🤝🏾 DEAL TACTICS 🤝🏾 Flashcards

Question 1

Q

I realize if I submit to get funding and fail to pay attention and don’t provide these answers it will cost me $500 to submit deals since it takes time to be done right before sending to the
lender?

Answer

A

YES.

don’t wast peoples time
*learn it so that you can ask the right questions
expect to spend $500 for every question submission and $1000 for every deal submission.

Question 2

Q

What is it you need to find out minute one?

Answer

A

THE SCREENING PROCESS

Determine if he has equity. (if he doesn’t you can’t even do it) Ask how much does the seller owe (to calculate equity) and how long has he owned the property? (to guesstimate terms of his mortgage)
Ask what he thinks the property will appraise for (or if he has the appraisal) - always disagree and make him pay for it.
Determine purchase Price (PP) by fighting him on it based on his “estimated” appraisal value. For ex. if he says 5M you say 4M and if he says nah I can’t do that you say alright well I can get you 5M but it’s got to be a structured deal. This is where you will discover if the seller will cooperate with a refi or come up with down payment for purchase.

Question 3

Q

Tell me why its a bad idea to send bad info to a lender?

Answer

A

Lender(s) will black ball your name, put your file at the bottom, never close your deals.

Question 4

Q

What is AP and PP? Why do they matter?

Answer

A

AP or AV = Appraisal Price or Appraisal Value (the real numbers determined by a hired 3rd party appraiser used to get the loan and accurate LTV for purchase)

PP = Purchase Price - agreed upon price between you and the seller (only the seller sees this unless used for preliminary lender approval to get confidence of seller that you can close the deal)

Question 5

Q

Why is it important to have a higher AP?

Answer

A

Because that allows you to be able to have a higher LTV to use to purchase the property with out having to carry back as much on the back end. (Good for you because you don’t owe the seller any extra money after close and good for him because the less they need to trust you’ll make the extra payments and he can get as close to his target number as possible - IE the deal closes faster and is a more win-win for everyone)

Lender only see’s 80 LTV of AP (not PP) or whatever they approve it for.

Question 6

Q

Why is it a bad idea to guess on any numbers?

Answer

A

Guesstimating the real value or noi or gross off a listing with the formulas to figure out numbers is good and fine but guessing when asked a direct question and you guess what it is verses find out.

THE MOST IMPORTANT THINGS NOT TO GUESS ON IS:

What the seller owes and IF PROPERTY HAS EQUITY
If HE WILL BE COOPERATIVE to do a refi or bring the down payment money for a purchase.

Question 7

Q

Why is it important to ask things about the property in the right order?

Answer

A

It keeps you in the dominant position.

• controlling the seller to get your way exactly how you want it & prevents from wasting time on dead deals & the order important cause builds up your position.

Question 8

Q

What are you supposed to look for when you see financials and the numbers ?

Answer

A

Make sure the DSCR is 1.1 or 1.20 or higher if its lower means you’re over paying and need to lower the offer price and it doesn’t work.

Purchase price (PP) LTV with out anything about seller carry. (This is the preliminary lender terms based on your first LOI agreement before you get the real numbers and appraisal)
Appraised value (AV) for the refi then submit just seller info to the lender and have LOI on side (lender doesn’t see).
Appraised value (AV) LTV & seller carry back, lender doesn’t see (PP or the carry back on the side)

Always get the real #’s from a schedule e and if it’s a larger apartment (50+units) it’s best to get 50 leases or at least 25 (if you want to close fast) because it shows the lenders REAL proof of income (POF).

Question 9

Q

Give examples of what you’re supposed to look for in the real financials.

Answer

A

Ideally you want to get:

Schedule E - to show what his real NOI is and also what he really owes/pays on the property in terms of debt servicing for the mortgage

Rent roll - to show all the tenants names and information on what they pay and how consistent they are at paying.

Profit and loss statement - to view what specific expenses or maintenance have been paid for.

Question 10

Q

How do you catch a seller lying ?

Answer

A

You know seller is lying if:

If he’s doing seller financing thus he is too high on price and if he is too willing to carry a 2nd mortgage it could mean the sales price is too high
(he’s hiding something)
if the financials like the rent roll are too generic with no names of tenants and details
When seller says 100% occupied it usually doesn’t mean they paying
on time or that some are not paying late for months.
No schedule e

Question 11

Q

What does it mean if a seller carry’s or is a for sale by owner or is too agreeable?

Answer

A

it means he is over priced but you should find out what the real price is.

reference lying question

Question 12

Q

When they make you backpedal why do you have to tear into them?

Answer

A

To gain control back

you will get stuck doing their game plan vs yours
RICH people play poker
RICH people tell others what the rules are and make their own rules and path
RICH people Find ways to make OTHERS fit their needs
RICH people find ways to get others to work for them even when they have no money
RICH people are MENTALLY richer vs others who are mentally POOR
Poor people do what rich people tell them to do
Poor people find problems and excuses why things fail

Question 13

Q

How do you control a conversation? Hint: what do you do to control a conversation?

