My Worst Real Estate Deal in 2022

Описание: I’ve created a passive income stream of $75k per month in rental income, and my properties are currently worth $10.6M. I did this ​while working a full-time job, and I’m going to show you how you can do it too.

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My Worst Real Estate Deal in 2022

In this video I’m going to tell you about the least profitable deal I’ve ever done. How I gave too much away to my client without keeping enough for myself. I’ll also cover the lessons learned and what I’m doing differently now having made these mistakes. On the bright side, I did find house #36 during this process of working with this client. I also met a realtor and broker who encouraged me to get my license and work with them at a very attractive split.

Lease Purchase Client
A little over a year ago, this LP client viewed one of my properties for rent. He really wanted to do a lease option or lease purchase but since covid I’ve suspended my LO program on my existing portfolio because it's so hard to replace my inventory.
I told him that I am still offering my LP program for clients who have 20% or more to put down on a property which we can shop for together, I will buy it and LP it to them.
This is good for people who need some time to qualify for a loan due to their income or credit, and it allows them to be in a home that they have an ownership interest in and make a portion of something on the the equity side instead of just renting.

We signed a simple LOI outlining our intentions and how it would work. The more he puts down, the less his monthly payment. His purchase price is based on all of my expenses such as all closing costs on when we purchase the property as well as all of the closing costs when he completes the sell. I gave him 10 years to do so, at any time with no restrictions (more on that later). Plus only 2.99% annual appreciation (more on that later!) This deal was in Mar 2021 (more on that later!)
This was a very skinned deal for me. I had known my client for a while. We did some advertising together for our other business. While working with he kept kept asking for a better deal and lower payments. I kept shaving off profit here and there. Because I know him, and because he had more than 20% to put down which was non refundable and lowered my risk.
We agreed on what kind of property we would look for and set up his Zillow search. He looked at properties first, and then asked me to look at them if he was interested in putting an offer.
After looking at several properties and loosing a few, the showing was like it was a circus. There were so many realtors and buyers at the property at the same time. It was nuts. It was very competitive. There were multiple offers, we had to drop the inspection contingencies and pay all cash. We went all the way up to $215K which was a little over asking and finally won the deal. $76.63/ sf!
Before I signed the offer he gave me his $60k which was non-refundable and lowered his monthly payment.
When touring the property I noticed termite tunnels, and we left the termite inspection contingency. We had the property inspected. There were in fact active termites as I thought! The seller was unwilling to pay for the treatment and said it was cheaper for her to accept the next highest offer if we’d like to walk! The agents and I were pretty surprised to hear this as we have never seen a seller who would not take care of their termite problem. I asked the pest control company for a discount, and then the realtor volunteered to split the discounted fee with me.
Closing went smoothly, and my tenant took possession on the same day, and I started collecting rent on the day of closing also. He is responsible for all utilities and all maintenance and repair.
I have tenants who have been in LO/ LP deals for 5-10 years. They usually take a few years to exercise their right to purchase, and it’s always been very easy and profitable for my clients and me both.
After only a few months, my client inquired about completing the sale and asked for a payoff amount. He asked if he could add a family member in order to qualify for the loan sooner to which I agreed. His lender would not let him include any closing costs, and so he asked me if I would add them to the sales price. I agreed and added the estimated increase in my federal income tax.

***The math
Purchase price $215k
Closing costs (Title policy, home inspection, etc) $3101
Termite treatment $400
Post Financing Fees $2253
Total Acquisition Costs $220,779