The Science of Flipping - How To Convert More Deals in 2021

Episode Date: December 21, 2020

Deal conversion is a topic not talked about enough. You'll find unlimited resources on how to bring leads in, but what good are leads if they don't convert into deals?

What is up everybody? What is up? Welcome back to the Science of Flipping podcast. I am your host, Justin Colby. If this is your first time here, please check out thescienceofflipping.com. The website has a ton of free giveaways, a ton of free content. Go over there, check it out. And if you have not yet checked out my daily YouTube videos, make sure to jump over to YouTube, youtube.com forward slash Justin Goldbeer. Just look at my name and start looking at my daily and watching my daily YouTube videos as I try to give as much free content as possible. This episode is all about how to convert more deals by simply understanding some stellar

finance. to convert more deals by simply understanding some stellar finance now this isn't going to go into a deep dive of sub twos or lease options or agreement for sales and all that but what this will go into is exactly how you take a deal that is not a deal and transform it into a deal by understanding how to reposition your offer. Now, first of all, there are several different ways that you can get creative with your financing, but most of them, if not all of them, have the seller carrying back some level of a note. Now, it doesn't have to be the home loan. The seller actually might be able to carry a note. So it is up to you to make that decision on how to create the deal. But what I can tell you is when you go in for the offer, and let's just say you're $25,000 away,

well, it's not a big enough margin to simply just walk away. That just means it might not be a good wholesale deal or fix and flip, or maybe it's still not even a great rental portfolio as it stands right now. But what if you go in and give them an option or even give them a purchase agreement for two weeks, meaning you have an inspection period or it can be a contingency period around financing, whatever it may be, or you give them a two-week option. And what you get to do is start to play with the numbers. Now, I'm happy to help you guys. um i gotta find a creative way to get you guys involved with me um most likely you know start with going to my social media but i'm happy to help you guys kind of analyze these deals once you have them under contract but what the idea is any home that

is under two hundred thousand dollars and you are likely, and by the way, I'm making this general and easy for everybody. You can do this with homes that are more than $200,000, but essentially what really, really works best is something under $200,000. If you are five, 10, 15, 20, $25,000 away from a cash offer and that seller accepting your offer to walking away from the deal, well, then what I would really encourage you to do, and again, I got to find a way for you guys to present this to me buy the deal from you and you still get a check. Anyways, my point being is you want to buy yourself two weeks to underwrite it so you can get creative with the deal, with the structure, with the terms. So as a good friend, Matt Terry, always talks about, right, it's not a lack of money that stops you from doing deals. It's a lack of ideas. And so this is what I would tell you is you need to start getting more creative.

You need to come up with different ideas of how to get the deal done. So, again, without going in deep offer is at $110,000, depending upon the condition of the home, the livability, what it's going to take for rehab, you can run your numbers. Even if the seller wants $130,000 and your cash offer is at $110,000, you really can't bridge that gap. You might be able to get something done for that $130,000, but you just need a little time to figure out, is there a seller finance opportunity there where you might be able to take it down with a loan and do a seller carry back to a buyer with a 10% down?

Maybe you inflate that buy price to 145 grand or 150 grand, 10% down, you know, create the terms that are better terms than your mortgage. Meaning if your mortgage payment was $800 a month, maybe you're charging them $1,000 a month. So you have some arbitrage in the rental payment. You know, maybe instead of the bank charged you maybe 5% down, you charge them 10% down or more. You do some sort of balloon payment that you may have found financing for a 10-year balloon. You give them a five-year balloon. So that kind of stuff can absolutely work. And it just takes a little time, a little ingenuity, and some ideas in your head about how do I get this to structure so that I can make this work.

Now, that's just one option. You can absolutely just do a seller carry where, hey, Mr. Seller, I'm happy to buy it at $130, but you have to carry the note. I'm going to make some improvements on this. I'm going to do an agreement for sale. You will be paid off on your $ 130 at the resale of my property. I will pay you, you know, I will cover your mortgage through this time. I'm going to do the remodel and then we will sell off and I will pay you your 130, right? And so that is also an option to stop the bleeding for the homeowner. Now, again, I don't have time on this episode to give you every criteria, scenario, example there are.

There's a lot of them. You have to think outside the box when going in. And, again, in the ideal world, these properties are under $200,000. That is not always the scenario. You absolutely can do creative financing on higher ones. But I will tell you, I guarantee you are throwing away a vast majority of your leads because you simply are allowing the seller to sell you on a price that they want without giving the time, energy, and effort to really think through,

is there a way to get that deal done with some structure of creative financing so that I didn't waste my money driving in this lead and not get the deal done? Guys, I promise you, you are going to have a higher conversion. If you can start getting creative, you're going to be more profitable. If you can start getting creative and you can start to create wealth in a very big way, if you start getting creative, that's what we're all really here for. So again, hopefully this helps. If this is your first time, go to the scienceflipping.com, scienceflipping.com, or go to my YouTube channel. I do a video every day on youtube.com forward slash Justin Colby. I will see you guys on the next episode. Peace.