Working WITH a realtor

[mr2monster 0]

I've got a ton of realtor contacts and i was talking to one yesterday that has a condo that she cant sell.. They are looking for about 79000 and are comped right within FMV. I asked her if they would be willing to sell on a lease purchase and if they needed the cash out to buy their next home.

 

Well she called me back today and told me that she talked with the lender and they have good enough credit and dont need a down payment and that this was a feazable solution. She also said that she talked to them and they were willing to go this route as well.

 

Here is what I'm thinking....

 

I give said realtor her 3% out of my pocket right now.

 

Price of the home is 79K. the seller will net 74260 after paying realtor fees which they were planning on doing because they have a realtor. So If i can buy the home for 74260 net, front the 3% to my realtor friend as a referral fee (total into the house now is 76,630), have her cancle her contract and let me take over ( she is willing to do this) I would be good to go right?

 

Average appreciation on this home over the last 4 years is 8%/year so that would make the TB price 85320 at the purchase point of 12 months.

 

According to my #'s that is a $8690.00 difference, 2400 of that coming now as option money, 6290 coming at the back end. plus a cashflow if i can make one. I havent done rent surveying yet. I probably wont do a rent credit unless i cant find a TB.

 

Am I missing something here?

[Kimberly 0]

Mr2Monster,

 

I give said realtor her 3% out of my pocket right now.

Maybe get her the money when you get a tenant/buyer. Pulling cash out of your pocket is a bad habit. As long as you have nothing in the deal, you have nothing to lose, and no chance of becoming a motivated seller!

 

Use the search feature of the forum and search for Realtor or Agent and by Adam King (MI). He's posted on how he does this.

 

Kim

[Mr.B 0]

Maybe get her the money when you get a tenant/buyer. Pulling cash out of your pocket is a bad habit. As long as you have nothing in the deal, you have nothing to lose, and no chance of becoming a motivated seller!

I second this. Almost every Agent, Bird Dog, Fellow Investor understands or should understand that they get paid when and if you do. It shouldn't even be a question. Just remember nothing is a sure thing.

 

~Mr.B

[-Tony- 0]

CA or next.....it is just to skinny what about closing cost which could be 3-4k.

 

You already said they were open to a l/p do a ca keep the 2.4k (go an even 3k) or at least 1/2. Talk to adam see how the realtor can keep her commission.

 

Just my 36 cents

[Adam King (MI) 1]

Mr2Monster,

I have finally gotten to the point where I can offer a Realtor what you just suggested. If it's a good enough deal, I'll give them their 3% right up front when I close with the seller. Then, I'll pick it back up from a tenant/buyer and move them in. The logic behind this is simple:

 

1. If you're doing enough deals and need to keep the funnel full.

2. If you can afford it, it's a sure way of having a great reputation with Realtors for saving their listings. (And getting more deals)

3. It DOES work and will get you a ton more deals than you would without doing it. Again, you will be opening up a whole new door showing people that you’re serious enough about your business to be able to take care of your team.

4. This does NOT work with a CA unless you already have a buyer with more than the 3% (Your profit) and you're motivated enough to include the Realtor.

5. Sooner or later you're going to have to make the jump to creating passive income.

Remember, a CA isn't an investment; it's a form of leverage.

 

Something to consider is that this is experience talking. A lot of people may say stay away from Realtors, but I can tell you right now if you start throwing around offers like 3% and you'll take it on terms, you're going to get a lot more deals and a lot more calls.

Regards,

Adam

[-Tony- 0]

Adam,

If it's a good enough deal

I look for 20% or 20k witch ever is higher (or better)

 

Mr. B said

They are looking for about 79000 and are comped right within FMV

He is talking about a 3% discount off of FMV wich will not cover closing cost in my area. That is not a discount if you ask me. That is why I suggest a CA.....

 

Tony

[mr2monster 0]

Im talking about doing a sandwich lease with the seller and having the TB paying closing costs, not a CA. I would initially buy the home for a 6% drop (full price minus what they would have paid in realtor commissions) fronting 3% when i close with the seller to the realtor as a referral. I would get the 3% back on the back end because of the discount i bought the house at and the gap of my selling price. on a normal deal the gap would be smaller because you would be giving a seller "full price" not Full price minus 6%. I'm actually coming up with an extra 3% for the split because i am only paying for half of what would have been paid out on realtor commissions by the seller(i.e. paying 3% to save 6%).

 

Does that make sense? Or am i wrong?

 

Ive got enough of a savings that i can afford to do this, not to mention the TB will be putting a Option Payment down so i will have that to replentish my savings until the TB buys.

[Adam King (MI) 1]

Mr2Monster,

 

According to my #'s that is a $8690.00 difference, 2400 of that coming now as option money, 6290 coming at the back end. plus a cashflow if i can make one. I havent done rent surveying yet. I probably wont do a rent credit unless i cant find a TB.

 

Am I missing something here?

 

I only see you making $6,290? If you're putting down the 3% up front, the tenant/buyer's 3% would be a wash right? Meaning that you can't count it as profit.

This isn't an impossible deal, but counting on market appreciation can get you some times. However, I don't know the area and if all goes well you could profit. I just have to play the pessimist because I know the real world of late payments, evictions and real estate politics.

 

Also, I agree with Tony. There's better deals out there that can be purchased at 80% LTV or less. But again, I'm not here to tell you what to do. This may be a very favorable property and could make you some easy money. Either way, I think your head is in the right place with taking care of the Realtors. Sooner or later word will get around that you pay 3% on soon to be expired listings. That right there could be priceless to you in the future.

Regards,

Adam

[mr2monster 0]

Heres how i figured it:

 

85320 (sale price)

76630 (Buy price and 3% realtor commission)

_____

8690 split

 

 

Now, i can just take the 8690 at the back end and have no option or i can split it up and take 2400 now and collect 6290 on the back end. Either way I am making 8690 plus any cashflow if there is any.

 

 

Did i do this wrong?

[Kimberly 0]

So far, your math is correct assuming the realtor's commission IS INCLUDED in the $76,630, and not based on that number.

[-Tony- 0]

Okay your Realtor friend is getting $2,400, so if she/he listed the house that would have been her/his commission anyway (50/50 w/ broker) if she/he didn't list it you just doubled her/his commission. I would offer a split on the option 20-40%. I to believe you should pay your realtor but don't go over board $500-1000 in there pocket is better than the dream of 3%

 

Here is a funny story about paying your realtor.

 

I made mine crawl under her kitchen table with me so I could pay her. She had a really bad day but she couldn't stop laughing.

[Adam King (MI) 1]

Mr2Monster,

 

85320 (sale price)

76630 (Buy price and 3% realtor commission)

_____

8690 split

 

What is your cash-flow and rent credits?

Other than that, it looks like you're doing okay. Again, if the moons align the right way, this may be a good one for you. I just still hate expecting profit from amortization or an inflated price, but that's just me. And don't forget, my opinion is only 1 out of 7 Billion or so on this planet.

Regards,

Adam