Epic Real Estate Investing - Double Escrow or Assignment of Contract? | Episode 160

Episode Date: June 8, 2015

When is the right time to use a double escrow to close your deals, and when should you use an Assignment of Contract? -------------- The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E ducation P roperties I ncome C oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

Having trouble finding motivated sellers, frustrated that nobody will buy your deals. Most of whatever it is that has your business struggling can be fixed with three simple systems. Attend the epic coaching intensive live event June 18th through the 20th at Universal Studios, California, and install these three simple systems into your business. Turn your year around and finish strong. If your business is flourishing, you already have to be. have these three systems in place. If your business is struggling, you don't.

Go to Epicintensive.com to register for the Epic Coaching Intensive Live event, June 18th through the 20th at Universal Studios, California. It's not too late for 2015 to be your best year ever. Epicintensive.com. This is Terrio Media. From Terrio Studios in Glendale, California, it's time. for Epic Real Estate Investing with Matt Terrio. Hello and welcome to the Epic Real Estate Investing podcast,

the place where I show people how to escape the rat race using real estate. Just shift your focus from making piles of money to making streams of money, change that one thing just one time, and you are on your way to financial freedom. It's not the most exciting path, I promise you that. It's actually rather boring, but it is the fastest path. And once you get there, life, your life, then becomes, exciting. All righty. So, more and more of my students these days, actually, very recently,

are getting better response rates from their marketing, of which a few have been totally bombarded as of late. And so that's good news. You know, the marketing at ebbs and flows, at peaks and valleys, it comes and goes, and it goes in cycles. And so it looks like, you know, that sea that kind of went out for a couple months is coming back, at least for a good portion of my students. We'll see, I guess it remains. means to be seen on the rest. But keep on mailing because that cycle will come back your way. It will ebb and flow in your favor if you are consistent with your marketing activities. And what has happened here is the big question that I've been getting is where do I find the time

to respond to all of these calls? Now that the marketing is really working and I'm getting a bunch of leads, where do I find the time to respond to them? All right? So indeed, it's a problem. It can be a very big problem. It's a good problem. But it is a problem. and it could also be a costly problem too if you don't know how to handle it, meaning it's costly first by not getting back to all of your motivated seller calls, you know, you're missing out on opportunity or opportunities. And the opportunity costs,

they can be huge here. We make a lot of money doing what we do. And if you miss out on two or three deals and you average five, 10 grand a deal, you know, there's $30, $40, $50,000 that you're missing out on if you're not getting back to all of your leads. The second is you're wasting your marketing budget by, by generating leads you can't call back.

You know, it's not cheap to do the marketing. You know, you've got to pay for the printing, got to pay for the postage, and you've got to send it all out there. And, you know, if you're generating more leads and you can get back, then you shouldn't even have sent that portion of your mailing. Got it?

So two ways that you're really kind of losing there. And the hot topic, you know, in real estate, the irony here is the hot topic is, it always seems to be around money. Where do I find the money for my deals? And should I find the money first? Or should I find the deal first? Should I pay all cash or should I use leverage?

I mean, these are some of the most common questions that you hear in real estate. But once you get in the mix and once you get on the field and you're in the game and you're actually making a business out of this, you find that your biggest challenge doesn't really revolve around money at all. It revolves around your time. And, you know, a perfect example of this scenario is when your marketing starts to pop and it will, if it hasn't yet, it will. where do you find the time to respond? Do I leave work early to make these calls? Do I do it on my lunch break?

Do I spend less time with my family to make these calls? I've already cut out my TV time, so do I now steal time away from my golf on the weekend? Or do I still time away from my morning workouts? You know, that's the thought process most of us will go through first. And it's the wrong thought process. Well, it's the wrong thought process as a business owner. I mean, if you're thinking these thoughts, you're thinking as someone who is self-employed, you know, one that's working in their business,

more than they're working on their business. And for someone who's making a first run at being an entrepreneur, a business owner, a shift has to happen. A shift to makes any real progress, there has to be a shift. And this shift is rather counterintuitive. It doesn't make a lot of sense. And that shift is, the less you work, the more money you will make. Yeah, it doesn't make sense, right?

the less you work, the more money you will make. And what I mean by that is specifically, the more that you can delegate, the more time you have to work on your business. For example, how efficiently would a cruise ship run if the captain was maintaining the engine, if the captain was tending bar on the Lido deck, if the captain was cleaning up the guest quarters

after each morning, how much time would the captain have to steer the ship? How often would the ship even arrive at its destination if that was the case? And how often would it even arrive on time? What would the experience of the guests be? Would they be repeat guests? Would they refer their family and friends if they arrived in Alaska when they purchased a ticket to Jamaica? Probably not.

