In this roundup of different deal structures, market pressures and liens brought sellers to us and our due diligence paid off.
Here I’ll review the various ways a property can come to you and how you can navigate extraordinary circumstances on favorable terms.
These two deals were examples of where motivated sellers benefited from non-traditional deals and terms – perfect examples of the ways you can break away from standard processes and structures.
Connected: How Pivoting Allowed Us To Find An Extra $195,000 On Deals
Buy a Home, No Lien
We’ll start with the first eyebrow-razor.
For this property, the homeowner had two home equity loans, which were terminated upon the bankruptcy filing and will be written off after 15 years. The owner was still tied to the property for another five years under that state’s statute of limitations.
Getting rid of the house helped him move and retire in Florida. In the meantime, we could sell the house, knowing that we could wait five years and that our underlying debt would be less than two liens. Win-win!
When structuring deals, my company and I create three pay days. On their own, those payments would be a good deal in this instance – even if we had to pay off the lien, which is why we were able to make the decision to move forward.
In addition—and we knew this was a good possibility—the lien totaled $195,000. We wanted to negotiate for something like 30 cents on the dollar. I was confident that we could accomplish this.
In the meantime, we had a lawyer doing some digging. They learned that the statute of limitations on the liens had less than five years to expire. They were attached to the house, but not to us personally, as they lived in the seller’s name and moved with some help from our attorney.
So, with the final payment plus an additional $195,000, the deal just got better.
three payment days
Payday #1 – $30K (purchased for $361K, amount of underlying loan plus 2 liens)
payday 2 – $60K (easily $1K per month with such a low loan-to-value
Payday #3 – Before the lien, he had about $33K
If we go five years, that’s $63K in payday 1 and 3 and $60K in payday number 2. So, before adding back in the $195,000 in the expiring lien, it was $123K. Good deal, isn’t it?
Now, add $195 and we’re over $300K on a house that’s selling for $400K because of terms, loans, and expiring liens.
Connected: How We Made a 6-Figure Profit from an Owner-Financed Deal: Case Study
take advantage of slow weather
The second property was more of a ham and eggs lease-purchase deal, meaning pretty boilerplate.
The property owner called after accessing a sly broadcast message as part of our “finished dialing process”. the owner had sold the house; He had a buyer with $100K to put down and pre-approval from the bank, but the deal died.
We talked to him about the deals we settle and how we handle non-compliant buyers. The owner said that he understood all too well. He had a non-conforming buyer that caused the deal to die, so he took the house off the market.
Autumn season was coming. When this happens, people tend to panic if they are in an area where the weather can affect sales and other areas of the market. This could result in a lot of new properties getting listed. For example, our colleague had occupied five properties in the last 45 days.
The owner of this one was asking $520,000 and only owed $290K. They were sitting on a lot of equity.
We structured $230,000 and paid off his loan in 36 months or so. Provided they can wait for their equity, this is a great setup for them.
three payment days
Payday #1 – $40,000 Down!
payday 2 – $800 x 36 months = $28K
Payday #3 – Approximately $26K, principal payment plus markup calculated
Total: $94,000
In two deals, we got about $400,000. One was a very rare transaction and the other was a more regular transaction, but both came through months of following our systems.
Will you make a deal on terms? why or why not?
comment below!
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
