How We Put an Extra $11k In Our Pocket On a Simple Deal

They say good things come to those who wait. In this deal, we ended up getting over 11,000 good things for waiting.

The deal we’re looking at today has two interesting things going for it. First, it’s a property that we’ve never actually seen. Second, we were able to add $11,652 to this deal just by waiting an additional year...

Curious what I’m talking about? Let’s get into the details.

The house we had never seen

The property in this deal was found remotely. We got wind of it and, since it was several hours away, we had someone go check it out for us. This was someone we trusted, and part of the process was for them to fill out an entire report on the property that covered everything we needed to know.

The report checked out and the person who looked at the house said it was good to go, so we were confident this property would work out. We went for it, and here’s how the numbers shaped up...

The purchase price of this property was $283,784, and we structured this deal over 36 months. We owed the seller $1,818 per month (by way of direct payment to the mortgage company).

We then turned around and sold it in the end for $329,900 over a term of 24 months. We received $2345 per month from the buyer, which gave us a spread of $527 per month.

So, let’s look at the Paydays…

Payday #1 was the down payment. In this case, we received a down payment of $24,000, which was spread throughout the term. We actually got $11,000 up front and the rest over the course of 24 months.

Payday #2 was the monthly spread of $527. Over the course of 24 months, that adds up to $12,648.

Payday #3 was the principal paydown and back-end profit. In this case, $444 of the monthly payments were going to the principal paydown, which comes out to $10,656 over 24 months. Plus, the house sold for $329,900, adding an additional $22,116—after the $24,000 deposit has been removed—to the third payday.

In the end, that’s $69,420 over 24 months. Not bad!

But I’m sure you’re wondering… Where is that $11,000 I was talking about in the beginning?! Well, we’re about to get to that.

Adding an additional 12 months

In all the numbers above, I had been using a term of 24 months. But that’s not actually what happened!

While we had originally planned for a 24-month term on this deal, we ended up going for 36 months in the end. Remember, our term with the seller was 36 months—but we had been planning for a 24-month term with the buyer.

Now, why did we do this? Well, by extending this deal we were able to add a significant amount of profit to Paydays Two and Three. Here’s how it worked out…

Payday #1 was the same, with $24,000 down.

Payday #2 was the monthly spread of $527, but over 36 months instead of 24, giving us $18,972.

Payday #3 was also increased because the principal paydown was increased 36 months, meaning the total was $15,984 instead of $10,656. The back-end remained the same at $22,116.

In the end, the total of all three Paydays ended up being $81,072—that’s $11,652 more than what we would’ve made on the 24-month term.

So, by adding a year onto the term, we put an extra $11,000 in our pocket. Not too bad, considering this required no extra effort on our part—it just meant that we had to wait a little bit longer to get that final Payday.

Now, there is obviously a catch here. Some people might be in a situation where they can’t afford to extend deals out like this. Maybe you can’t wait another year for that final Payday. That’s fine—but when you get to a point, like us, where you’re constantly doing deals and you have Paydays coming in week after week… It pays to be patient.

Is this a strategy you can implement in your business? Have you ever extended a deal to increase your Payday? I’d love to hear about it.