In my last article, Marketing for Big Juicy Deals, I spoke about how and where to get deals as well as to whom to mail to and when to mail to them. I ended the article with a question “So how do I get the Big Juicy Deals that bring me $100,000, $200,000, $500,000, $840,000 dollars on each deal, NET PROFIT? The answer…. VALUE.
When I’m looking at a deal, I always try to come up with a strategy that will be a win-win for all parties involved; meaning the seller who sells their house to us, gets what they want. We get the house to fix. And our end buyer gets the property flipped to them, a beautiful home that’s been transformed.
When I started this business as a new Rehabber, I adopted a saying, “Open Up the House, People Will Open Up Their Wallets.” This has proven to be right 100% of the time. I’ve never had a buyer or potential say the house was too big or too open. Most people fall in love with the houses and fight to get us to accept their offer.
To get this Value, you must have a plan and a team of people that understand and share your vision. If done properly…you’ll make your profits on the purchase of the property. By that I mean the rules must be applied.
Rule #1 ARV = After Repair Value = The dollar amount value placed on a house once the house is completely repaired and similarly sold comparables supporting the subject property.
This is what your end buyers will pay. It doesn’t matter if you’re fixing and flipping the property or selling to a tenant buyer on a lease option plan.
Rule #2 MAO = Maximum Allowable Offer = The maximum dollar amount you will pay for the subject property.
Remember: 70% of ARV – Repair Cost = MAO
This is where you make your money with Big-Time Negotiations. You Must Know Your Numbers!
If you don’t know your numbers, in particular your ARV or the repair cost, this could prove to be a fatal flaw and you’re out of business. This could cause a negative reputation with your investors.
Whatever you decide with whatever type of business you’re going to have, you should always focus on being a “Transaction Engineer.” In other words, you should have the skill set to recognize the deal in front of you and how you are going to take it down.
I love rehabbing, that’s just me and my business model.
However, I still have several properties I attract for long term such as lease options or owner finance, whereas I’ll sell to long term tenant buyers.
These types of deals get me a big fat check up front, cash money in the middle monthly and a sizable check at the end when the tenant buyer cashes me out.
Cashing me out years down the road is probably the worst thing that can happen to me, as you see it “Kills the Golden Goose.”
The best thing that can happen in this type of deal is the tenant moves and decides not to buy. Well then, I guess I have to go find another buyer and start this process over again, and get another big fat check.
Man, only in America can you do deals like that; it should be a crime not to make a six figure income. All you have to do is decide what you want and go for it.
Creating Value is the essence of creating a Win-Win-Win situation for all parties involved.
Always remember we are in the people business. Real estate is just a part of what we do as a bi-product. Have fun, enjoy life and make lots of money putting people first.
Alton J Jones