Don’t Just Make the Deal, Construct the Deal
Creating deals that help you get what you need.
That is, by far, the most frequently asked question I get when it comes to real estate investing.
How do I buy with no money down?
How do I buy with bad credit?
How do I buy if I filed bankruptcy before?
How do I buy when the seller is itching to get rid of the property?
I will tell you. It seems magical, but it’s actually not magic. I use a system, the same process I teach the Property Hunters with GIC Deal Finders. The system works when you work it. In the financial world, they call it a leverage buyout.
I am a small business owner. I own a portfolio of properties that, over the years, has included more than 400 income-producing assets that generated both immediate cash and passive income for myself and my businesses. The process is very simple. I will walk you through this simple three-step process.
1. Locate an asset.
I encourage Property Hunters to keep a pen and pad or a recording device close by at all times. That way, you are ready when you come across a property that may be a good candidate for a deal.
2. Locate the owner of that asset that has value.
The cardinal rule of real estate is you must find an owner that is willing to sell. A motivated seller is a lead. An unmotivated seller is a waste of your time. The owner must be willing to sell and agree to allow the asset to be used as both the collateral for the immediate cash and long term financing of the asset.
When hedge funds employ this technique, they usually look for assets that can be leveraged to support the loan amount. In some cases, borrowers come up with some money, but in most cases, all the money comes from other sources like banks and even cash flow from the business.
3. Don’t just make a deal. Construct the deal (so everybody gets what they want).
Brandi needs $20,000. She finds a vacant house that will appraise for about $120,000. She finds the owner and constructs the deal so that the owner of the property gets some cash and Brandi walks away with $20,000 at close of escrow. The seller agrees to an owner finance part of the purchase price of the property at an attractive interest rate. This is a bit more sophisticated than the traditional home purchase to which most of us have become accustomed. That’s okay. Different doesn’t mean wrong. Your ability to succeed as a real estate investor hinges on your ability to find the income stream. The terms of this agreement, much like the terms of any agreement, is a mutual decision between the seller and the buyer. The closing officer, realtors, insurance folks and even dear old Mom and Dad are only there to witness the agreement.
Constructing a leverage buyout is a much better deal for most individuals and businesses than marrying yourself or your company to an alternative lender for the next three to seven years.
I have successfully used this process to finance most of my businesses. Some of these businesses became multi-million dollar organizations. You don’t have to rely on a bank or an alternative lender. Change your mind about real estate deals. Smart investors, smart business people construct the deal to meet their needs.