Answer

A

Ask questions to lead, persuade and control; the seller has no time to think and you lead them where you want them to go.

Question 14

Q

Ask them what?

Answer

A

Ask them questions

Question 15

Q

What does asking them questions keep them from doing?

Answer

A

Avoids then giving you the job interview, or wanting your POF, asking what properties you own, what your resume is… etc.

Question 16

Q

What terms do you tell the seller that you want on the 2nd mortgage ?

Answer

A

“Balloon note” (second mortgage, don’t bring up interest because 99% of the time the terms go as you say BECAUSE THEY’RE MAKING THEIR PROFIT ON YOUR INITIAL 40-70 LTV upfront purchase agreement SO DON’T FEEL BAD), no payment for 5.5 years (start out at this number because all prepayment penalties go out to 5 years, there are several types of prepayment penalty’s: 54321 “diminishing” penalty or a “adjustable” prepayment penalty or one you can “buy down” in a year that cost a point (1% added interest) or just a flat balloon payment) DO NOT OVER PAY ON YOUR 2ND MORTGAGE!

Max interest if any: 6%***

Seller pays for appraisal.
Seller pays for the closing cost including down payment.

You want to establish these things UPFRONT… if you don’t then the seller establishes control later on and it’s HARDER to add in later and you’re desperate at that point to close the deal.

If he wants interest for the 2nd mortgage make sure it’s “interest ONLY”

“If you have an issue with the ballon payment or interest only then I’ll just cut the purchase price down and we won’t need the second mortgage at all. I’m just being nice by giving you your asking price. IM DOING YOU A FAVOR by paying so much upfront, I’m just doing this because I’m buying as many properties as I can right now.”

Question 17

Q

Why do you set the terms we recommend for the second mortgage?

Answer

A

Because you make more money
Because the DTSCR is higher
MOST lenders use a 5 year prepayment penalty and you pass that.

Question 18

Q

When do you say your terms or put them out?

Answer

A

At the beginning, minute one.

Question 19

Q

What happens when you don’t state what the terms should be on the 2nd Mortgage?

Answer

A

You have pay for appraisal
DSCR may not work
You lose money & can have cash flow issues
PP issue
Deal may be too tight to do at all

Question 20

Q

What if the seller tells you what these terms should be?

Answer

A

Means you’re not in control of the deal. You have to convince him on your terms.

Question 21

Q

Do you know what is better: interest only or principal and interest on the 2nd Mortgage? What are the best terms for the 2nd mortgage?

Answer

A

No payment for at least 5yrs. (interest only is always better if any at all)

Question 22

Q

Do you know why all these questions are critical to know and how not knowing will affect all your
interactions?

Answer

A

Because its how you build yourself into millions each and every piece done perfectly leads to unlimited money and success. Failure to do it in the right order, or right answer or right responses will lead to staying average and never being on top.
Being rich comes from being smarter not from having more money. This is proven all the time.
Being able to correct & grade oneself & adjust is key to being rich too

Question 23

Q

Why is it important that the seller has equity?

Answer

A

Mainly because you need at least 20% equity in a property to do a cash out refinance.

Question 24

Q

Why is it important to get a “guesstimate” from him on what he “thinks” the property will appraise for?

Why should you disagree about what the seller thinks the property will appraise for?

And why is it important for him to pay for the appraisal?

Answer

A

It’s important for you to get his guesstimate of the appraisal (and gross income) so that you can calculate what kind of deal structure you can offer him based on the hypothetical AV (assuming you get 80LTV)

You should disagree in what he thinks the appraisal will be and say that you think it’s going to come out lower than what he says it’s going to be so that you can get him to pay for it and thus getting him “invested” in you and in closing the deal… (if you pay for the appraisal and it comes out much lower than he says and it’s not enough for you to purchase the property at what he’s asking for, you just PAID to not close anything… YOU are in the power position and have the money HE wants, so he will pay for the appraisal so that you can cash him out.)

You can do this because you need this appraisal to determine what you can actually borrow on the property and what LTV you can get for it and also how much you’ll actually be able to pay him up front and potentially need to have him carry on the back end. You’ve also clearly communicated how easily and quickly you can get approved for the loan to purchase.

Question 25

Q

How do you “ask” if the seller has any equity?

Answer

A

How much do you owe on the property? (determine equity) And how long have you owned it? (Determine the interest rate and how much he owes)

If he’s had it for less than 5 years ask if he would have to pay a prepayment penalty? (It all factors into how much he needs to make to be satisfied)

Question 26

Q

What data is needed for submitting a loan application on apartments/hotels/motels that are $5M+?

Answer

A

Cre APP BASIC (filled out)
Trailing 12 month P&L (Schedule E for 3 years can count for this)
Current Rent Roll (showing # Beds # Baths and Sq footage)
Current amount owed on the property.
Address and photos (if you can get them)
When was property purchased and for how much?
Who manages the property?
PSA (In addition this is what I will need from your borrower)
Assets and Liabilities Statement
List of Properties currently owned (USE ATTACHED APPLICATION
FOR THESE)

Question 27

Q

“In general” how does this strategy work in terms of getting funded?

