Is it Possible to Average $100k Per Deal on Your First Two Deals?

If you have the right resources available to you, you can make a great living off of terms deals from the beginning.

There seems to be a common misconception with real estate where people assume it takes years before you can start making a decent living. It’s like some people expect to be eating ramen for their first year in real estate.

The reality is that, like anything, you get out of real estate what you put in. I always tell people to manage their expectations—you can’t expect to make a million dollars in your first week, after all. But if you do the work up front, do your research and, most importantly, get a mentor to help you through your first couple of deals… Guess what? You’ll be making money right off the bat.

And in the terms business—thanks to our three Paydays deal structuring—you’ll be getting a nice down payment in the beginning, sustained income throughout the term, and a great payoff at the end.

Our goal is to help all of our Associates lower their “TTFD” or Time to First Deal, so that they can start generating income right away. In this case, we’ll look at an Associate of ours who generated an average of $100,000 per deal on their first two deals!

Getting paid $114K for a personal call

The source of the property we’re looking at was an expired. Now, we normally recommend using virtual assistants or automated calling systems for expireds. Those methods allow you to efficiently contact hundreds of expireds without spending any of your valuable time.

In this case, our Associate had some spare time and actually made a few calls himself. This was one of them—and that simple phone call ended up providing him with over $100k in the end. So, while we do recommend using automated systems, there is always value in making that personal connection over the phone. It’s also not a bad idea when you first start out to get comfortable calling so you’re in a better position to work with your virtual assistants as your business matures.

The seller had listed it with a realtor for six months, and our Associate caught him right at the expiration. He was pretty bitter about the whole situation—he had just lost a tenant, there was about $70,000 in repairs to be made, and he was prepared to relist it.

Our Associate was able to jump in and present him with a quick way out of his situation. This is one of the biggest benefits of terms deals—when a seller wants to get out of a messy situation, we can take care of it for them. (After all, that’s why we get paid—to provide solutions as investors!)

After a few weeks of back and forth, our Associate was able to settle on some numbers and get a deal structured.

And there’s one more nuance to this deal… The seller was a contractor—meaning he was very aware of how these situations work—and his spouse was a paralegal. This can be a tricky situation to deal with because when people know the ins and outs of the industry, they often want to get into all the nitty-gritty bits of a deal to make sure it is perfectly aligned with what they want.

But as you’ll see, that’s no problem for us—our forms are rock-solid and this deal went off without a hitch.

Renovations, high standards, and 3 Paydays

We mentioned above that this house needed about $70,000 in renovations to get it ready to sell. Well, the seller—a contractor—actually ended up doing the renovations himself. But he didn’t just renovate this home to make it livable… He renovated the property up to his standards—as if he would be living in it.

And he has pretty high standards!

The renovations were top-notch and he ended up putting a lot of his own time into it. This was a bit odd as he still wanted to get rid of the house as quickly as possible, but our Associate made sure to let him know that they would be extra selective when looking for a buyer.

We always use an extensive vetting process to find tenant buyers, but in this case, we wanted to take extra care to find a tenant buyer who would appreciate the work that had been done to the house and keep it in great condition. Needless to say, he really appreciated that.

Let’s get into the numbers on this one. Our Associate purchased the property for $365,000 on a sandwich lease with a 36-month term. The seller owed $65,000 on the home, so we were effectively paying off his $65,000 loan and giving him $300,000 at the end of the term.

REMINDER: At the end of the term, the $65,000 loan will be less all the principal paydown.

Payday #1 is always the down payment—in this case, our Associate got $10,000 up front and another $31,000 within the first six month for a total down payment of $41,000.

Payday #2 is the monthly spread. Our Associate owed $2,600 per month to the seller and was getting $2,995 in monthly rent from the tenant buyer, which means a profit of $395 per month, or $14,200 total for Payday #2. This might feel a bit low, but wait until you see how much of that $2,600 is going to the principal.

One note here: We almost always opt to pay the mortgage directly in these cases, instead of paying the seller and having them pay the mortgage. Why do we do this? There are multiple reasons…

First of all, we can’t count on the seller to pay the mortgage because if they screw up it’s on us. Second, we’re doing deals all the time and we don’t have time to be checking in on each seller every month to make sure they’re paying the mortgage. It’s a lot easier to just do it ourselves. And finally—and most importantly—we have a fiduciary duty to the tenant buyer to make sure the mortgage gets paid on time so they don’t run into any issues.

If the seller has any objection to this, we basically tell them exactly what was listed above—and that clears up any issues.

Getting back to the Paydays, Payday #3 is the big one. This is the profit from selling the home to the tenant buyer and the accumulation of all that principal paydown over the course of 36 months.

Our Associate was able to sell the home for $409,900, making a profit of $44,900. And out of that $2,600 monthly payment going to the seller, $1,520 was going to the principal—which is a total of $54,720 over the entire term!

Add those up and remove the initial down payment, and you’re left with $79,100 for Payday #3.

And with that, all three Paydays come to a total of $114,000!

An average of $100k+

The deal we covered in this post was our Associates second deal. The first one—which we covered in another post about structuring a deal in a seller’s car—came out to right around $84,000 in total.

That comes out to around $99,000 on average…

But when you also factor in an extra month’s rent on each deal, it brings it to over $100k! If you don’t already know, we always structure our deals so that we don’t start making payments until 30 days into the term. That gives us an extra rent payment from the tenant buyer, which goes right into our pocket.

So, if you’re just starting out in real estate—what does this mean for you?

It means you can make big bucks right off the bat. But only if you put in the work, do your research, and GET A MENTOR! These deals simply wouldn’t have been possible for our Associate if he didn’t have a mentor to walk him through some of the tricky situations he faced.

And without those resources, it will likely take a long time before you can make a decent living in real estate.

Did you have a mentor when you started out? How much did you make on your first couple of deals? And how long did it take?