Ep 551: The Good and The Bad About Leases

Chapter 1: Introduction and Recent Wins.)
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all right welcome to today's call I hope you all had a little side note for showing up early on today's call we have
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some interesting wins this week I am a little bit uh I got sick sometime last
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week so bear with me yeah I've been sick for a couple days now my kids got me sick you know you know how they do it
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but my kids got me sick and I am and I've been talking all day so I need to
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drink water I have it right here so today's call I want to cover some wins
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we've had some couple internal wins this week chorus landed a $850,000
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$885,000 deal that we contracted I don't know if he's here right now but one of
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our students here who shows up to this call landed a big deal that we contracted essentially he found a really
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good deal and had a really good layout and we helped negotiate with him and the
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agent because it was listed on the MLS and ended up turning into a deal we ended up negotiating through oh he's under Mac
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there you go uh course Mack ended up uh negotiating we negotiating through him a
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great deal and it's a big big win that we have not under contract so sales team will have a packet going out hopefully
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here in the next couple days and they'll start selling deals on that a lot one thing I really want to show you on that
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deal is why we like it this isn't if he has any questions please put in the chat
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we're going to cover over some cool wins this week but I wanted to show you guys why we like this deal and why we got it
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under contract so this is the deal here it was
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part of a larg larger track and I think it's the first time we ever did this but
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we ended up buying the best part at the same price breaker so whenever you whenever we're going after land the
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bigger the parcel the more price breaker you can get um was price breaker trash
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so this is like an additionally like a 400 acre track that goes above here and it kind of almost like it's probably
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like another 300 acres Above This same little staple it just kind of cuts across the freeway I think course
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decided to kind of go after the bottom part CU it's the best part the top part is a little deeper deeper than we want to be and based off the driveway spacing
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it would make it a little wonky Lots which we're kind of hitting wonky Lots right here this is the vital subdivide
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is kind of like my first version one concept I think we're going to have somebody do a better job but this kind of general
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idea but this is 161 162 acres and we're getting 1610 off the frontage which is
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really really great textbook deal very very simple and it was just a great opportunity well part of the
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negotiations was they wanted uh to close by the end of the year so I think we set like a close date of December 15th or
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something like that but it was a really really great opportunity that we got for 5500 an acre so if you do the math 5500
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an acre we found comps supporting 12 to 15K an acre so I think we're going to
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try and sell each track for 120,000 is I think target
Chapter 2: Negotiating Seller Financing.)
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so really really good opportunity long due diligence period and there is plenty
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of spread which is great opportunities here I wanted to show another deal we actually another one of our guys I don't
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know if he's here right now let me see here one of our sales team he actually lives in Belgium yeah one of our one of our
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sales team actually lives in Belgium he sold one of our Lots from Belgium so a lot a lot of wins this week
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we have another deal from John fam and I don't know if he's here he is here that
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we're negotiating as well it's a $3 million deal so hopefully we'll contract that this week we'll let you guys know
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next week but might have a couple contracts from the group here from participation it's really amazing really
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amazing to see and congrats everybody one of the big things why I like I like showing highlighting the deals and why
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they're good and why they're not good different opportunities is I want you guys to get better and see opportunity
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better it takes a it takes a while to get the eye on deals and what they look
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like and how to structure them and you got to look at good opportunities to kind of picture them so the reason why
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we teach this stuff is you get a better understanding of how to structure your own deals a lot of what we've done we've
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done with very little Capital so we've extended all of our private Capital as
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much as we can to try and lock up really great opportunities that deal the one I just showed you is uh we're a little bit
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aggressive but if it's a great opportunity we don't want to we don't want to we don't want to negotiate as good of terms as possible by being
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aggressive on the front end and uh that one we actually we're putting down $50,000 hard non-refundable money uh
