looking at $72k for my 2 bed 1 bath)

    She has zero desire to rent, wants it gone. Gotten to the point where she can no longer afford the payments, not late yet, but decided just to let bank have it back (her words)

    Mortgage balance is about $69k ( no statement with her) Payment is $500 PITI ( again couldn't verify)

    Current area rents per a PM/ Investor I know are $850 easy, $900 for this house given freshness of everything. I realize this may be a marginal deal but I believe in the area's appreciation and some cashflow.

    I honestly couldn't see where I would have to spend more than a $1000 for repairs, everything, floor to roof was 3 years old.

    My offer was on the fly given what she gave me, but it was to buy subject to the existing mortgage, take over her debt, prevent foreclosure or ruining her credit. She was super excited about this and so was I, until  in addition she wanted $8k in cash. Which put sales price at $76k, plus $1k repairs and $1k in closing. I explained the values wouldn't support it, given what she owed, repairs, and cash to her. So the only option I could consider was only taking the payments. She insisted, I thanked her, handed her another business card and left.

    That was about the short of it. I got her contact info and will follow up in 10-15 days.

    Now about my negotiating experiences. I work in commercial site clearing and grading where everything is basically competitive bid and very little negotiation. I buy properties from HUD so no real seller contact.

    Would love some advice, Thanks!

  • Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y

    I'll respond to this tomm 

    great report!

  • Bakersfield, CA · Member since 2015 · 10 posts · 4 votes
    11y

    Thank you @Brian Gibbons for a thread that is sooo valuable. I'm definitely trying to piece it together. Been listening to all your negotiation stuff and I must say, good stuff.

    I was wondering what the flow was: Find seller, negotiate, get LOI, use attorney to draft contracts, market for tenant/buyer, use RMLO to help with plan, and then what??

  • Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Arleigh Cortez:

    Thank you @Brian Gibbons for a thread that is sooo valuable. I'm definitely trying to piece it together. Been listening to all your negotiation stuff and I must say, good stuff.

    I was wondering what the flow was: Find seller, negotiate, get LOI, use attorney to draft contracts, market for tenant/buyer, use RMLO to help with plan, and then what??

     1. Marketing for Sellers - Expireds, Cancelled Listings, Long DOM Listings, Go see the seller, give a letter about lease to own vs selling for cash.  

    2. Negotiating with Sellers 

    3. See attorney about drafting lease and option from Letter of Intent.  Have seller sign lease and option and notary witnesses signatures.

    4. Record the option

    5. Market for Tenant Buyers

    5a) Start a Wordpress Blog about Lease 2 Own, what is in it for the Renter or Credit Challenged FHA Buyer; go to ipage.com , get a domain like PrescottRentToOwnHomes.com if you lived in Prescott AZ

    5b) Get a Tenant Buyer site at OnCarrot.com

    See

    https://oncarrot.com/rent-to-own-website-templates...

    5c) Get a BIG Sign on the front yard

    Rent To Own Home

    Rent $1100 

    24 months or less

    666-xxx-xxxx 24 hours rec message

    5d) walk door to door 50 houses next to house in neighborhoods.  

    6.  Tenant Buyer Presentation and Paperwork

    Show the tenant buyer prospects the property. Get them to sign a Earnest Money Agreement and a Option Release Fee half of 3% of FMV.

    ex) 3000 Option Release Fee, get a check made to Title Company for $1500, write Option Release Fee in memo.  Deliver to Title Co.  

    DO NOT MAKE CHECK OUT TO YOU OR YOUR COMPANY.

    7. Final Items

    I would cancel the original lease and option once the total option release fee has been collected and cashed.

    A new lease and option is then created with the seller and the tenant buyer, and signed and notarized.

    Keys and contract papers are delivered to the tenant buyers and sellers.

    You collect your option release fee and go onto the next deal.

    Good luck!

  • Residential Real Estate Agent · Salt Lake City, UT · Member since 2014 · 156 posts · 50 votes
    11y

    Great thread! I love it!

    A few questions for you though... Say that these sellers need to sell but don't have the ability to own two homes at once, how do you tell the sellers they won't be able to buy another home while they have a loan on their current property (the one with the lease option on it)? Do they have options? Will they just have to rent?

    What do you tell the sellers will happen if the tenant buyer does not purchase the home at the end of the lease agreement? Doesn't that basically put the sellers back at square one?

    When you use the negotiation tactic of "what if I can get you a monthly payment that is close or equal to your PITI?" What happens to the spread on the monthly rent? It sounds like this is specifically for a wraparound and not for a lease option assignment?

    How do the sellers get past paying closing costs at the end of the lease option agreement when the tenant decides to buy? This is still a 1-2% outlay right?

