How We Make $75,000 Per Deal

There's a lot that has gone on behind the scenes to set up the systems and frameworks we use to generate an average of $75,000 per deal utilizing our unique 3 Payday ® system. Let's take a look at how it all works.

I usually use this column to discuss specific terms deals that we do in our buying and selling business, as well as deals from our Associates on the coaching side of the business. But today, I'd like to do something a little different.

Our average deal size is right around $75,000, and I'd like to explain how we've got to this point and what we've done to get such consistent terms deals across the board. It wasn't a walk in the park, and I think this will be a valuable lesson for many reading this who are either interested in terms deals or already doing them themselves.

Three disclosures

Before we dive deep, let's cover two disclosures.

First of all, I am not saying that you will make $75,000 per deal if you do what we're doing, nor am I saying that you will make $75,000 right off the bat if you join our community. I'm merely talking about our personal experience.

Second of all, you should know that prior to the 2008 crash, we were doing almost everything wrong in our buying and selling business. We did all the things that work in a conventional market, but fall apart when things shift or when a recession hits.

That 2008 crash was a huge wake-up call for us, and it almost finished us entirely. But we got through it, and moving forward, we've completely re-engineered our business and our strategies for buying and selling homes on terms so that we never get caught off guard again.

Our mission since 2008 has been to structure recession-resistant deals and create systems that will allow our business to weather any storm. Recently, we've seen this in action with the COVID-19 crisis. Our business has not only been able to weather this storm without a hitch, it's actually doing better than ever.

Third, our Associates around North America on average are producing 3 Paydays ® per deal worth $45,000 to $250,000 - we’re actually on the lower end of that with our family deals.

This "recession-resistant" mindset (not recession-proof, as there's no such thing) is the main reason why we've been able to maintain such consistent averages per deal across the board.

So, what did we do? And how did we "re-engineer" the business? Well, it comes down to two things…

Safeguarding ourselves and limiting risk

When I say we were doing "everything wrong" before 2008, I mean that we were taking on too much risk and putting too much of our own money into deals. We would get loans in our name, put our personal cash into deals, and bring investors in.

That stuff might be okay for a little while, but sooner or later you're going to run into trouble. We did—big time. Since 2008, we have changed our system for buying and selling on terms:

• We don't take any loans out.
• We don't put any of our own cash into deals.
• We don't bring investors in.
• We don't sign personally on loans.

All of these things mean we are at virtually zero risk if things go wrong. We're not putting our assets—or those of our families—in jeopardy in the event something goes wrong or the market takes a turn.

(If you're curious as to exactly how we structure these deals without any money down and without putting loans in our names, just check out any of the many articles in this column or videos on our YouTube channel, where we go through terms deals in-depth and discuss all the nuances.)

3 Paydays® and long-term profit centers

The other reason we've been able to maintain consistent, high-value deals is that we always structure them with 3 Paydays™. This is a system we created that minimizes risk by vesting tenant buyers in the property while spreading profits out over multiple Paydays for consistent revenue over time.

Instead of one Payday like you'd get with a traditional real estate deal, our 3 Paydays™ are as follows:

Payday #1: The nonrefundable down payment that we require from every tenant buyer we work with.

Payday #2: The monthly spread. This is the difference between what we're paying to the underlying debt (which is not in our name!) or the seller, and what we're getting in each month from the tenant buyer.

Payday #3: The long-term cash out. This includes the final markup from the sale of the home, plus all the principal paydown that has accrued (in our name) over the course of the term.

This system minimizes risk for everyone involved and it gives us consistent revenue over the length of the term. We're getting a nice lump sum up front, consistent monthly payments throughout the term, and then another lump sum at the end.

Nowadays, we're even taking this a step further and structuring deals with extra long terms—four, five, six years or more. These long-term deals turn into major profit centers for our business, as the total amount increases (due to more monthly payments and appreciation of the property) and our monthly recurring revenue increases.

This system helps make our deals recession-resistant because they provide us consistent cash flow regardless of what's going on in the market. And because our buyers are vested in the homes thanks to the non refundable down payment in the beginning, the risk of them leaving is low. (And even if they do, we can easily pivot and get a new tenant buyer in the door or sell the property conventionally!)

Everyone says that they have the best system, but ultimately that is up to you to decide. My recommendation for anyone getting into terms deals is to do your due diligence and find what works best for you. This system works for us and it is working for hundreds of our Associates across the country.

But regardless of what system you end up using, make sure to do what you can to make your real estate business as recession-resistant as possible. I hope this has helped you do that.

Are your deals recession-resistant? Is there anything from this post that you'll implement in your own deals? I'd love to hear your thoughts in the comments below.