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probably tomorrow for that transaction just because we got really great terms and we really want to lock ourselves
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into that transaction aggressively that's how you get great opportunities is if you're aggressive in your
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negotiations and with your EMD you usually can get extended timelines and
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negotiate a really great deal so that's kind of the terms on that
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one but you get you get a lot of you get a lot of cool stuff uh just keeping your eyes open course I don't know if you
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could speak and tell how you found that deal briefly yeah I mean just searching the MLS and I
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I was looking at big land big land uh for sale on list and
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just came across land or something that's it I know we're not trying to make it
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difficult but that's easy as that yeah it's it's it's really cool man so there's a lot of opportunity out there the bigger opportunity the more you can
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get creative with it I think this one he's 1031 into another project so he needs his cash but generally what I've
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noticed anything like half a million and up you can ually get some type of seller financing pretty easily so don't don't
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leave your uh your negotiations H off when you're negotiating these price points I think generally stuff under
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that half million 250k it's they're going to want it in cash because they're
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you can spend 250k pretty easily for most people if I ask anybody in the room
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if you had 250k next week what would you buy you know you probably think of a car
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a house you can probably think of a rental property you can think you 250,000 pretty quick so I think that the
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price point of 250 to 500 it's really really hard to get seller financing but
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on the bigger stuff very very easy we just bought a deal off that's another wi we had we just we closed on 67 Acres
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last week it was $100,000 down seller financed with four it was 537
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purchase and it's $100,000 down so sellers carrying $437,000 on it so like I said it's like
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a little little around half a million we got seller finance with 20% down so you can get really creative with uh
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opportunities with uh bigger transactions and you can get long-term financing so I want to talk about fam's
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deal let me pull up his terms that we have we essentially have a verbal yes on
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we have a verbal yes on this transaction so we're sting out a contract I think hopefully tonight or tomorrow morning
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let me pull this up it's a purchase price of
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$2.95 so it's almost $3 million uh we're putting 10% down of
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295 we have 12 months to close which is amazing 120-day option for 1,200 bucks
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and then we're getting seven years of financing for 4,000 a month which is crazy I told Kyle who negotiated that
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transaction that he's crazy because he negotiated better than I would have so one of my let me Dr my phone I kind of
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show you my my thought process you can kind of see and why that's crazy so one
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thing I generally do is I try and negotiate a a fair monthly payment and
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you really don't know what they're going to take to you kind of show throw on an offer so I want to show you the the math on this and it is way better than I
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would have done it which is really cool it was Inception for a second absolutely
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so I want to show you the math what I would what offer I would have made and he got better terms than I did so I'll
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put the terms here in the chat so you can kind of see what he did
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here all right all right so it's
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29500 Z and then we're putting 10% down so we're getting two and half million of
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seller financing so generally what I'll do is I'll put 0% interest and I'll do a 30-year term and then I'll figure out
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what that monthly payment is so it's 7,300 a month I wouldn't 7,300 a month would probably be a little bit more than
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what I probably would have made an offer of five 5,000 a month because usually 5,000 a month they can that's a really
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good monthly term but Kyle in his wisdom decided to offer four and they took it
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so with bigger down payment they're getting $295,000 down that's a big chunk when
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you can get down to that price point down and if it's like a million a half deal might be 20% down think about that
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so if you get to that big that1 to $250,000 price point down you can really
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get a lot of flexibility on your terms I'm trying to share screen but let me just tell you
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essentially since we have long-term seller financing on that deal at 0% at 4,000 a month it's equivalent to getting
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a 663 month advertised loan at 0% which is
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in insane we got seven years of financing so low cash low down payment low cash flow and then seven years of
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financing so I'm going to show you what the power of that is I I really want to show you this numbers because it's crazy
Chapter 3: Example Deals and Terms.)
