$66,000 On Your First Deal?

The first deal is always the toughest… Let’s look at how one of our Starter Associates made $66,000 on their first deal.

If you’ve been reading my articles or watching our YouTube channel, you’ve probably heard me talk about “the gap.”

The gap is the time it takes from when you complete your first webinar, course, seminar, or book to when you do your first deal. It’s the time between learning how to do a deal and actually doing one.

Now, it’s important to understand that you might find yourself in the gap for a while. We always tell our Associates that they should expect at least a 6-month gap when they start out in the terms business. We’ve been pushing to get that lower over the last few years—even getting as low as 120 days for many of our Associates—but no matter what, there will always be a gap of some size. We now call this TTFD - Time to First Deal, and we work super hard to constantly improve it.

Which leads us to this deal. This one is from one of our Associates, and it was his first deal ever. He worked with one of our certified coaches, who helped him through every step of the process.

And in this case, we were right on the money with our prediction. It took him about six months from the time he got into the terms business to complete this deal. Let’s check out the details.

6 months for your first deal

The source of this deal was a FSBO (for sale by owner) that our Associate found through a virtual assistant. This is a great way to find properties without spending any of your own time, and we have an entire process that we use for this.

This property was interesting for a few reasons. First of all, it was a rental property where the owner was tired of renting and wanted to cash out. That’s not very unusual, but what was unusual was that the deed had four different people on it.

The house was originally their grandfather’s and it had been passed down to them. So it had two grandchildren and their two parents on the deed. Kind of unusual, but nothing problematic on our end. The house was free and clear, but they wanted to stay on the deed.

The owner had this house on the market for $139,000. We were able to purchase it for $124,900.

The owner was also getting $850 per month for rent from the tenant, and he wanted to continue getting that same rate. We worked backwards, figured out the taxes and insurance he was paying, the principal paydown, and what kind of rent we could expect to get from a tenant buyer.

It worked out that $500 of the $850 was going to principal paydown and the remaining $350 was going to taxes and insurance. We ended up putting it on the market for $1200 per month, which covered the owner’s $850 while giving us a $350 monthly spread.

But we’re getting ahead of ourselves… Let’s get back to the Paydays.

Payday #1 is always the down payment. In this case, we asked for a 10% down payment which comes out to right around $14,000. Simple.

Payday #2 is the monthly spread. As mentioned above, the monthly spread was $350. This deal had a five-year term, or 60 months. So when you do the math that ends up coming out to $21,000 for Payday #2.

Payday #3 is the back-end profit from selling the house plus the principal paydown. I already told you the principal paydown was $500 per month, so when you extend that out over 60 months you’re looking at $30,000 right there.

We were able to sell the house for $139,700, which is a total back-end profit of $14,800. When you remove the down payment of $14,000, you’re left with a total of $30,800 in profit for Payday #3.

If you’re not keeping up with the math, that comes out to $65,800 in total profit for this deal. We’ll round it up to $66,000 just to make it look nice. You may have noticed recently that we’re teaching and doing deals ourselves with longer terms—this is all in an effort to best position us and our students to be Recession Resistant.

The value of a coach

When I talked with our Associate about this deal, there was one thing he said that really stood out to me.

“There’s no way I could have done this deal without a coach.”

I asked him about it, and what he told me was so relatable. He said, “At almost every step of this deal, I didn’t know what to say to the owner. I had a good idea of what I should be doing, but actually doing it was a totally different story. I talked to my coach before every phone call I had with the owner and he helped me figure out exactly what I needed to say. If it weren’t for that, I never would have been able to go through with this deal.”

What he’s saying is not uncommon. I felt the same way when I got into real estate, and I’m sure almost everyone does. And that is the difference a coach can make.

When I mentioned the gap at the beginning of this article, I was referring to the gap when you have a coach. Without a coach, that gap becomes massive. You may never even make it to your first deal for a myriad of reasons.

So, if there’s one thing to take out of this… Having a coach, mentor, or someone to help guide you through your first few deals can literally be the difference between you having a career in real estate and not. Don’t go out there on your own and expect everything to work out perfectly. Lastly, with the average profits per deal with all three Paydays as high as they are, the sooner you master it the better!

How much did you make on your first deal? Did you have a mentor or coach to help you along? And how long was your gap?