You need ship hands. You need a crew. And sure, the ship hands, they need to be paid. And that may be a big bill, depending on the size of your ship. and that may appear as a quote-unquote cost. But if the captain doesn't take on those costs, the captain has a terrible cruise business, right? In fact, there likely wouldn't be a business at all

or the business would remain so small to where the captain would have to scale down to a much smaller boat, like a rowboat even. Maybe, you know, if the captain has to do everything. So you want to look at you. your business? Are you the captain of your ship? And are you also the crew? If so, how is that limiting you? Significantly likely. So you have a few options. First option, you can get a partner,

or you can team up with a fellow investor or a fellow wholesaler and divide up the tasks. A place you might want to start is your existing roll-a-dex of people that you've done business with. Would any of them make a good partner. Or maybe head down to your next RIA meeting and look for the top wholesaler in the room. How great would that be to have the top wholesaler in the room on your team? You don't think they would be open to that opportunity if you have more leads than you could actually get back to? Who is always in the front of the room with the mic?

That's a good clue as to who the best wholesaler in the room is. Maybe that's your ideal partner. Look for someone who knows more than you. Look for someone who's better than you. look for someone who can do more than you can do. And don't underestimate your ability to generate leads or don't underestimate the value of that in this equation. You know, you could divide this up. You do the marketing and answering the phone, then they visit the seller and get it under contract, for example.

You know, split at 50-50. Even 40-60. Give them 60% if you want. That would be fine if you're closing more deals and you're spending less time doing it, right? second option hire a VA hire a virtual assistant to take all the calls and set up appointments for you it's a very easy task just take the calls and set up an appointment for you to go visit you know through va's for real estate.com our friend robert nickle over there you can get a highly trained virtual assistant to do that for you for less than $10 an hour that's a lot cheaper than the 5050 split right

less than $10 an hour and they could run the comps for you too they could even market the property for you once you have it under contract. So that's the second option. Hire help, whether that's a virtual assistant or an in-house assistant. Third option. Do both. I mean, imagine. Imagine this.

If you had a virtual assistant taking the calls and setting appointments. And then you had someone on the ground visiting with the sellers and putting the properties under contract. Then you had another VA marketing the properties looking for buyers. And all your job was, your entire job was to simply. market. Your job, your responsibility is to make the phone ring. So

now, with a system like that, nothing is falling through the cracks. And now you have the opportunity to scale up your marketing, to scale up your business. And you just pump out the mail out there, pump out the marketing materials, and boom, that's how you're working less and making more.

You're the captain. You're steering your ship. You're calling down to the engine room and asking for more gas. Let's go faster. Let's go further. In the kitchen, they're bringing up a sandwich and a cold drink to you while you steer the ship. That's a business owner. That's making more by working less.

The point here is, when any part of your business becomes overwhelming, it's too much for you to handle. Your thoughts shouldn't be around the idea of, how am I going to fit this all in? Where am I going to find the time? No. It should be more about the idea of, who can I get to do this? this for me. That's millionaire real estate investor thinking. Stage one of the millionaire real estate investor.

See how that's just stage one, but it keeps coming up? You know, even if you're in stages two through four in your current place in life in your career, you can never abandon stage one. Focus on what you do best and delegate the rest. Now, when it comes to getting paid, I was asked this question the other day. When should I use a double escrow? And when should I use an assignment of contract? So it's a great question.

As there is a time and a place for both. And I'll go over that in 30 seconds right after this. There are two steps to wealth. First, stop doing what poor people do. Second, start doing what wealthy people do. The wealthiest people work more on their business than they do in their business. If only you have the time and resources to do it. Now you do.

We're VAs for real estate.com. And we have some free information for you. Get the five-step shortcut to hiring a rock star virtual assistant that will make you millions. Go to VAs for Real Estate.com. Stop doing what poor people do and do what wealthy people do. VAs for real estate.com. Double escrow versus assignment of contract. Which one do you use and when should you use it?

All right. So first, what are they? Okay, so they are both used for a wholesale deal. They're just a way of putting the wholesale deal together. You buy low and you sell low. And you do them both fast. You collect your money and you get out. That's how it's supposed to work.

The whole time requiring none of your own money. You maybe have to have a deposit, but you get it back really, really fast. So it's these two instruments that allow you to do this with little to none of your own money, the double escrow or the assignment of contract. All right. So first thing, you go out there and you find your deal. You get that deal under contract with a motivated seller. This is your A to B transaction.

A being the seller, B being you, the buyer. Second thing, you're going to go out. and find a buyer for that deal. This would be your B to C transaction. You are still B, you're always be in this scenario, but in this transaction, you are the seller. Okay, you're still B, but you're the seller, and your buyer is C in this part of the transaction.

Now, you have an option. Do you do a double escrow, or do you assign the contract? Okay, so that's where we are. Which one is best? Which one do we use in under what situation? So a double escrow. That would mean you entered a second contract with your buyer. The B to C transaction is a contract actually in place there.

So you have two transactions going on. Two transactions. You have one with the seller and you have one with the buyer. That's a double transaction. You have in one hand the A to B contract with the seller and in the other hand you have the B to C contract with your buyer. You will take both contracts to your closing agent and tell them to perform a double escrow. And the closing agent, what they're going to do is they're going to use your buyer's money to pay your seller. And when that's all said and done, there's a nice little chunk in the middle.