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so essentially with us getting 90% financing on this transaction we now get
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to leverage essentially 90% of the property or more I think there's still value even above that so whenever you
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value add on top of your price you have a uh
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you get like a seller financing Arbitrage plus you add on Top Value so now you have a crazy Ro which is amazing
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because the more seller financing we get the more leverage you get so let's say we sell 2 point we we're buying it for
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2.9 and we're selling it for 2.9 hypothetically which we're not but I want you to understand so hypothetically
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we sell it for $3 million at 12% which is the current terms we're doing that will produce $330,000 a month in cash
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flow and Debt Service is only 4,000 so just off of that alone buying
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for two and a half or buying for 3 million at 0% and selling for 3 million
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is 30,000 a month it's crazy so this is a great deal that we're sending out a
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contract on immediately just because of debt Arbitrage now we're actually value
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adding this property as well so we're thinking we can hit almost closer to 40,000 a month in cash flow on this one
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deal that our debt service is 4,000 a month which is insane literally insane
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so it tells you the opportunity so one of one of the big reasons why I like going after bigger land deals is I want
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you to understand that every time you get Sellar financing especially with low interest rate or even 0% we've gotten a
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couple 0% interest loans it's equivalent to getting a bank loan for that amount
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so imagine going to Wells Fargo and asking for a $2.6 million loan with no
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paperwork essentially because we're not doing a credit check we're not doing work verification we're not doing
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balance sheet we're not doing all that stuff you have to do to get a loan we're not doing any of that and then all we're
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doing is we're buying it and then seller financing it so now we're we bought
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creatively now we get to sell creatively to the end user through a wrap and we
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get to Value ad and create more inventory and do all that jazz and we can now get to Arbitrage that financing
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we got on this property and now Finance it to somebody else without having to bring cash to the table it's a really
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really great opportunity that you get to Arbitrage debt and once you understand
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the power of arbitraging debt it is no longer a cash business like most people
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that do land they buy buy for cash sell for cash our main strategy is Finance
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because we understand the value of creative finance and how it can create leverage forever like we're talking
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about what's the close when your balloon hits that's a great question let me find
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out so we have uh s years of financing which is 84 months uh 0% interest 4,000 a month 295
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z z we will owe when the seven years are up we'll owe 2 39 1 n so 2, 319,000
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now for perspective sake I want to show you what the what the value creation is
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they say hypothetically we sell up for 3 million on notes at 12% 3 60 months our
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same uh timeline at 7 84 months will put us at
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2.8 so we'll have we 02 2.3 to the seller and we'll have a debt obligation
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of 2.8 or larger plus we paid we made 26,000 a month for 84 months which that
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is 2.18 million 2.18 million of of of debt value created across seven years
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plus we'll have half a million in equity from their position to our position after seven only seven years
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it's insane let me go through questions uh what's the close when your balloon hits do you balloon it off or to or sell it off the
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note that's a great question I'm gonna uh go to the questions but hypothetically I want to extend it
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forever and one thing I want you to understand is I don't mind balloons because a balloon is just an option to
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renegotiate so if you get somebody in the position most people don't want us Finance for 30 years or 10 years or 15
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years or 20 years because they're afraid you're not you're going to default so if imagine if I make seven years of
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payments on time with no hassle and I send them a Christmas gift every year
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you think after year seven I asked for an extension of the of the of the payments they're not going to say yes I
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don't know depends on their current position but I'm gonna ask and I'll ask
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for free and then if they say no I'll ask and give them money and see if they extend it because every year they extend
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it means the more leverage I give every year year over year so you get a lot
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more leverage over and over again so think of a balloon as a as another
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negotiation point in that transaction and as long as you're a good person in
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that transaction they should extend hypothetically so I'm going to use every
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seller financing opportunity that we get whether it's 12 months 18 months 3 years
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5 years 7 years when it comes due I'm going to renegotiate and try and extend because if I don't have to move the debt
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I'm going to I have that still have that debt Arbitrage where I have to can make 300 Grand and they get 36 or whatever
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that number is how does a cash flow monthly essentially we would sell or Finance it we we bought creatively
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seller or financed we're going to cut that property up into uh 10 acre tracks
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and then we'll sell our finance it out the same way we bought it but we'll offer it at a different price point
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because we're creating value through subdivision and then we'll charge a higher interest interest rate because we're getting it for zero and we'll
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offer it for 12 the down payments from the end buyers good question the down payments from the
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buyers will go to us we get all that cash so we essentially have that once we cover that 295 anything over that is
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ours and then we essentially have to cover that Debt Service of 4,000 a month and then we're in the money so there's a
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lot of money to be made on this transaction just by simply asking to get sell our financing and us getting
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multiple years with a blue and a low low cash flow point so we get a cash flow
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significantly for a very long time yep good question and this is and I
Chapter 4: Arbitrage and Value Creation.)
