Is It Possible to Get a 2000%+ Return on Your Real Estate Investment?

This deal had its fair share of peaks, valleys, and pivots—but the end result was well worth the effort.

We talk a lot about pivoting in the terms business and how there is virtually always a way to get out of a deal or keep things going when times get tough. These pivots can get complicated, and it may take a few years before you feel comfortable implementing them in your own deals… But once you fully grasp these concepts, you’ll be able to feel confident with nearly every terms deal you do—because no matter what happens, you can pivot and ensure it will be successful.

Today, we’re looking at an incredible terms deal that had a number of pivots. There were times where it seemed like this thing wasn’t going anywhere—but in the end, it created a 2,000% return for our Associate student.

And no, that’s not a typo. That’s a two-thousand percent return on investment. (Actually, it’s 2,086% if you want to get technical.)

The Setup

Let’s cover some basics on this deal before we dive into the pivots. This was a FSBO (for sale by owner) that our Associate contacted back in August of 2018—almost two years ago as of writing this post.

It was a funky house in a rural area, and the owner was looking for $390,000. The house needed some renovations and the owner ended up doing the renovations herself for about $50,000. She wasn’t getting much traction on the house selling it herself, so she ended up listing it with a realtor for $460,000 after the renovations were complete.

Well, the house still didn’t sell with a realtor. After about six months, our Associate reconnected with the seller right when the listing was about to expire, in April of 2019. He knew it was free and clear and he said to her, “Look, I will pay the price you want if we can agree to terms.”

She was fine with that, although she had one stipulation—she wasn’t going to wait more than five years. Fine with us!

Our Associate ended up purchasing the home from her for $460,000 on a five year term. There was a $1,500 mortgage payment per month that was principal only—so with just some quick math, that’s $90,000 in profit for our Associate over five years just from principal paydown which always falls into Payday #3™ always.

Now, let’s get into some specifics.

The Pivots

When our Associate kicked off this deal, he told the seller he would close the property within 60 days. Well, it ended up taking a bit longer than that. After about three months, he had missed the 60-day window and was getting a bit nervous (remember, most of our deals we make are contingent upon finding a buyer). But then he got an interesting inquiry…

He was contacted by someone who was building a house in the area and needed a short-term rental to live in while the house was built. They said they needed three months, and our Associate was happy to get them into the home to provide some cashflow while he continued to look for a tenant buyer. (As a reminder, we place buyers who need time—that’s why they’re a tenant buyer, not just a regular buyer.)

He rented the house to them at $2,950 per month. But guess what happened? Those three months turned into seven months… Then, one day, the renter called our Associate and told him they weren’t going through with building the house—there were too many delays and the builder luckily offered to give them their money back.

That was pivot #1.

As it turned out, our Associate had another property for them in the area that was perfect for them—and he ended up doing an owner financing deal that netted him about $150,000 in profit in the end. We’re not including that in the total profit, but it’s just another example of how he was able to make pivots throughout this deal to bring in extra cash.

That was pivot #2…

So, with that all taken care of, our Associate put the house back on the market. But he made one key change to his listing. He wrote in “Seller financing available to well-qualified purchaser with a significant down payment.” This is a subtle technique we’ve been using that can help bring in great buyers for owner-financing deals. Yes—just this one simple script change has brought in much better buyers for us. We made that tweak about a year ago and the results have been astounding.

Within a month and a half, he had a buyer that was interested in owner financing. They were self-employed and didn’t want to deal with banks, so it was a great solution for them. Here’s what our Associate did…

First, he put them on a three month lease purchase deal. That’s because he wanted this deal to be outside of the 1-year anniversary of purchasing the property, allowing him to pay long term capital gains tax instead of ordinary income tax.

So he leased it to them for $2,550 per month. With the $1,500 mortgage payment and $450 in taxes and insurance, that gives him around $500 per month in profit—or $1,500 over the three months

Pivot #3!

The Paydays

And once those three months were up, the terms deal with the buyer began. Here are the Paydays...

Payday #1™ is the down payment—$49,700 in total. This was spread over a few different payments, including $10,000 upfront, $10,000 over the next several months, and then $29,700 at closing for a total of $49,700, or 10% of the sale price.

Payday #2™ is the monthly spread. Our Associate had a monthly profit of $1,181 ($2,681 coming in from buyer and $1,500 going out to the seller). Over 48 months (remember, it was a five year term but one year has already gone by at this point) that’s $56,688. Add the $7,500 from those seven months of renting plus the three months of lease purchase, and the total for Payday #2 comes out to $64,188.

Payday #3™ is the profit from the sale. In this case, our Associate bought the house for $460,000 and had been paying $1,500 per month for five years—which comes out to $90,000. When you subtract that, it means he’s left with $370,000 (his balloon payment).

But the buyer’s balloon payment (he financed them at $447,120 at 6%) at the end was $423,040. That gives our Associate a profit of $53,040 for Payday #3.

Add all of those Paydays up and you’ve got a total of $166,928.

So… how did we come to the 2,000% return figure? Well, the only money our Associate invested on this deal was $8,000 in closing costs. When you factor that in, the return on investment is 2,086.6%.

Not bad if you ask us! The key lesson here is that our Associate never gave up on the property and he used multiple pivots to keep money coming in when the going got tough. And let’s also remember that he found a buyer for another one of his properties through this deal! Throw in the extra $150k he made on that other deal, and the return skyrockets even higher.

These pivots can be tricky when you’re first starting out. That’s why we always recommend getting a mentor or coach to help you through these nuances. We help our Associates through tricky situations like this all the time because we’ve been through them ourselves. But without a mentor, these situations can be extremely difficult to navigate and many dollars are left on the table or not captured at all.

What is the highest number of pivots you’ve made on a deal? I’d love to hear about it.