Put in the Extra Effort! (It Will Pay Off)

Even if a deal requires a little more effort than normal, it can be well worth your time to pursue it.

Sometimes we encounter deals in the terms niche that require a little extra effort. Maybe they’re far away, maybe it’s a particularly tricky seller, or maybe it’s a difficult house to market.

Whatever it may be, these harder-than-normal deals are almost always worth your time. At the end of the day, you’re usually looking at a few extra hours of work for five figures in your pocket. It might mean the difference between making five thousand dollars an hour or four thousand—and when you put it into perspective like that, there’s no reason why you wouldn’t want to put in a little extra effort and pursue these deals.

A 2.5 hour drive

The deal we’re looking at today happened to be two and a half hours away from our Associate. The property was an expired that he had originally found through a Slybroadcast. When he reached out to the owners—a couple—they were interested but hesitant.

No problem! He just explained the process, gave them his info, and told them to get in touch if they wanted to continue with a deal. This is pretty common.

About 45 days later, he received a text message from them saying they wanted to move forward with a deal. They wanted him to come see the house.

Because the house was two and a half hours away, our Associate wanted to make sure the sellers knew what the rent to own process looked like and fully understood how this deal would work. He didn’t want to go through all of this effort to drive to the house, only to find out they had a misunderstanding and the sellers weren’t interested in a terms deal. So he called them and went through the entire process to make sure everything was clear before he got in his car.

This property was the sellers’ second home, which had been vacant for some time. It wasn’t very flattering on the inside, so he knew that it would need a specific type of buyer who was willing to either live with the interior as is, or put some money into renovating it.

All 3 Paydays™

After driving out to the property, our Associate was able to structure a sandwich lease-purchase deal with the sellers. He purchased the home for $450,000 on a three-year term, then found a buyer through RentLinx—an online service we use to market our properties on multiple websites. He agreed to a purchase price of $489,900 with the buyer, which shows you there will be some significant profit on this deal already!

Payday #1 is the down payment—in this case, 10% of the purchase price or $48,990 in total. There were some nuances here, however, because the buyers weren’t able to put down the entire amount right off the bat. So our Associate used a few strategies to get them to the full amount by the end of the term.

They paid $18,000 right at the beginning of the deal. Our Associate then structured the deal so they would pay an additional $500 per month and $1,000 per quarter until they got to the full amount of $48,990.

He was also able to capture the first month’s rent—a strategy we use on many of our deals by structuring it so that we don’t start making payments to the seller until 30 days after the term begins—making the total for Payday #1 come out to $51,985.

Payday #2 is the monthly spread. Our Associate was getting $2,995 in from the buyer each month and owed $2,652 to the seller, providing a spread of $343 per month. Over the course of the three-year term, that comes out to $12,348 in total for Payday #2.

Payday #3 is the surplus from the sale of the home, plus the principal paydown. We already mentioned that the house was bought for $450,000 sold for $489,900, which is a profit of $39,900.

But there’s also the principal paydown to take into account. $551 out of that $2,652 monthly payment was going directly to paying down the principal. Over the course of three years, that’s a whopping $19,836 in principal paydown.

When you add all of these up, the total for All 3 Paydays™ comes to $72,084.

And by the way, that two and a half hour drive? Our Associate only had to do it twice. He was able to use a lockbox to show the property to buyers, and he asked that they send him a photo of their driver’s license before they viewed it just to make sure all his bases were covered.

That’s five hours of driving plus the time on the phone with the sellers and buyers, and then some time spent structuring the deal. Maybe ten or twenty hours of total work on a $72,000 deal. So, what do you think—was it worth the effort?

Would you have taken this deal? Why or why not? I’d love to hear your thoughts and any stories you might have of lucrative deals that required a little extra effort.