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want to say we've gotten zero and a lot of people when I talk to people in the real estate space they say getting 0%
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financing is insane and you're lucky to get one in once in a lifetime and we've
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gotten a lot of them like a lot of them I've gotten probably four this year alone that I can
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think of off hand that 0% financing so uh and these are seven figures the F we
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did one in January we have 1.6 in debt 0% we just closed on one last week it's
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400 Grand at 0% it could even be like due diligence periods we have a deal right now 4 and a half million we have
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two years of due diligence uh and it costs us 40 Grand that's pretty much seller
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financing they're holding the property without putting us any any other money into the transaction we're using a uh
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PSA which is a person sale agreement as some type of seller financing even chus
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deal six months of due diligence period That's a form of seller financing we don't we have six months to come up with
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$800,000 so Dan Daniel um can you explain a little bit more like of a of a
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situation where a seller would be willing or he's willing to give you a
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two-year due diligence period that transaction is special we did a transaction with them prior so this is
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our second deal with them and our first transaction was nine months and it was a lot easier and uh he kind of coerced us
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to do this transaction with him and we asked for two years and he said yeah so every deal is completely different and
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that one we have a lot more report where they're okay with a two-year due diligence period in most cases we might
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have to pay for that so we negotiated a deal a few months ago that we have a
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year of due diligence for 12 Grand and then after that year we can extend for six months for
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200,000 we use big tranches of payments to extend further if needed because the
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longer they carry or or hold that property the more leverage I can create
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because that deal were turning into an entitlement deal so the longer they carry it the less I have to bring I
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don't have to actually close in the property yeah they're essentially waiting for us to buy it 100% what are you doing with
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your two years term for entitlements engineering and pushing out for sales uh
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that deal specifically is a commercial deal which we have not done a commercial land deal successfully this will be our
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first one it's uh 15 acres in San Antonio and a great corner right across street from a school it's on 1604 if
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you're familiar with San Antonio at all uh there's like 70,000 cars per day that drive by this thing which is a really
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great car count so um it's in a really great location great car count and we
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asked for two years cuz we didn't know how much we needed and uh we're shopping out with Buyers so if you get a buyers
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you'll tell them they can't no if I get a buyer to buy me out sooner I will just
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double close so right now we have a big commercial buyer interested in buying
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nine acres so we're entitling it as a
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commercial industrial not not Chris industri Park but it's a retail Center hypothetically
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so we're trying to get a large anchor Tractor Supply Walmart HB lows into as
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an anchor position and then in the front if You' shopped anywhere in America you know there's restaurants Chick-fil-A
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Starbucks Chipotle McDonald's Burger King whatburger whatever they're all in
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front of that because the main lows HB Tractor Supply is going to bring a lot
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of traffic so depending on what the anchor is the other buyers would come in
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99 year lease no yes we could lease it out which that's another strategy with commercial land some of those anchors
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will try and buy it outright or they'll lease it so uh generally Lowe's is
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interested in in this project specifically they've already walked it three times I believe and most recently
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was like two weeks ago they want to buy at cash so so this
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commercial deal just because we ask for time and this is the big thing I want you guys to understand when you ask for time you lock in your price for the
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future essentially an option Lowe's wants to buy nine acres of
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the 15 supposedly for N9 million say that again that when you kind of fast and and
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I couldn't really make out what you were saying you said when you when you're asking for time what did you say how did
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you say that when you get time and due diligence on a contract you're paying
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future dollars for it and future dollars are worth less than today's
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dollar if that makes sense if I can option out a $5 million project for two
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years and never buy it and then you buy it at today's price and it goes up in
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value there's a huge Spike during covid which there was you get all the upside and you can sell it for retail at
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current pricing and still make money and all you had was an option or a long due diligence period or options to extend
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like you have all this advantages basing for time you get all the upside just create create money out at the in air
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create money through Time by your long due diligence periods and that's through actively subdividing or actively
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entitling it or just actively not doing anything with it and just sitting on it you can create value through nothing
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just by sitting on it so instead of working and fixing flipping that house to create value you just sit on it with
Chapter 5: Commercial Leases and Master Leases.End)
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paper paperwork and you create value that way I'm G to tweet that after I get off this
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call you can create value just by sitting on paperwork it's a good tweet right there Lowe's wants to buy
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essentially nine acres for 9 million hypothetically Angie if they buy it next
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month I'mma close that whole transaction out seller gets four and a half million