Answer

A

The initial LOI is set so that you can get an agreed upon number from the seller to gain commitment to closing.
(From this you can actually get a loan approval letter from the lender to prove to the seller that you can get the deal closed)

Then you can get the appraisal + the real financials so that you can write out the real LOI based on the real numbers from your due diligence w/ the schedule E etc. (preferably much less than the appraisal) so that you can then send the data in to the lender using the appraisal value (so the lender will see that you’re buying it off the appraised value and not the purchase price because they generally lend off the lowest number) if you’ve agreed upon a good PP below appraisal value it can allow you to purchase a property with 100% financing even with a low LTV from the lender at 65% LTV.

Question 28

Q

Are the loans recourse or non recourse loans? What’s the difference between the two?

Answer

A

Generally the loans you’ll have access to will be non recourse loans (loan secured by collateral asset but the borrower is not personally liable) but some lenders will be recourse (ie the borrower IS personally liable for the outstanding debt) if they say they feel it’s a little bit higher risk they will extend a recourse loan/Personal Guarantee, if you miss one payment they’re not at a loss because you’re overpaying for the property…. So it’s a win win.

Question 29

Q

Recourse Loan vs Non Recourse Loan

Answer

A

Recourse - Borrower is personally liable for the outstanding debt. The lender is able to go after personal assets in order to receive any sort of collateral that they weren’t able to get from either the “refinance” or “sale” of the property.

Non-Recourse - the borrower is NOT personally liable for the outstanding debt and the lender cannot go after personal assets directly related to the borrower. HOWEVER, that does not mean that the borrow is completely off the hook for paying back the loan do to clauses called “bad-boy” carve-outs which protect the lender in the case of fraud, bankruptcy, tax issues, or any sort of illegal or unethical act that may hurt the lenders ability to be paid back.

Question 30

Q

How much should you knock off the preliminary NOI?

Answer

A

Take whatever their “stated” NOI is and subtract about 20%… because they’re usually lying… get the real numbers later (or sooner, it’s up to you)

Question 31

Q

What’s the most ideal deal to close, a purchase or a refinance?

Answer

A

Purchase, because you’ll be in first position with the lender and he won’t be able to kick you out if you miss a payment. (Requires you to get down payment though)

Question 32

Q

When the numbers don’t clear on DSCR what do you need to adjust to make the deal work?

Answer

A

Either adjust the agreement for the purchase price of the property or lessen the amount of cash out upfront. (If the DSCR is lower than 1.1 it means you’re over paying)

Question 33

Q

What points would you use to get the seller down on price to make the numbers make sense?

Answer

A

Property is super old
Too many 1 bedrooms
It’s in a high crime neighborhood
Bad tenants (looking at cars/smoked out windows etc.)

Question 34

Q

What should you get from the seller of a 50+ unit property if you want to close fast with the lender?

Answer

A

Get at least 50 leases for proof of income, or 25 min. and they will give your loan a higher priority. (Leases are gold)

Question 35

Q

What do you do if the seller try’s to get you to back pedal on price?

Answer

A

You say: “this is the price I want to offer (hold your ground), if you want to do a structured deal I’ll pay more… let me know when you guys are ready to sell…)

Question 36

Q

What do you do if the seller try’s to get you to back pedal on proof of funds/experience?

Answer

A

You say:
“what about your income statement?”
“what about how many people aren’t paying rent?”
“how long have you owned the property?”
“What do you owe on the property?”
“How’s the roof on it?”
“How’s the maintenance and differed maintenance?”
“What’s your management structure?”
“How much are you paying for management?”
“What other properties do you own?”
“How much did you pay for this thing?”
“Why are you selling it???”

When you question them you establish control and it prevents them from being able to think in their feet. The person who’s questioning the other person the most is in control because they have no other time to think about other things because they’re too busy trying to think of the answer you’ve questioned them with?

THIS IS THE DIFFERENCE BETWEEN RICH PEOPLE AND POOR PEOPLE

Question 37

Q

What kind of note (2nd mortgage/seller carry) terms will you propose?

Answer

A

Balloon note for 5.5 years (no interest)
- if he wants interest, make sure it’s interest ONLY

(Interest plus principal is WAY TOO MUCH $)

If any of this is a problem for them CUT THE PP DOWN, so that there is no seller carry. (You’re just being nice by trying to pay his full price)

Establish these terms upfront!

Question 38

Q

If they don’t budge on proof of funds, how long will it take to produce?

Answer

A

If they want official approval from the lender, this takes 1 day vs pof which takes a week to get your banks to draw up something based off all of your accounts.

Question 39

Q

What do you say/do if you get stuck on a call?

Answer

A

“I have several properties, I want you to tell me why this is the best one and I don’t have a long time to talk but I wanted to help you out. If you get stuck say, “well I have another seller calling, I have to take this call” or just hang up.

Question 40

Q

Describe the initial “cash lowball” offer?

