Do You Have a Real Estate Lifeline?

Having the ability to “phone a friend” can mean the difference between having a profitable career in real estate and not.

What if you could have a “real estate lifeline” that you could call as many times as you like and ask whatever questions you want?

That’d be pretty helpful, wouldn’t it?

Well, that’s not a far-fetched idea. This is something we offer for our Associates and it’s something that everyone should look for as they start their career in real estate (or even if they already have an established real estate career).

And I am not saying this as a sales pitch, but to point out the value of having a coach or mentor that you can call upon when you’re unsure, when you find yourself in trouble, or when you just need some guidance.

Getting into real estate—especially the terms business—can be daunting. So daunting that a lot of people dip their toes in without ever taking the plunge. They don’t know what to say on the phone, they don’t know if their agreements are correct, they’re not confident in their ability to make a deal… The list goes on.

In this post, we’re going to look at how one of our Associates made their first deal ever, and how they used their “real estate lifeline” to get through it.

Finding a seller, a buyer, and making the deal

Like any deal, the first thing our Associate had to do to get this deal in motion was find a seller. There are many different methods for this, but one thing that he did was reach out to our community to see what was working and what wasn’t.

When you have a community of like-minded people who are all doing the same thing you’re doing, it can be an invaluable resource. You can bounce ideas around and figure out what’s currently working and what isn’t.

In this case, our Associate was sending out emails to prospects and following up with them via text message if they didn’t reply. All of this was automated, which was great, but he wasn’t getting many results.

This is not uncommon when you first start out in real estate! How are you supposed to know the exact right words to use in your email? How are you supposed to know what works and doesn’t?

After reaching out to our community, he was able to get some feedback on his campaign copy, make some tweaks, and fine-tune his strategy. After that, he quickly got his first response when a seller called him after receiving a text message.

(By the way, I did the same thing when I started out in real estate and almost everyone I know has done similar things! You have to reach out to the community around you or find some mentors to help you figure out what’s working and what isn’t.)

The property in question was an expired listing and he intended to take it on as a lease purchase deal. From the initial phone call, he was able to get the papers signed within two weeks and sell the property within another week. That’s just three weeks from the first phone call to getting a buyer in the home.

This is just one of many situations where having a community and a lifeline can make or break a real estate career. Without these resources, you’re on your own—and most people don’t make it. It’s not because of a lack of talent or skill, it’s simply because they don’t know what they don’t know.

The rest of this deal was no walk in the park, either. To put it bluntly, we were dealing with a tricky seller—they were very particular on what they wanted and they had reservations about the deal right off the bat.

For anyone new to real estate, this situation would have been nearly impossible to navigate. Our Associate was reaching out before nearly every interaction with this seller—and that’s okay! If he didn’t have some type of support on this, there is almost no way he could have gone through with it. Even for us, it was a tricky one.

So let’s get into the details and see how this deal shaped up.

The numbers

As mentioned above, this was a lease purchase deal on an expired listing. Our Associate was able to purchase the house for $368,333 and sell it in the end for $399,000 (remember: with sandwich leases we only use “price” to determine the amount of equity they’re getting at the end of the term as there is no “price,” but rather a fixed equity and payoff of the loan which goes down in principal monthly).

The seller owed around $260,000 on the home, so our real obligation to the seller was to simply pay that off and pay him the difference from the sale price, which comes out to $108,000 cash. This is how we always frame our deals—the seller is not just getting the sale price deposited in their bank account, they’re getting their mortgage paid off plus the difference from the sale price in cash.

Payday #1 (the down payment) on this property was $36,000. Now, we often get some of the down payment up front and the rest in installments. In this case, our Associate is getting $12,000 up-front, $12,000 a year later in February, and the final $12,000 the next year in February.

Why February? Because it’s tax season! And that means a tax refund.

This is a great way to structure deals to help out the buyer, as they can take their tax refund and put it right into that down payment. (This is also something that we discussed with our Associate on one of his calls—how could you be expected to know this stuff on your first deal?)

Payday #2 is the monthly spread, which comes out to right around $776 per month. This deal is set up with a 24-month term, with the option for the buyer to go to 36 if they need it. There’s a solid buyer in the home, so it’s unlikely that they’ll need the extra 12 months—but it’s always nice to have that cushion for the tenant buyer plus the opportunity for a larger payday for our Associate if the term does get extended.

Payday #3 is the back-end profit minus the down payment, plus the principal paydown. In this case, there was actually no profit on the “sale” of the house. When you take out the down payment, it would look as if our Associate was actually at a loss. But the principal paydown over 24 months comes out to $11,400—so they are still making a sizable profit here.

In total, all three Paydays add up to $65,700. And that’s for a 24-month term—if it does go to 36, that number will be closer to $80,000!

This deal had a lot of nuances, roadblocks, and unique situations to deal with. It would have been a tricky deal for any seasoned professional to navigate, let alone someone just getting into real estate.

The lesson here is simple: If you’re getting into real estate, get a mentor, get a lifeline, get a community to collaborate with… Whatever it is, you need some type of support.

Make sure you have a lifeline that you can use when you’re not sure what to do—because if you don’t, chances are you’re not going to last.

Do you have a mentor? How have they shaped your real estate career? Would you recommend that everyone get a mentor when they start out?