    Thanks!

  • Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y

    Geez @Cody Steck

    Sellers have 3 options

    • Sell with an agent and pay the Costs To Sell with an Agent
    • Rent it out
    • Sell it Creatively with Terms (sub2, wrap, lease 2 own, lease purchase, installment sale)

    Show the home sellers all of their options.

    Help the seller sell and solve their problem.

    Have buyers pay closing costs or split them.

  • Colorado Springs , CO · Member since 2013 · 73 posts · 11 votes
    11y

    @Brian Gibbons

    I know it is after Spring, but this thread is a God sent. I am active military here inClarksville, TN and have been looking to get striated in REI. I have been reading a lot about how to buy and sell on terms, and this thread lays concepts out that are easy to understand.

    Thanks again for your time,

  • Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    10y

    OK every body, I am going to put some things to think about, to plan about...

    Setting Goals

    Which type of deal do you think you are most attracted to and why?

    1. Wholesaling to Cash Investor Buyer (Assign or Double Close)

    2. Buy, Fix and Resell to Retail Home Buyer

    3. Control with Lease Option or Buy on sub2 or Wrap or Land Contract, then rent out

    4. Build a Rental Portfolio with Traditional Financing.

    Question for you.....

    What is the ultimate goal you want to achieve in each of these 4 time frames.....

    1.  in 30 days:

    2.  in 90 days:

    3.  in 6 Months:

    4.  in 1 Year:

    Set a goal as to how much time you will dedicate to real estate investing each day or each week.

    Take your main goal and come up with short-term goals that you must achieve first:

    List as many consequences you can if you fail to take action to change your financial future. 

    (i.e. Will be stuck in a dead-end job, 

    won't be able to spend as much time with family, etc.)

    I will next place ACTIONABLE STEPS to achieve your goals as a creative and successful real estate investor.

  • Springfield, IL · Member since 2014 · 22 posts · 16 votes
    10y
    Thank you so much for this awesome post Brian Gibbons. It's accomplished investors like you that we young ones look up to and who motivate us. The content of this post works for both experienced and newbie investors. Thank you again. Dayo F Osibamowo
  • Bakersfield, CA · Member since 2015 · 10 posts · 4 votes
    10y

    Hi @Brian Gibbons,

    For some odd reason, I still have a HUGE desire to do what you're teaching. Unfortunately, I don't have the funds to get your coaching. So I'm going to do the next best thing and try as hard as I can to understand your posts and teachings that are available. Hopefully, I can do a couple deals so I can afford your coaching and make my business even more profitable. SO, I'm going to answer your questions and hope you give me the actionable steps.

    The deals I am most attracted to are the deals you are teaching.. TERMS. Why? To be honest, based on your teachings, I already have leads because I have access to the MLS. No need to market for leads which is probably the biggest factor right now. I don't have a budget or time to generate leads but I do have the time and budget when a list of leads is already provided. I don't have cash or a network to do fix and flips, and I most certainly can't get traditional financing to build a rental portfolio. So terms is the way to go!

    In 30 days, I want to acquire the knowledge to start building the systems needed to launch a TERMS deals REI business.

    In 90 days, I want to have closed 3 terms deals and hire you as my coach.

    In 6 months, I want to start leveraging people (hire) to do the stuff I don't want to do in my business.

    In 1 year, I want a TERMS REI Business that is running by itself.

    Because I work, I can dedicate only 10 - 15 hours per weeks. 

    I'm looking forward to your reply Brian. Thanks again to all that you do here in BP!

  • Colorado Springs , CO · Member since 2013 · 73 posts · 11 votes
    10y

    Good morning I hope everyone had a great Easter,

    The military is now moving to a new duty station ( Colorado Springs). I have done some research and this is a really hot and fast market. I am extremely interested in TERMS deals, and have been doing extensive research while I was deployed. I am now ready to start taking action. 

    30 days: attend reia meetings after I get to the springs to get a better feel for the market and start making contact with other investors, title companies, and or attorneys.

    60 days figure what lead source I want to implement to generate seller leads ( direct mail, bandit signs, seller website)

    90 days to 6 months have a good mix of terms deals and wholesale deals closing. 

    Then re assess what is working and focus more on results. Also using some of the money for a VA to make the initial calls and property information sheets.

    Then rinse and repeat. Of course these are all goals, and I am need of an action plan step by step..

    Thank you for your time,

    Chris

  • David SabaPro Member
    Miami, FL · Member since 2014 · 17 posts · 1 vote
    10y

    Hey Chris, i have several properties for sale, thx to my website, i can save you time and money, and sent you some fresh motivated seller leads direct in your email, non listed, direct from google, not zillos, fb or cl

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