Answer

A

OFFER cash price, say you’ll wire in 1 hour for 30LTV or 40LTV of what he’s asking for. This prevents them from asking you for pof cause it appears u have cash and u start haggling over price.

Then give in and say: “If you want this at an overpriced # then it has to be a structured deal. (Bluff mainly, but if he agrees you could actually wholesale & pull it off but the point is to go low to where HE WON’T so this will eliminate the seller ever getting you in job interview with POF, Past Closed Deals or Your Resume.

Question 41

Q

What do you say if they ask you what you’re using as collateral?

Answer

A

Say you’re using their property

Question 42

Q

Describe the “purchase” deal options

Answer

A

The seller puts up your down payment. Why would he do that? Because you are paying the price he won’t get from anyone else. If the seller says: “you have no skin in game” - say “it doesn’t matter you want all this money, you get it back & more than what others will pay.

Option 1:
40-10-60 for a purchase with a seller carry back. Seller (ideally pays down payment or you get investors or use your own credit) gets 40% of AV LTV upfront you get 10%LTV of AV (hence 50% on front end) and remainder of PP + the 10LTV in a ballon note of 5.5 years (no interest or max of 6%)

Option 2:
20-70-10-30 for a 80-20 purchase with a seller carry back. Seller pays 20% of PP for down payment and gets 70% of PP at closing and you get 10% at closing the while he carry’s a 5.5 year balloon note of the remaining PP plus the 10LTV he gave you on the backend. (No interest or max 6%)

Question 43

Q

Describe the “owner refinance” deal option?

Answer

A

Seller gets first lien position by getting the property refinanced in his name so you are making the payments to him.

If the seller says: “what if u don’t pay?” - you say “if I don’t you win and get the property back with all the improvements and tenant increase”.

If the seller says: “I’m afraid I’ll be stuck with a giant loan if you fail.” - you say: “No it’s a non-recourse loan so you can walk away with all the cash.”

The structure:
70-10-30 for an 80-20 refinance (generally you can get 80LTV on a cash out refinance), and seller gets primary position on mortgage and you make the payments to him. The seller gets 80LTV of Refi LTV based on appraisal upfront and breaks you off with 10LTV of AV and he carry’s a 5.5 year balloon note for the remaining PP plus the 10LTV he gave you. (no interest)

You can get him an 85% LTV (needs 650-700 FICO+) maybe an 80% on the refinance (if FICO is worse we can still maybe make it work)… they get you 10-20% LTV cash back from that refinance depending on the size of the property.

If seller is too weary about giving you cash out you can say “if you really want to feel better about it we can have 50% (of what you’re asking for cash out) put in an escrow account and you can oversee how I’m spending the money… to do a bunch of value adds…

** REMEMBER **
He will want to do this because he will be making double and even triple the amount of money if you fail within the 1-1.5years. He gets the property back plus all the value adds you put in…

Question 44

Q

If the refi strategy and purchase strategy doesn’t work, what’s the next deal structure you can offer?

Answer

A

INVESTORS (to pay for your down payment to get the loan to purchase the property)

You pay him less than options 2 and 3. TELL HIM 120 days to close vs 1 week and if he tips the appraiser normally they do it in one week and our private lender will have the rest done so it’s 1 week to close, when others usually take 120 days.

We can go slow too if you want to get paid less money and not make MORE.
Tell him you can bring all cash and you do nothing but takes longer & I have to get my investors involved & do that.

Question 45

Q

What’s the purpose of the cash lowball offer and the “investor” cash deal options?

Answer

A

These are “generally” bluffs to push him into doing the Purchase or Refi deal options.

Question 46

Q

Deal options if you’re struggling with closing

Answer

A

PROPERTY MANAGEMENT ANGLE

If you’re really failing, you can set up a property management website and manage these properties. You can charge 10% of revenue and an application fee to tenants and run the property untill you can buy it

PARTNER with SELLER

Say you will manage the property and just pay for what you need on improvements and you want all profit over his sales price and be a partner on the property. This can work if you could get cash from him to cover your time too but these are the last options. If you have to do these your sales ability is terrible but maybe you’re slow to start then work into building your confidence.

START SMALLER

Start with duplexes or triplexes or 4 plexes and say you’re going to make them your primary residence do the same 1-4 options but the cash down on these is only 3% so if 1-6 is failing get into these and work on your closing skills.

Question 47

Q

How must negotiations be done?

Question 48

Q

What’s needed once you agree on a purchase price?

Answer

A

LOI gets signed for the lender “OFF WHAT HE THINKS IT WILL APPRAISE FOR” doing 80Ltv of that work those numbers & then 2nd LOI for what is REAL Purchase Price (once you have real #’s from Schedule E and appraisal) and keep it between you and the seller.

CREDIT REPORT: You need 3 bureau pdf of credit.
INCOME on the property, at minimum Schedule E but ideally: Rent Roll, Income Statement, Balance Sheet, P&L, Year to Date.

Question 49

Q

How do you lead the seller?

