Can You Structure a Deal in a Seller's Car?

It doesn’t matter where you structure a deal—what matters is that you get it done!

Can you really structure a deal in a seller’s car?

Well, the short answer is—yes!

The long answer is that deals can come together quickly if you use the right tactics—and it doesn’t matter where you structure them! We’re going to look at a deal that was structured in a parked car in front of the property in question, but the point you should take from this is that if you’re in the right place at the right time, you may be able to get a deal together that very instant. So be prepared!

Let’s take a look at what happened.

A win-win for everyone

This property was a for-rent-by-owner (FRBO). The owner had just lost a tenant and was currently in the process of finding a new one.

When we reached out to the owner, it became pretty clear that he did not want to deal with this property. He didn’t want to find a new tenant, he didn’t want to deal with maintenance issues, and he didn’t want to stay committed to this property over the long term. This is often the case with landlords, so it makes for a great source for us to find deals.

There was also some work that needed to be done to get the home ready to sell. It was fairly basic, so as we got further into the deal we made the decision to leave it as is and see what happens. That appealed to him because he wouldn’t have to deal with it—whereas a realtor would absolutely ask him to take care of it before getting it on the market.

This is something that you’re uniquely positioned to handle in the terms business. We knew that the incoming buyer may be interested in handling it themselves, and regardless of what happens it’s something we can easily work into the deal.

As it turned out, the buyers we found were very handy people and wanted to do the work themselves! So it worked out perfectly. (This isn’t as uncommon as you might think!)

Structuring a deal in a car

The reason this deal was structured in a car is because the property was in Florida and our Associate had a very short window to meet with the seller, walk through the house, and get a deal together.

When they met at the property, they started to build some rapport and it quickly became clear that they were going to be able to work out a deal. Without a real space to sit down and go through the numbers, they sat in a car in the driveway, did some negotiating, and settled on a deal. The papers were signed a few days later!

As far as the numbers go, our Associate was able to purchase the property for $221,000 over a 30-month term. This was a sandwich lease deal—and it’s important to note that when we work these numbers with sellers, we make it clear that they are not going to be getting a lump sum for the purchase price of the home.

In fact, we don’t even like to talk about the purchase price. Because really, all we’re doing is paying off the seller's loan and giving them the difference from the purchase price. And that’s exactly how we frame it to them. We say, “We’re going to give you ___ and we’re going to pay off your loan on or before the end of the term.” The loan is less at the end of the term, which is where we ultimately benefit as part of one of our three Paydays (Payday #3).

So, in this case, the seller owed around $110,000 on the house. That means we’re paying off that $110,000 and giving him the remainder—about $111,000.

The Paydays

For those that don’t know, we always split our terms deals into three Paydays:

• Payday #1 is the down payment from the tenant buyer at the beginning of the term.
• Payday #2 is the monthly spread, or the difference between what we get from the tenant buyer in monthly rent and what we owe to the seller each month.
• Payday #3 is the profit from selling the home, plus the amount of principal paydown that has occured over the course of the term (and minus the down payment).

In this case, Payday #1 came out to be $22,000 in total. Our Associate got $10,000 up front and then another $1,000 each month until $22,000 was reached. This strategy of getting $1,000 per month for the rest of the down payment is a great move—it improves your cash flow, helps the tenant buyer become more vested in the home, and sets them up to win for the mortgage.

Payday #2 was around $769 in profit per month. Our Associate owed $1,440 to the seller and was getting $2,199 per month from the buyer—giving a monthly spread of $769. Our average monthly spread across all of our deals is around $308, so this was an exceptional spread.

Multiplied out over the 30-month term, Payday #2 comes to a total of $22,770.

Payday #3 Came out to $39,443 in total. That’s calculated by taking the difference between the purchase price ($221,00) and the sale price ($269,900) for a profit of $48,900. Throughout the term, though, there was also $418 per month in principal paydown—which adds an additional $12,500.

If you remove the down payment from the sum of those two numbers, you arrive at a total of $39,443 for Payday #3.

All three Paydays come out to $84,213 in total! That’s $84K in profit from a deal that was structured in a car and signed a few days later! Plus, we didn’t even mention that our Associate was able to find a buyer in about a week’s time.

This was a pretty unique place to structure a deal… What’s the most unique deal you’ve ever done? What happened? I’d love to hear about it.