How to Create a 4th Payday with Terms Deals

Our deals normally focus on 3 Paydays™, but there are ways to add a fourth. Here's how.

When I first entered into the terms niche, we primarily focused on "Assign Out" deals (A/O for short). These are some of the simplest terms deals you can do, but they also leave a lot of money on the table.

In 2013, I did my first ever sandwich lease deal, and with that I soon developed our 3 Paydays™ system which is used on many of our deals. We realized that these deals were far more lucrative, and as such, they've become the mainstay of our buying and selling entity as well as our coaching business.

But what if you want to add a fourth Payday? Well, as it turns out, we added a fourth Payday to that first sandwich lease deal we took on back in 2013. Here's how we did it, and how you can add a similar Payday to your rent to own deals.

The original deal

This deal started out as a typical sandwich lease. The seller was moving to Florida, they were having trouble selling their home, and they were interested in what I initially proposed. The seller's loan balance was around $189,000 and she had it on the market for $210,000.

As such, I structured a lease purchase for just the loan balance, meaning there was no equity in it for her. If she sold with a realtor, she probably would have actually lost money with closing costs and fees even if she got the full $210,000, so this was fine with her.

This deal was originally written for 36 months. Here's how the Paydays went down…

Payday #1, the down payment, was $9,000. Looking back, this is crazy to us now—we would ask for much more. Back then, I was still figuring this all out. I barely even knew how to do the paperwork! Lessons learned. Thinking back, our average Payday 1s were around $10,200 and now they’re closer to $28,000!

Payday #2, the monthly spread, came in at around $324. I had $1,450 coming in from the tenant buyer and $1,126 going out. That comes to around $11,664 after 36 months.

Payday #3 consisted of a $20,000 markup on the home, plus $19,200 in principal paydown throughout the term. Take out the deposit, and I was left with $30,200.

In total, that comes out to around $50,000 for the entire deal. At the time, I was thrilled with this! It was much more than we had been making with our A/O deals, and got us excited about the kind of deals we could be making in the future. Our 3 Paydays™ now average closer to $78,000 (up again since last year was closer to $75,000).

But things didn't exactly go to plan with this deal, and I had to make a few pivots…

Pivoting to a 4th Payday

Around 26 months into this deal, the seller started communicating with us. She was stressed out and going through a major life event down in Florida, and she desperately needed some money in her pocket.

We wanted to help her out as best we could, so here's what we proposed:

• We take the deed to the property, buying it "subject to" (This means subject to the existing loan staying in her name but the deed transfers).
• Her loan stays in place.
• She wasn't going to get equity, but we agreed to pay the transfer taxes and give her an extra $2,500.

So, in the end, we purchased this home for $2,500 plus some transfer and legal costs.

But it doesn't end there! The tenant buyer that was in the property had a life event soon after this (a separation from their engagement) and decided to stay in the home on his own. Unfortunately, this did mean that he wasn't going to be able to purchase it at the end of the term.

Normally, we would look to just get another tenant buyer in and close out this deal. But in this case, the tenant buyer was very vested in the home. He had put a lot of work into it, fixing it up over the years. In fact, he had always wanted this home but knew he wouldn't be able to get financing for it when it was on the market. When he saw our rent to own sign on the property, he called us immediately.

He wanted to stay in the home, so we simply converted it into a rental. He knows his price isn't locked in if he does want to purchase the property, but we'll simply renegotiate if that ever comes up.

So this deal went from a sandwich lease, to a subject to, to a rental. We still own the property and we're still renting it to the same tenant. The loan balance is now sitting at around $125,000, and the market value of the house has gone from around $200,000 to $340,000.

You can do the same!

A lot of people think they aren't interested in terms deals because they're "in it for the long haul." Well, here is a simple method you can use to turn deals into more long-term, passive investments.

This technique may not work on every deal, but it can work for some. We just worked with an Associate of ours who has 9 deals in progress, and we found two in particular that this can work for. Now we're working with him to add a fourth Payday to those two deals. We call this Wealth Stacking and we're doing it with many of our higher-level Associates to create even more long term wealth and cash flow.

Remember: You can always pivot with terms deals! And sometimes those pivots can result in an additional Payday.

Do you think you could add an additional Payday to any of your deals based on what we outlined here? Let me know your thoughts in the comments below.