Answer

A

ASK QUESTIONs to lead
Persuade and control. When asking questions the seller has no time to think and you lead them where you want them to go. If you’re in a corner, take control, don’t answer and question them. You’re the one with the money, not them. They have NOTHING TO LOSE.

Make them answer 3 yeses in a row - a person will automatically say yes to 4th.

Use CLOSED-ENDED QUESTIONS

When you only give them options on what to say for example

You would like me to pay you the price you want?

I know you want me to close this fast since it’s been on the market for 120 days.

Question 50

Q

What should you do if you need to buy time?

Answer

A

REPEAT or REPHRASE BACK THEIR QUESTION
If you don’t have the answer and need to buy time to think.
Get them to elicit yes response.

Question 51

Q

What’s the main attitude and expectation you should hold when engaging with the seller?

Answer

A

ASSUME THE CLOSE

Always talk in past tense assuming you’re going to close and get all you want and suspend any of your disbelief. People will always follow a leader who makes the path, always because people are born to listen to their parents. People will always let the leader control all business deals because once they realize who the father figure is, it is a natural instinct. People no matter how rich will always follow others that KNOW MORE than them. This is also what makes people rich. Smarts = Unlimited Wealth. If one doesn’t build all this into their brain they can be mentally & financially poor or just need to get investors until they learn how to control the dynamic.

Question 52

Q

How do you get the seller off your back and re-establish control?

Answer

A

Use Zingers:

You like money, don’t you?

You want to sell your property, don’t you?

Question 53

Q

What are tie downs?

Answer

A

Tied Downs are made to elicit a yes response & also when you throw in a statement they may not agree to normally then you tie it down. Then if they ever bring it back up again you can always say: “Well you said this before didn’t you?”

You want to close in a week, don’t you?
Wouldn’t you?
Wouldn’t you agree?
Doesn’t it?
Don’t you?
Isn’t it - That’s right, isn’t it?
Exactly?
You would like that, wouldn’t you?
This is a win-win, isn’t it?
So just to recap? You will pay for the appraisal so you can get XYZ price right?
Would you like me to get the LOI to you? Wouldn’t you?

Question 54

Q

What are hot buttons?

Answer

A

These are the reason why they tell you they want to do something if someone says I want to sell this to spend more time with my children or to go sailing or to do another project. Every time you get stuck you always bring it back up and get BACK ON THEIR EMOTIONS.

Question 55

Q

What are pain points?

Answer

A

Find out what is their problem & provide the solution like why he has an issue with the property. Say: “What’s been the biggest pain or problem?”, use this too with the hot buttons.

Question 56

Q

What’s the significance of leveraging emotions?

Answer

A

Emotions, getting people to feel them will make them buy every time, people buy on emotions they don’t buy on sales pitches or for beggars asking.

Question 57

Q

What’s the significance of making statements?

Answer

A

You can control with statements give an offer and say I’m looking at other properties too and will really want to know why this is gonna be a good investment for me?

Build excitement & momentum – When you get them excited people will agree to anything.

Question 58

Q

Why is it important to find out how much they’re making on the deal? And how do you find out?

Answer

A

How long has he owned it and what does he owe? Determine the best estimate of what he bought it for or look it up and find out so you can get in your mind that they are not doing you any favors and if you’re asking for 10% ltv cash out and even though they’re paying you to buy the property they are still making millions + and you’re the one all paranoid thinking they wouldn’t do that.

When you know and call their bluff and say I’ll buy it for x vs their y based off of the real value calculation and know they are making x millions then you can say I’ll pay this price if you pay me to run it and take it over and pay that over-priced amount.

This works on any of them but the ones that don’t have the 80 ltv or close to 80 ltv make them the payments and make them pay you 100k to 200k cash upfront. WHY because they are making a fortune and you are also putting money in their property and rasing the value they can’t lose because they still make millions even if you disappeared with the cash.

Question 59

Q

What do you do to get the seller to bend to your desired offer?

Answer

A

HANG UP

Tell them why you’re offering what you are offering and what you need for cash out and say call me back when you’re ready to make some bank and hang up.

Let them call you back. Play poker not patty cakes!

Don’t call them back. Give the offer that will work for you and one they will have to bend some on but still win.

Question 60

Q

What should you do with every deal opportunity?

Answer

A

Put all your energy into closing every deal even if it doesn’t work.

HONE in your POKER SKILLS. Be angry you are broke & losing the game because you are.

After you get them to agree and it’s a bad deal anyways tell them you changed your mind and ignore them for a week then make them increase the cash-out and do it or play them again if it really sucks.

You’re in BOOT CAMP learn to fight for your life or die broke, don’t waste any deal and not get all YOU CAN out of it executing from your killer character position and work on closing every deal even if it’s shitty then BACK out at the end on really crap deals but see HOW FAR YOU CAN LEARN to make SELLERS BEND.

If you assess how much their real profit is you’ll realize they’re bending like a car hit by a bus.
Track all the lies you see in a deal.

Question 61

Q

How should you track your progress?

