The Deal After the Deal

Here's how you can extend terms deals to benefit you, the buyer, and make significantly more income.

We often talk about making "pivots" in terms deals. There are many ways you can change a deal to benefit you, the buyer, or the seller—if you know how. So, instead of walking through All 3 Paydays™ like we would normally do in this column, I'd like to open your eyes up to some of the pivots you can do in the terms niche to make more income for yourself while also helping the buyer and seller.

We like to call this "the deal after the deal."

My first sandwich deal

My first ever sandwich deal, back in 2013, also happens to be an example of some of the best pivots you can do in a terms deal. The fact that we're still talking about it to this day should give you a hint.

At the time, the deal was originally written as a 36-month sandwich lease with a one-year extension. But we still own it today.

When we started the deal, we took it on for a purchase price of $183,000. The seller had no equity in the property, and we were making $1,150 PITI payments. Somewhere in the 25 to 36 month range, the seller contacted us and was desperate for cash. We didn't technically owe the seller anything at this point, but we were happy to help. Here's what we did.

We told her that we'd give her $2,500 in cash right away if she would allow us to close on the home subject to existing financing. This converts the deal to a subject-to, which is something we often do with sandwich deals. Once we build some rapport with the seller, we often look to convert to a subject-to because it lets us depreciate the property (for accounting purposes) and gives us more control.

When we converted it to a subject-to, that $183,000 was now closer to $170,000. And this was only the first pivot.

The deal that keeps on giving

There were a few more pivots with this deal.

First, the original tenant buyer defaulted. It was a couple that split up and neither of them were able to close out the deal on their own. No problem—we secured another tenant buyer and got them in the door. (This also means we capture an additional Payday #1, the non refundable down payment.)

But lo and behold, the same thing happened with the next tenant buyer. It was a couple who split up, but in this case one of them stayed in the property. And not only did they stay, they did some great work on the property. When the time finally came to close out the deal, we got in contact with the tenant buyer and he wasn't ready to buy yet. So we asked him if he wanted to simply rent the home.

He accepted this offer, acknowledging that we'd turn him into a normal renter, and that if he did want to buy the property at a later date, it would be at market value.

Well, he's still in the home today and the market value now sits at around $260,000 and that initial $180,000 is down to about $132,000. If we were to close out this deal right now, it would be around $200,000 for All 3 Paydays™.

Think about that: $200,000 in profit on a house that we tied up for $183,000! And the longer it goes, the more profit we'll make.

I hope this gives you some insight into how we think about these deals and why we put such an emphasis on knowing how to pivot. If you can think this way and incorporate some of these pivots into your deals, you can significantly increase your income while also providing unique solutions to help your buyers and sellers.

What do you think of these pivots? Would you be interested in extending deals like this, or would you rather close them out? I'd love to hear your thoughts in the comments below.