06 Dec How to Structure Real Estate Deals
When learning how to buy properties for your business, it's important to know how to structure real estate deals. Not every buyer is going to want the same thing. The key to a good deal is knowing what options to send sellers to get them to close with you.
Find Comparables For The Property
This process is essential as it helps you pull together an accurate deal for your seller. We recommend visiting the property before pulling comps, as you may discover things about the property that were not included in the original listing.
Once you've gone to the property, talked with the seller, know the expenses and the mortgage, it's time to look at comparables. If you're already a member of our Wicked Smart Academy, check out Module 7 of our Seller Specialist Program for an in-depth explanation of the comp process.
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How to Find Comparable Properties
To find comparable properties, go onto a real estate site like Zillow and search for homes sold within the last six months to a year within a given radius of the property you are looking to buy. Make sure to specify the number of bedrooms, bathrooms, and square footage that your property has to get the most accurate comparable listings. If the property is in a volatile market, you should look at the area's most recent sales and current for-sale properties.
Once you find about 4-5 good listings, right down the home prices of each and take the average. This will give you a good idea of what the list price should be. Remember that the list price can be flexible depending on the length of term, principle down payment, and monthly payment. When structuring a deal, you'll provide multiple options for your seller.
Examples of Options of Real Estate Deal Structures
Below are a few examples of options you can provide when sending over a deal to your seller. Remember, when you are structuring a deal, it's best to include around 2-4 options. If you have a specific type of deal you want them to take, emphasize it and include it in the options. Use your best judgment based on their situation to provide them with the best choices.
Subject To
Here, you would be buying the property subject to the existing loan if the seller is selling the property roughly about what they owe. The market price of the house is roughly what the mortgage balance is. This is a great way to buy a property and have the seller finance the rest.
Owner Financing
This is if the property is debt-free. You're constructing a deal where the seller will hold a mortgage, and you're going to close on it and take the title.
Sandwich Lease
Here, you are under the understanding that the property has underlying debt, and there's more than likely some equity in it for the seller. You're going to purchase the property based on an agreed-upon price and take on all expenses. Then, on or before the end date, you're going to close out the seller.
Assign Out
With an assign out, you agree upon a price with the seller. Then, you take the property to the tenant-buyer market. Once you have a buyer in hand, you assign the buyer to the seller.
As a reminder, you should send your seller multiple options so that they can decide what is best for them. Keep in mind that you can do more than one of one option and adjust things like lease term to increase or decrease the price.
For more information on how to structure real estate deals and get paid, make sure to enroll in the Wicked Smart Academy!