Answer

A

Track every point you lost and why and how to overcome it with the right rebuttal.

LEARN your rebuttals.

Role-play them talking to yourself on both sides of the conversation.

Put in the self-discipline now and serious hard work and you will make a billion a year.

Half-ass your focus and training and you will stay broke.

Question 62

Q

List all the reasons why a seller should or shouldn’t go with the 4 available options when exiting.

Answer

A

Cash-out refinance: they should cash out refinance with our lenders and we take over the payments and get them 70 upfront and 30 on the backend… this way they’re still in first lien position and can recoup the property if we miss one payment plus all the value we’ve added making it potentially 2-3x more than they would otherwise.
Long-term hold: warn on the state of the market and the increased new development competition as well as influence of high interest rates.
1031 exchange: you want them to do this so they can sell to you and get into a bigger/better cash flowing property (more secure/low CAP), save/earn on their taxes, and expand the size of their portfolio.
Sell and retire: you want to glorify this to them if it’s in alignment with their motivations. Amplify the dream, amplify the lifestyle, amplify the income!

Question 63

Q

Break down all the “main” ways you can get into a property with NO MONEY DOWN out of your own pocket?

Answer

A

If it’s an “off market” deal you can get it appraised and negotiate a price that is either going to allow you to get 100% LTV to purchase in full or get him a high LTV for the property and only have him carry back a little bit of cash to hit his target price, depending on how much the appraisal comes out at and the lender terms. Pay 0% (through seller DP, investor DP, or DP from your credit) up front and pay him out on the backend after you’re able to get a loan on the property from now owning the asset. Pay the seller out in full or a large percentage of the PP and the rest pay him out over 5.5 years interest only (amortized over 30 years) and get him a balloon payment after the term has matured. (If needed, if it’s not a lot of money to carry back it could be much shorter of a time period)

OR if it’s “listed”, you can essentially have the down payment carried back over a set period of time (ex. 24 months) and say for doing that I’ll pay you an extra $500k (for example). The lender knows about it, the sellers cool with it, and everybody wins.
- generally you will have to pay above market interest rates OR even better, just agree upon a higher purchase price for the property.
-This also benefits the seller because they won’t immediately take a tax hit at the sale, it will be spread out over the 5 year period.
-It is even more especially attractive to them if they can get the 1st position on the mortgage and you have to make the payments to them. They then reserve the right to foreclose on you the minute you don’t pay on time and can recoup their asset plus everything you put into the property. It’s a win win (worst case scenario), you don’t always have to offer this but this could be the determining factor that allows the seller to feel comfortable with financing the acquisition OR at anytime within the 5.5 year period if you’ve built up enough equity.

Or you can get the seller to put the down payment up for you to secure the loan to pay him out what he needs upfront and he breaks you off on the back end and carry’s a second for a specified amount for 5.5 years at interest only payments until term matures.
-when the balloon comes do you can simply refinance the property and pay them off.

Or you could just get investors for the needed down payment to close on the deal but this is the last resort if you can’t get a 0% down locked in or get him to put up 20% for the down payment on the loan to pay him out with. This route takes much longer, around 120 days so use that to steer him towards the first two options.

Question 64

Q

What are your options if the property you are purchasing is “publicly listed”?

Answer

A

Either a seller carry back 2nd mortgage or an assumable loan situation.

Answer 64

A

Tell him you will pay him an extra 1% to connect you directly with the seller.

Answer 65

A

Because they allow you to get 100% LTV for the purchase of a property or very close to it with 0 money out of pocket AND cash out up front!

This is because when a property is off market lenders cannot use its “listed price” as the gage for their loan to you so you’re able to use a 3rd party lender that can get and justify a much larger value than your agreed upon purchase price. This gives you a great spread with your LTV from your lender to pay the owner his target price and get you some cash up front plus plug into a cash flowing property.

If the appraisal comes out lower than expected than you can adjust the deal so that the seller carry’s back a 2nd for the rest over a specified period of time. (Generally 5.5 years interest only if at all)

Answer 66

A

Only needed for listed properties, this is used to “reserve” the right to purchase the property while under contract and gets the owner/rep to take it off market so no other offers come in (generally refundable if you want out after the due diligence period).

You always side step earnest money because it’s a ridiculous concept and you can get them cash way faster than anyone could extend them earnest money. This is a simple thing to clear. (If it ever comes up).

Answer 67

A

You can get him an 85% LTV (needs 650-700 FICO+) maybe an 80% if 600 FICO but can make it work with lower.

Answer 68

A

Promissory note and purchase agreement.

Answer 69

A

Above table - in writing and executed at the closing table or done/satisfied in the upfront agreement at closing.

Below table - in writing and executed as a side agreement between you and the seller, activated and executed before or AFTER closing. (Generally done with “promissory notes” or clarified in the purchase contract)

All options have a “above table” agreement associated with them, these are the terms satisfied and performed at closing.

