06 Feb Aligning Seller Timing and the Ideal Buyer
Timing is key when you're buying and selling homes as a real estate investor. But with terms deals, it's even more important.
We often deal with people who need to sell their house quickly because of some type of life event, and the traditional avenues just aren't working for them. This is perfect for us because we can market their home to an entirely different group of people—and often a much larger group of people—who would otherwise be unable to purchase it with conventional financing. And we can often get it sold very quickly.
When we take on a house that needs to be sold quickly and we have a perfect understanding of who our ideal buyer is, our job becomes very simple. It means we can take a home that has been sitting on the market for months and turn it around in a matter of days or weeks.
So let's take a look at one deal in particular that involved a seller that had run out of options.
Expired listing? Not a problem.
The source of this deal was an expired listing. While most real estate investors would shy away from an expired listing, we actually seek them out.
Why? Because of timing!
When a listing expires it means the house has been sitting on the market for months. The seller needs a way to get it sold, and we can provide that for them—they just don't know it yet. It's the perfect time for us to reach out and it's the perfect time for the seller to hear what we have to say.
That's why we set up systems like Slybroadcast to call on expired listings. These people had a house for sale, which means their information is publicly available and you can contact them about their property.
We use Slybroadcast to automatically send out mass voicemails to expired listings this way. They get a voicemail explaining what we can offer them—a quick way to sell their house on terms—and we just ask them to call us back if they're interested in learning more.
That's exactly how this deal was acquired. The seller's listing had expired just days before the voicemail went out, and our Associate received a call from them in no time. He talked to them, realized they needed to sell their home quickly, and got a deal together.
All 3 Paydays®
Our Associate ended up structuring a sandwich lease purchase with the seller. Now, to structure these deals we do use a purchase price but all we're really doing is plugging that purchase price into a formula to figure out how much we're going to pay out the seller.
Our contracts for sandwich lease purchases state (in simple terms): “The sale price is equal to the payoff of your loan at the time of financing, plus your remaining equity in cash.”
What does that mean, exactly? Well, let's look at how it worked in this deal. Our Associate agreed to a purchase price of $466,000. The seller owed $344,000 on the property, meaning she had $122,000 in remaining equity.
So, our Associate is simply going to pay off that $344,000 loan and then give the seller the remaining $122,000 in cash. And it's important to remember that we're paying off the loan at the time of financing, which means we capture all of the principal paid down over the length of the term.
So, with that said, let's get to the rest of the numbers.
Our Associated structured this deal with a 48-month term and agreed to a sale price of $509,900 with the tenant-buyer.
Payday #1 is the down payment, in this case, it was 10% of the purchase price, so $51,000.
Payday #2 is the monthly spread, which is an impressive $909 per month. We get to this by simply calculating the difference between the monthly payment to the seller and the incoming rent from the tenant-buyer. In this case, there's $2,720 going to the seller each month and $3,629 coming in from the tenant-buyer each month.
That comes out to $43,632—a massive Payday #2!
And finally, Payday #3 is the markup on the final sale of the home, plus all the principal paydown and minus the deposit. The markup is $44,000 and the principal paydown is $543 per month, which works out to be $26,064 over 48 months.
When you subtract the initial deposit, that's a total of $19,000 for Payday #3.
And that comes out to a total of $113,632 for All 3 Paydays®!
This is higher than our average of $75,000, but it's also not unheard of. Any time you're dealing with a property that's close to half a million dollars, you can expect to be reaching or exceeding six figures.
Hopefully, this has shown you why timing is so crucial and why expired listings work so well for terms deals.
Do you have systems in place to attract sellers?
Do you have scripts that guarantee you get properties consistently?
This and so much more including the newest techniques we use will be taught and discussed at Business Scaling Secrets in just a few months.