April 2016 H OUSING N EWS R EPORT
MY TAKE By Eddie Speed and Kevin Shortle NoteSchool President and CEO (Speed) and Director of Research (Shortle) Make 5 Times the Profit by Combining Real Estate Investing with Notes
seller to carry back a note.
Most real estate investors lose out on tens of thousands of dollars in profit on every deal they do. This happens because they don’t have a clear understanding of how to architect a deal using both real estate and note investing techniques. Combining these techniques enables investors to make five times the profit! This article will use an actual transaction to show you how to do just that. Let’s start with a little background of the investors so that you can see where their mindset was and how it evolved from being just an investor in to what we call a deal architect.
The seller accepted the offer as he figured that 5.49 percent was a much better return than he could get by putting the money in the bank.
Eddie Speed
Kevin Shortle
The investors in this transaction were a husband and wife team. Their approach, like that of many investors, was to purchase properties at a discount and then sell to a rehabber. In this particular transaction, they found a motivated seller who was looking to sell a vacant home that they inherited. The property had an after-repair value of $48,000 and the property seller was willing to sell it for $17,000. This husband and wife team (HW Team) figured their exit strategy would be to resell the property “as-is” to a rehabber for $25,000 cash. If they were successful in doing that, in a few months they would profit $8,000. During this time, we were teaching them to become deal architects. They were starting to realize that not only were they missing out on bigger profits but they were also facing a changing real estate market. This changing market left them with thinner profits on their shrinking inventory. They shifted their strategy to utilizing both real estate and note techniques and made more than five times as much. Here is how they did it.
Second Step
After a $500 cleanout, they sold the property to a buy-and -hold rehabber. They didn’t sell it for cash rather they offered TERMS. They negotiated a $45,000 purchase price with $6,750 down and $454 per month for 120 months. Now your knee jerk reaction at this point may be “no way, this investor is over paying.” When the HW Team explained the benefits and value of this financing, the investor got it. He realized that he didn’t need to come up with all the cash nor did he need to get a high interest hard money loan. He only had to come out of pocket with $6,750 to close. He could use the rest of his money for the light rehab.
First Step
After the seller turned down a low-ball offer of $10,000, they countered with the full asking price of $17,000 but on TERMS. They offered the seller $500 down and monthly payment of $237 per month for 84 months. In other words, they asked the
Continued Next Page
9
Made with FlippingBook Online newsletter