Options with below table agreements are mainly the cash out refinance where you make a below the table agreement to refi the property under his name and make the payments to the seller and if you miss a payment he can recoup the property. As well as an under the table agreement with the seller if he puts down your down payment that you’ll pay it back to him at close (because the lender is not supposed to see or know that you’ve used his money for DP)

Answer 70

A

“Win even when you’re losing”

Recounter and take something back…
Example if he’s going high you’re not going to go all the way up you’re only going to go up a little bit.

Ways to do this:
* Add more time on the seller carry
* Get more cash out upfront
* He pays more or all the closing cost
* He has to get some new doc like a Schedule E etc.

“Always have leverage in the negotiation”

DO NOT COME ACROSS “TOO WEAK” OR TOO EASY! (Don’t be desperate to get into your first deal, people can sense it)

Answer 71

A

Equity (yes or no)
Seller Cooperative? (Yes or no)
Does he have cash? (Yes or no)
What’s the gross Income?
Give him the options
Hang up

Answer 72

A

10% of appraised value

Answer 73

A

KNOW the principals
Be able to calculate the #’s on 📞
Have a large lead pipeline (momentum, care but not that much)

Answer 74

A

Lower price

Answer 75

A

Are all tenants paying?
Any lates or missed months of payment?

Answer 76

A

What kind of renovations have been done?

If units are renovated: What was the cost of renovation per unit?

Is there any differed maintenance?
- how’s your heating? air condition? plumbing? Roofing and foundation?

Answer 77

A

I will buy it but I just need you to put the down payment (under the table) so that it looks like I’m buying it… you get it back immediately at closing with the 80LTV of AV that you get upfront at closing. You get me 10LTV of AV at close for renovations/value adds and you carry back a second over 5.5 years for the remaining PP plus the 10LTV you gave me.

Objections:

Seller - Why would I do that if I could just do that myself?

Me - You could do it yourself but I’m going to pay you a price higher than what the “market price” is…

Seller: why don’t you pay the down payment?

Me: well I can and that’s why I offered you the 30% in the beginning or I can pay you your overpriced number with something more structured.

Answer 78

A

Under the table in regards to CRE means agreements that are not apart of the transaction at closing. They are “side agreements” held between you and the seller outlined in a promissory note.

This is legal in commercial real estate as it is not regulated like in residential.

Answer 79

A

You’re weak on your principals/mastery of the information.

Answer 80

A

“All that matters is that I can close in a week at your target PP as soon as we get an appraisal. I can get an approval letter from the lender as soon as the next day. Let’s close this today.”

You want to make some money right?

What # do you need to get this deal done?

You want to close this deal or not?

Answer 81

A

I have plenty of cash I’m just using my capital intelligently. I’m looking to make money not put all my eggs in one basket. I’ll buy 10 properties before I pay full price in cash.

Answer 82

A

Running out of questions and having “dead air”

Use closing statements like:
Get xyz documents for me and get back to me when you have them.

Answer 83

A

You can see my POF and background after I talk to the seller and see if it’s a doable deal. You want to close this deal or not?

Answer 84

A

You get the data out of him and question him to see what cards he’s actually playing with… does he have a hand full of aces or does he have a hand full of crap…

9/10 he has a hand full of crap but you’re playing the submissive role because you’re “too eager” to close a deal…

You’re the one paying him millions of dollars, you’re the one with the money HE WANTS… I.e you’re the one calling the shots…

Do not fall for their bluff, and play the insubordinate child: asking for this and that.

Tell them the terms and what you need from them in terms of docs and to get back to YOU when you’re ready to sell. 🎖

“ I don’t need to buy another apartment but I will if it’s at a realistic fair price.”

You should never be in a “pack pedal” position because you’re the one with the money, nothing happens without you… You are in the power position.

Answer 85

A

The seller is like a fat ugly chick trying to give you the run around for her number 🧐🤡😂

She’s over here like: why would I want to date you? Why are you better than the other guys?

Who gives a shit you’re fat and ugly and nobody’s out here banging on your door for your number.

I.E. your property sucks, it’s over priced, your financials suck, and no body wants it. Sell it now while you can.

Answer 86

A

You can say we can do a high value close in 1 week or do a low value close in 4 months. Play with the numbers to get a deal closed on the spot.

If you present it in the right way you’ll never need to go to the extremes

Answer 87

A

In martial arts and grappling, the key way to win (no matter what size opponent) is to keep them off balance). No matter if they’re on top of you or whatever move they’re trying to make you can “feel” what direction they’re going to and play it against them.

“You don’t touch me I touch you.”

If you’re in a fight and someone pushes you… you allow it and then the next time when they put all their energy into the next hit or harder push… you already know it’s coming and you use your angles and leverage their force to destroy them.

You lean in to their punch (what they want) but then use their weight against them to knock them down.

A good martial artist is always at an angle but a bad one is always toe to toe coming straight at their opponents and having a crash collision with them. (Ex. Negotiating on price only or ultimatum arguments/winner-loser outcomes vs. win-win)

The very best fighter is either “over pulling” or “over pushing” at an angle controlling and redirecting their attacks.

