how do i know when to use a cash offer vs. options or wrap?

Question

once I've established a rapport with seller and ask questions regarding the sellers situation and I have inspected the distressed property, How do I know which techniques to use to close the seal and make a profit? For example, when is a cash offer vs. Options or a wrap to close the deal?

Michele Rok · Answer

back in 2003 i used all the trees on my lots for cash. Sold the trees to a lumber yard who then came in and cleared my land giving me the ability to build a house on the lot. Made a nice profit for myself and they cleared my lot and I got cash. That to me was creative at the time. It just depends on sellers needs. Im looking for "Win Win" deals so the seller can walk away happy. Im happy. And perhaps future leads from seller bc they were satisfied. That is my end goal to be financial free and make it a "Win Win."

Michele Rok · Answer

Brian thank you so much for addressing my question. My issues are in finding the best possible structure for a deal. Generally i am a visual person so the scenerios are so appreciated. The more different scenerios there are the better tweeking the structured deal into profits Your experience is so key bc it not only allows me to move forward but in order for me to succeed i need to learn from someone who has already succeeded. So with that said your knowledge on scenarios are key in me moving forward. So once again your scenerios helped me tremedously. Didnt understand the sandwich structure until you explain in an earlier comment to another member. Th

Michele Rok · Answer

Brian thank you so much for addressing my question. My issues are in finding the best possible structure for a deal. Generally i am a visual person so the scenerios are so appreciated. The more different scenerios there are the better tweeking the structured deal into profits Your experience is so key bc it not only allows me to move forward but in order for me to succeed i need to learn from someone who has already succeeded. So with that said your knowledge on scenarios are key in me moving forward. So once again your scenerios helped me tremedously. Didnt understand the sandwich structure until you explain in an earlier comment to another member. Thank you again.

Brian Gibbons · Answer

@Michele Rok

You're in Ohio and Ohio restricts Real Estate Investors and a few things without a license, so you need to get on title

And I advise you to get licensed in Ohio

That said, with a pretty house with no work with no equity, you can look at

buying on subject to

land  contract or

do a lease option assignment or

do a sandwich lease option

~~~~~

Say you have a pretty house with a lot of equity say 50 per cent, you can give

a low cash offer w transactional funding and do a double closing

Have the seller refinance of 80% and give a note with good terms for ten per cent

Do a lease purchase sandwich or lease-option assignment if licensed

~~~~~~

Say you have a house that needs a minor rehab not a major one, which make lousy Wholesaling offers

Say the ARV is 10,000 in work and ARV is 150,000

If it's a wholesaling offer at 70% of ARV or 105,000 minus repairs of 10,000 minus a wholesaling fee of  say $5000

So 105 - 10 - 5 = 90k

For a rehab has minor repairs? The seller would have to be crazy to do that

INSTEAD

Offer a joint venture with the seller where you bring private lender money in for the 10,000

Give a note with no payments for four months to seller on the JV

Calculate 10% for Sales Costs or 15,000

Earn 10,000 for the free

So subtract across from the 150 ARV

-10,000-15,000-10,000 = 115k net to seller

That helps the seller and helps you to make more money

Don't be a one trick pony

Be a transaction engineer

Micah Copeland · Answer

@Michele Rok

In my opinion (and experience) its almost always cash. I assume you are referring to wholesaling, and if that is the case I also assume you are marketing in some way, shape, or form "I will buy your house for cash". So naturally the seller wants a cash offer. Cash is king after all.

In a few very rare circumstances for me, and all have been from sellers that own their home free and clear, have I discussed owner financing. 1 out of 5 of those would actually entertain it. In those cases they would usually demand a higher purchase price which made it not so much a deal.