That part is yours. That's how that works. That's a double escrow. Now, your other option is an assignment of contract. And this is when you take your A to B contract and assign your rights of that contract for a fee to your buyer. So you have the property under contract, and under that contract, you have certain rights. So what you're going to do is you're going to assign the contract. those rights to the buyer, to somebody else for a fee.

So there is no second contract here. It's just taking the one contract and kind of trading places. That's what you're doing. You're basically trading places. The new buyer is taken your place. Your buyer is now the B in the A to B transaction. And you make the switch via a simple one-page document called an assignment of contract. And you would then hand that document to your closing agent and ask them to perform an assignment

of contract. when the A to B transaction closes, you would then be paid out of that escrow. That's how that works. Now, back to the initial question. How do you know when to use what? Well, typically, I'll tell you what I would do. So typically, I'll use a double escrow if I'm making a good chunk of money on the deal. Even if your end buyer is happy with the deal that they're getting, even if you gave them a smoking deal, they can, and often do, feel like they're overpaying for the property should they,

they find out you're making as much or even more than they are, which is not uncommon. They may even say that they don't care because they will sometimes or they will say, that's fine. You make your money as long as I get mine. They say that they don't care, but they do. They're thinking about it at least. And they're going to remember it the next time. So that's the primary reason I will use a double escrow or even just close on it myself first

and then quickly sell it a couple minutes later, of which all my money would come right back to me. Now, the assignment of contract is what I'll use most of the time for the following reasons. First, it's cheaper. Okay, so especially if your margins are close, if it's a tight deal, you know, it's a lot cheaper because your closing costs are going to be less because there's only one transaction. There's just the A to B. There is no B to C.

So it's cheaper. You're not paying double closing costs. Second, less paperwork. Now, that's not that big of a deal, but it is a, it can be a hassle, especially if you're in a business and you're doing multiple deals per month. I hate paperwork, by the way. So I try to avoid that, and that's one of the reasons I like the assignment of contract, a lot less paperwork.

And three, the assignment of contract, it keeps my business under the radar. It doesn't show that I'm buying and selling and buying and selling and wheeling and dealing. It's just a personal preference of mine to not have my name on and off a bunch of titles. I mean, it could be considered, I guess, my own indirect form of asset protection. My business, that's no one else's business. My business isn't anyone else's business. No more people need to know what I do than those who actually need to know. So, so that's it. Those are my reasons for what and when with regard to the double escrow and the

assignment of contract. Now, to all the naysayers, I can hear you right now. Or those who have naysayers in their lives, I hear them too. I hear your buddies and your family talking to you too. This is not illegal. It's not illegal. This is real estate contract law with a licensed third-party intermediary overseeing every bit and every step of that transaction. Now, it may be against some company's policies, but it is not against any law.

The National Association of Realtors, they may not like it, but it's not against the law. Some sectors of the public, they might, may not like it, but it's not against the law. There may be people even trying to stop it, but it's not against the law. Having said that, you will find, if you haven't found already, that finding a closing agent that will perform a double escrow, it's getting more and more difficult.

But they're out there. You'll have to do some searching likely, and you'll probably get a bunch of nos before you get a yes, but they're still being done, so don't give up. and it's much easier to right now to find a closing agent that will perform an assignment of contract, but even they are starting to push back a little bit, but still very doable, very doable. I mean, we do them, we do, you know, a dozen here every single month. So the National Association of Realtors, it's a very big lobbyist group with a ton of power,

and they view wholesaling as practicing real estate without a license. That's how they view it. That's their opinion. It's not the law's opinion. It's their opinion. And in a result, the reason they don't like it is it takes money out of the pockets of realtors. There's transactions being performed without a realtor involved. People are selling their house with no realtor involved. And what that does, it results in reducing the amount of money that comes back to the National Association of Realtors via the Realtors Association of Dews. So you can see that right there. It's not their number one issue, the National Association of Realtors. But wholesaling, it is on their radar. And I wouldn't be. be surprised if the wholesaling practice changes in the future or goes away completely, but for now it's not illegal. The National Association of Realtor Lobbyist Group, very powerful, very influential, and multiple areas outside of real estate as well. But if they want something done, they'll probably get it done. So thankfully, it's not their number one issue at the moment. So for now, it's not

illegal. But it could be. But it's not right now. But it could be. And seeing this as, you know, strong possibility for the future is one of the primary reasons for the fund that I've put together. So, so that this community will always have access to easy transactional funds. But more on that at a later date. I'll be back in 30 seconds right after this. Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses. But don't let a lack of funding be your excuse.

We are epic fast funding, and we'd like to fund your business with up to 150,000. thousand dollars in revolving credit lines. If you've got 60 seconds and a solid credit score, you could have access to your funds in as little as seven days. Go to Epicfastfunding.com to fill out our 60 second application. It's fast, it's simple, up to $150,000 in as little as seven days. Go to Epicfastfunding.com. That's it for today. I'll see you next week or catch me tomorrow on Turnkey Real Estate Investing. I'm Matt Terrio, living the dream. You've been listening to Epic estate investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed the show, please take a minute to visit iTunes and share your

thoughts. Thanks for listening. We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.