If you get them mad and attack with more energy that means they’re going to go even further.

This is commercial real estate sales. You’re working these property deals, you give them what they want: they want cash, and you say I’ll give you cash but not that much… or if they really don’t want to let go of their cash idea string them out until they fold.

If you present in the right way you’ll never need to go to the extremes.

THIS BACK AND FORTH BANTER = YOUR MONEY

Answer 88

A

Even if I took off with the money you’d be better off than you were before because no one’s going to pay this much for the property and you’d be in the same position you are now NOT GETTING IT SOLD.

Answer 89

A

1003 application
Credit report (copy of sellers credit or yours if doing a purchase) 650 FICO is ideal or better, but 600 FICO will work or if you’re purchasing instead of the refinance option (where you pay the seller) we can get someone or you can use anyone you know with decent credit.
Income - Schedule e at minimum (rent roll, financials year to date, balance sheet, profit and loss) 1 year minimum but ideally 2 years with taxes but get what you can get to start.
PSA or LOI - be sure the purchase agreement (PSA) for the lender doesn’t say anything about him (the seller) giving you the down payment money & if he is refinancing make sure your name is not on it.

Answer 90

A

Credit reports are needed from the lenders when applying for the loan.

If you are buying the property (purchase deal option) then your credit report from the 3 bureau’s is what’s needed (if bad credit we can use someone you know or that we know).

If you’re doing the seller refinance (seller 1st position) you need the seller’s credit reports or get someone you know with decent credit.

650 FICO is ideal
600 is okay
Lower is possible to work out using other people.

Answer 91

A

It usually means your approach or presentation is wrong and you’re speaking from a place of asking permission or begging/hopping for want rather than leading and directing how the deal is going to go and WHY (as a leader/authority position)

Also it shows you’re probably paying them too much money because you should be able to close on PP without needing to use any of the seller carry deal options based on getting a 100LTV* from the lenders appraisal loan.

“If you gotta have a second Im over paying for the property anyways. You shouldn’t even get a second. But I’ll pay you a second over a 5 year ballon because I want to get cash out and I’m aggressive. If I wasn’t aggressive and wanting to purchase multiple properties I wouldn’t even be paying you this but if you want we can do it this way as a fast close. “

Answer 92

A

Do you want to refi or purchase?

If you’re going to put my down payment we can do a purchase

If we do a refi, I’ll make you the payments, you’ll have nothing to lose because I’m going to put the money back into the property and the value will go up due to my expertise in management and renovations and it will allow you to get the value you want for the property right now…

Answer 93

A

Find out where they are so you know which option to lead them to.

Answer 94

A

How you say it. It’s all about the energy 99% of the close and you getting your terms is about your energetic posture and knowing coming into the call. Assume the close and know the ins and outs so you can close with ease. (Know the angles/options/alternatives)

Answer 95

A

Link to the property
Real Value ((stated gross➗2) ➗CAP rate)
Gross (states from seller)
Purchase Price
# of Units
Property Type
Appraisal stated by seller
How much he owes/how long he’s owned it
Best assumption of how much he’s paid for it/profit he’s making on it
What deal structure he’s open to

Answer 96

A

Initially it will be what you present to him as an “tentative” split offer that you can get him to agree to out of the 4 main “templated” options you have…

However, it will ultimately depend upon what the actual appraisal comes out as in terms of:

The appraised value AND
The LTV they give you on that value

These two things will determine how much you’re able to split % wise from the total appraised value of the property (your note will be based on what’s left of the PP from your AV split at close)

Answer 97

A

Because you can only do a cash out refinance if the property owner has at least 20% equity in the property sometimes a bit more.

Answer 98

A

Yes, the lender can extend an approval letter and terms based off the purchase price you agree upon with the seller from an LOI. But they need:

Schedule E, Income + Expense and balance sheet for past 3 years, and rent roll.

Answer 99

A

At least $1M-$1.5M just for holding it and it appreciating 4.5%-5%. Not including the other value adds and their reduction of expenses and increased income. They’re making millions on you closing this deal for them… you’re doing them a favor. (They can afford to cover closing costs and appraisal)

Answer 100

A

Tell seller to increase their down payment if (purchase option) or to decrease the PP

Answer 101

A

3-4 years minimum or have built up 30% equity in the property.

Answer 102

A

2 2+ bedroom units for every 1 bedroom/studio

Why?
Because 2 bedroom apartments are easier to rent (unless your in a high density area or school town with high demands for rooms)

Answer 103

A

Take that revenue and divide it by the CAP rate.

Answer 104

A

LTV based - higher or lower
Interest Rate based - higher or lower
How you structure the loan

All of these have varying terms and conditions and you can choose the one that will allow your deal to go through.

Answer 105

A

Industry standard is: $100/door
But $200/door is even better

Answer 106

A

Delay the carry back payments for 12-24 months
Lower price so that there’s no carry or very little
Lower closing costs
Lower the cash out

Answer 107

A

You need to see if the taxes will increase in the following year to ensure that it won’t impact the DSCR.

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