Real Estate Investing’s “Let’s Make a Deal” Revisited

June 12, 2008 | By | 2 Replies More

Real Estate Investing's Let's Make a Deal RevisitedWe recently posted about a deal that we came across last week where the seller was asking $85,000 for her 3 bedroom town house in Summerville, SC. After giving you the particulars of the deal, we asked, “How would you structure this deal to make it spin off the most amount of green possible?

How the Deal Went Down

We contracted to buy her property “subject-to” the existing mortgage of $65,000 and are giving her $6,000 in cash (instead of the $20k she was asking for originally). So we are buying the property for $71,000 in its current condition, and the property’s after repaired value is $120,000-$125,000.

One of the “moving parts” of the deal is the money she is getting at closing and how she receives it. We could have negotiated paying the $6,000 over time or better yet, when we sell the property at the end. These are all factors that you, the creative real estate investor, should be thinking about when structuring a deal.

In this scenario, she needed the money at closing and we felt there was enough room to give it to her. So, all in all, we’ll be in this property for around $85,000, after the purchase and renovations, with minimal money out of our pocket.

Potential Exit Strategies

One of our readers mentioned that he would do a “handyman lease option.” This is where someone is willing to take a property as is, do the work themselves and have an option to buy. A benefit for the tenant buyer would be building “sweat equity” in the property. A benefit for the investor is being able to forego the renovation process and spend much less money. This is a great way to boost your ROI (return on investment) in any deal. The less cash that sits in a deal, the higher the rate of return.

Another option would be to do the renovation ourselves and retail the property on the open market. We could even wholesale the deal to another investor for a few thousand dollars by assigning the contract to them. There is never anything wrong with making a few grand and moving on to the next deal.


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Real Estate Investing’s “Let’s Make a Deal”


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  1. William Christenson says:

    I love the “work for equity” lease option exit strategy where the tenant pays a reduced option fee in exchange for accepting the property in as-is condition. Cash is always king and this lets you hold onto more of your cash in two ways: 1) no repair expenses 2) no holding costs. Add tho that that peace of mind from not having a vacant property and I think you’ll agree this is a great strategy. I recently did this on a property I have in Summerville. The tenant buyers had cash in my hand ($3000) before I even closed! This brings up another point: you can (and should) market before you close. In fact, if you’re new to investing, this can be a great way to give you the confidence to actually close on that deal you have contracted. If you have a buyer lined up before you have to close, your risk is reduced considerably.

    Happy Investing.

  2. Patrick Riddle says:

    Great idea to start marketing a property prior to closing on it! That is actually built into our purchase and sale agreement.