First deal preparation (need some motivation)

[RealNoob 0]

Hello everyone, after quite some time from reading through the forums as a guest, I created an account and decided to just put myself out there. I just finished MC's book and I told my wife after this book I would stop talking about it and take some action. Well its time, I had 2 questions bothering me before I began.

 

1. What would make somone go for a sandwich LO rather than a CA? I understand more would be made with the sandwich, do you always start out pitching a sandwich to the seller? Depends soely on the motivation of the seller? Or just how does the conversation get opened? Maybe they decide not to go with the sandwich option then you counter with the CA?

 

2. Ive been in the military since the age of 18, I know nothing about the "market" or how to guage it. Should I just try to find any house/deal where I can work with a seller and hope to find a t/b? I was thinking as long as a clause is in the contract to get out if I cant move it, I could try to move anything.

 

I actually have a million questions but I know they are just excuses to keep me in my comfort zone, and I realized today I need more knowledge, but I can never stop learning. So I need to get on with it because with what im doing now I will never be able to achieve my dream. Any motivations would be GREATLY appreciated.

 

Thanks

[pilot76180 51]

Welcome aboard Noob!! HA! I love it!

1) The CA works better for the seller financially, so I personally recommend doing CA's starting off, because they are so easy, and it's a pretty easy sell to sellers.

2) Yes. Find a seller willing to work with you, and learn the ropes by doing.

 

All the questions you'll have are the same we've all had, so don't worry about that.

I look back at the questions I had 8 years ago and think "Really? I asked THAT?!" Just because it becomes so easy so quickly.

[MichaelC 160]

Greetings, RealNoob, and welcome to The Naked Investor.

Reading the first paragraph in your post reminds me of how difficult in can be to go from reading about real estate to actually investing in real estate. Rest assured, you are not alone with this, RN. Everyone here was at that same starting line at some point. Our goal is to get you off that line and into the running, so to speak. With that in line I will offer this one bit of advice: don't over analyze deals and potential deals to the point of Paralysis of Analysis. The fear of something terrible going wrong and costing you your life's savings is ever present with most n00bs. But that needn't be a concern with what we do here and how we do it. These deals are as safe and as risk free as it gets. I'm talking specifically about Cooperative Assignments which, as pilot has already mentioned, are the best way to start in this biz.

Without further ado, your questions. . .

 

1) Who is the "someone" you are referring to? The homeowner or the investor? For the homeowner it comes down to their motivation level and their strong desire for debt relief. For the investor, it always comes down to the numbers in the deal. A sandwich lease carries more risk, so the reward factor needs to be greater, as well, to make it worth carrying that extra risk. Ask yourself what does the homeowner need, what do you want to do, and what are the numbers on the deal saying?

 

2) One of the many advantages to lease purchasing is the low risk factor. As you have already alluded to, if you aren't able to find a t/b, it's not going to crush you financially. We have several "weasel clauses" to cover our butts. So don't let fear stop you.

As for knowing your market, that only happens by rolling up your sleeves and getting out into the market. In other words, stop studying and start doing.

 

You have a million questions? Well, we have a million answers. So bring 'em on. We've heard them all by now, and when we don't know the answer we fake it.

[<Steve> 82]

Just to through in my 2 cents in on Sandwich Lease Options. The reality is that you are a landlord to the tenant/buyer, but it is better than a typically rental as you have 3 sources to make profit and you are dealing with a tenant/buyer vs. a renter. And if the SLO is set up properly and the tenant/buyer screened well it can be very rewarding, but an SLO can take more effort. Lastly, if you are looking to purchase a property for a long term hold, a SLO is great to test the house to see how well it will perform before buying.

 

I would typically always approach a seller with an SLO deal first and then also mention a CA. I would not settle on which technique until I could run the numbers to see what the seller's house could qualify for. Sellers do like that I make the rent payments to them and not the tenant/buyer, and I am responsible for maintenance and repairs to a specific limit. The seller is completely hands free.

 

Today the equity needed for a SLO is harder to come by but they are still out there. CAs require less equity and can offer the seller a higher purchase price and rent amount.

 

Real"Noob" you know you are going to have to change your name when you start "wheelin' & dealin"

[RealNoob 0]

Thank you for all the adivce, tonight when I get off of work I will be turning the t.v. off and formulating a game plan. Hopefully soon I will be posting my first deal up here

[MichaelC 160]

Just keep in mind between today and your first deal, lots of things may pop up that need your attention. That's what we're here for, so don't hesitate to ask for help.

[RealNoob 0]

I had another question, I was reading around about your periodic calls that are set up, to motivate and share. Could I get in on that? It would be greatly appreciated.

[MichaelC 160]

Are you referring to the occasional teleconference? The most recent one was this past March. Fellow member Jonathon Rexford has been good enough to post the recording for anyone to listen to. See the thread here.

[mweaver606 5]

#1 is an interesting question to me. I'm just getting started, will begin marketing next week actually as our new office in the woods will be done finally (working from home with 4 kids is brutal after 10 years!) Anyway, I don't think I will ever mention an SLO or a CA as an "option" to sellers. I plan on running the numbers and deciding which one works for ME as an investor. If the numbers are there for an SLO I can choose that option, if not, then I'll put a deal together as a CA, but giving the seller a choice is a recipe for a disaster to me. I can certainly see where I may change from an SLO to a CA to save a deal if I can't negotiate a price down, but again, my choice, not an option to the seller. (I reserve the right to change my mind as I begin doing deals, lol.)

[<Steve> 82]

mhmi-

 

Like you I like to keep my options open. At the start of the conversation with a seller I present what I do as if I want to do a SLO. I have 4 powerful talking points in my 1 minute explanation.

 

-I am responsible for the rent payments made to the seller. (note: not when vacant)

-I am responsible for the maintenance and repairs. (note: up to a dollar limit)

-I am not a realtor and charge no commissions or fees. My service to you (seller) is free. I charge the tenant/buyer a fee that is how I get paid.

-I also arrange to have the tenant/buyer pay all closing cost.

(Naked Investor Manual)

 

Then right before ending the call and explaining the Short Offer I will be emailing, I will see if they would be interested in a CA. Just to see if they would be comfortable and as a backup if a SLO will not work. If they are interested (and most of the time they are somewhat) I will quickly explain how the CA works. If I hear any hint that the seller has rented the house before or has any land lording experience, I know I have them hooked with either an SLO or CA. I tell the seller I am just trying to see which L/O programs their house will qualify for. I do the numbers to see what works and send off the Short Offer.

[MichaelC 160]

#1 is an interesting question to me. I'm just getting started, will begin marketing next week actually as our new office in the woods will be done finally (working from home with 4 kids is brutal after 10 years!) Anyway, I don't think I will ever mention an SLO or a CA as an "option" to sellers. I plan on running the numbers and deciding which one works for ME as an investor. If the numbers are there for an SLO I can choose that option, if not, then I'll put a deal together as a CA, but giving the seller a choice is a recipe for a disaster to me. I can certainly see where I may change from an SLO to a CA to save a deal if I can't negotiate a price down, but again, my choice, not an option to the seller. (I reserve the right to change my mind as I begin doing deals, lol.)

For some "just getting started" your approach is right on the money, as far as I'm concerned. Too many choices and the homeowner does too much thinking. . .which is never a good thing. Go into the deal knowing what you want to do, but be prepared to change hats if the conversation leads you in another direction.