Everything's Bigger in Texas... Even the Deals!

People often tell us terms deals don't work in Texas. Not only is that false, but the deals can be huge!

Disclosure: You just cannot do Sandwich Lease deals. The other deals we do in Texas are our preferred deals all over the Country. We’re not attorneys either, so that’s not legal advice!

We get a lot of inquiries from people asking if terms deals will work in certain areas. Or, people will tell us that they can't do terms deals due to a number of constraints—from legal issues to hot or cold markets, a lot of people feel like they can't do terms deals in their area.

But by and large, that is not the case. While there may be some unique situations where terms deals are not possible, there is almost always a way to get a deal off the ground. This is something we help our Associates with everyday. To put it simply, if you want to make a deal happen and you have the will to do it—you'll be able to get it done.

Let's take a look at a terms deal one of our Associates recently got under contract in Texas. People always tell us they can't do terms deals in Texas for various reasons… This will show you that's simply not true!

The Lone Star deal

The source of this deal was an expired listing. Our Associate structured it as a subject-to deal, which means he takes over the deed while the loan stays in the seller's name. We call it a subject-to because it is "subject to" the existing financing. It's a quick, easy, and inexpensive way to acquire a property and pick up all the benefits of ownership.

Just like most of our terms deals, there are 3 Paydays™ in this deal—the initial nonrefundable deposit (Payday #1), the monthly spread which is the difference between the incoming rent from the tenant buyer and the PITI payments to the seller (Payday #2), and the markup on the final sale plus the principal paydown that has accrued over the length of the term (Payday #3).

In this case, our Associate bought the house from the seller subject to and they owed $290,000 on the home. We prefer subject to deals to not be dated, but on occasion it works depending upon the deal as far as a close out date. I’d rather own it long term with no constraints to cash out. It’s important to know that we don’t assume or apply for it, we just make payments and it stays in their name.

He was then able to turn that around and secure a tenant buyer on a six-year term. He agreed to a sale price of $345,000 via owner financing at the end of that term. We do that sometimes to entice our tenant buyer to stay current and to then increase their deposit over time—if and when they do, we’ll owner finance it long term for them. That way, the tenant buyer doesn't need to deal with a bank during the final purchase (although, he could refinance later with a traditional mortgage if he wanted to).

So with all that said, let's get into the Paydays.

Payday #1 consisted of one initial deposit of $20,000, followed by three more installments: $5,000 for the first and second, and $4,5000 for the third. That comes out to a total of $34,500, or 10% of the purchase price.

For Payday #2, our Associate was receiving $2,820 from the tenant buyer each month and owed $2,750 to the seller. That's a small spread of $70, which comes out to $5,040 over the length of the six year term. That might seem small, but as you'll see, the principal paydown and markup on the sale more than make up for it in the end. In addition to that, if we owner finance the buyer long term, this deal becomes a 10, 15, 20 or even 30 year deal with much more profit.

Payday #3 comes out to a whopping $52,900! That consists of the markup on the sale ($55,000) plus the principal paydown ($450 per month, which comes out to $32,400 in total), minus the deposit ($34,500). So even though the monthly spread was only $70, our Associate was still essentially gaining $450 per month thanks to the principal being paid down.

In total, All 3 Paydays™ come out to $94,940!

Was this deal a walk in the park? Well, not quite—no deal ever is! There was plenty of back and forth between our Associate, his lawyer, and his coach in order to get this one settled. There were also some unique tax implications that had to be factored in because of the location, but he was able to easily navigate these issues and negotiate a higher price because he had a coach working with him.

In the end, $94,000 for a few days of work is worth nearly anyone's time. And if you're concerned that you can't do terms deals in your neck of the woods for whatever reason, just remember: where there's a will, there's a way.

Rarely, if ever, do we encounter an area of the country where terms deals are legitimately impossible to do. If you get a mentor, do your research, and have the willpower to get deals done—you'll get them done! It's that simple.

Do you feel like you can't do terms deals in your area? Why not? I'd love to hear your thoughts and see what I can do to help you get started in the terms niche. Leave a comment below.