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I make the difference and I still have six acres free and clear that I can now sell to McDonald's Chick-fil-A Starbucks
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and all that stuff this is a deal I didn't want to do I'm just kind of sorting uh through it right now but the
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biggest Advantage I had was time and time is what's going to do the deal it's not even about the price point anymore
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it's about the time so if you can buy any deal hypothetically with future
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dollars and all you asked for was time you're in the money every time and that's why I really want you to
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understand people that want you to close quick they're asking for today's dollars if I can
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if I can uh hypothetically even with cor steel if I can hypothetically purchase
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prices 900,000 if I can
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sell seven eight Lots I can pay them with their own property not bring anything to the table besides my earnest
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money and that's the value you create why not do a ground lease ground leases are tricky and I I don't I don't care
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either way when you get into the commercial space you have to look at your leases these ground lease people
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they play dirty and I will talk I guess I talk
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about ground leases next week I'll bring up an example but uh they play dirty and how they play dirty is they lock in
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great leasing terms now but they lock it in for 15 20 years they might lower
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their rent increases 3% 1% annually so by the time they're into this transaction in four or five years your
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your property becomes less valuable because they have a long-term lease on it so you can only sell that
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lease which has value it gets becomes less value the longer you hold it so
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lease terms are crazy and I I I'll probably cover that in detail a little bit more next week because ground leases
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are interesting they're very unique I looked I was looking at a Lowe's deal a while back because I Lowe's was
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interested in buying this project so I was looking at other lows what lows triple net leases are selling for on
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Loop net hypothetically and this Loop this Low's deal let me see if I could
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pull it up because I think I might have downloaded their packet it was crazy this Lowe's lease steel was crazy they
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screwed over that that whoever owned that property they screwed them over I have to find it it was such it was such
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a good thing I'll talk about a little bit more Lowe's what they did is they put small R
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increases over time so it devalues the the lease and then they aped they asked
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for five five year optional extensions with no rents increase which that means
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essentially they're paying top dollar now but hypothetically and it was already a 20-year lease so they
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essentially have it locked in for 40 years and the agent was trying to portray it as oh the the it's a
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long-term tenant really showing in their value by locking in a 40-year lease but it was terrible ter because essentially
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their rent never goes up so whoever buys or holds that that lease essentially is
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losing money buying it it's insane and it's just the way that the terms of the lease are written
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and they locked in so much time we talked about time they locked in so much time that Lowe's would make a killing
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after like year five and they'd be in the money for the next 40 years on that
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one location and whoever's holding the bag is holding the bag and they're kind of screwed so it's uh leases are are
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dangerous very very dangerous yeah I have another story no matter these are
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like my Daniel isms or my high mind isms however you want to call them so no matter what you invest in I know a lot
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of people invest in other asset classes a lot of people you follow invest in other asset classes they're really investing in the land when you really
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think about it it's all about location location location I have an example for this
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so if you one of the craziest markets I've seen is you think of Like a
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downtown City I always think of like Seattle Seattle has gone through so many changes over the last 15
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years and I watched a video online and it was just a regular ABC house that was
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in a regular subdivision it was a little bit disheveled and unkempt sold it for like 300 Grand
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somebody remodeled it put a new house sold it for a couple years later it was like two three years later they sold it
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for like 700 after it was like a nice new modern build four or five years pass they tear
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it down again and they put a mansion and they end up selling that for like $2 million or something like that
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was was literally insane this this one little hold house and it's time so as no
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matter where you're investing as time changes you could be your zoning could
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change into highrises so think of like a major city that has highrises I heard of a story recently that uh
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Triplex zoning 5,000 foot lot to me a 5,000 foot lot you really can't do
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nothing but City changes the zoning where now you can build up you now have air value they're turning that Triplex
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zoning into 22 units which would be worth $10 million and it's all about
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location so as time changes and density and the city changes zonings and
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potential zonings on land you get the ability to Value add and create value just by being in the right location so
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the other story I have is a dude I follow on Twitter he he does a lot of gas stations he had a really great
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Corner Gas Station and a lot of people avoid gas stations because it has potentially environmental issues but he
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had the right location so Chick-fil-A ended up reaching out to him and they wanted his gas
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station and they wanted to lease it so Ray and Jose are talking about leases in in the chat here so they wanted to lease
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it so they made him an offer which was way more worth than he thought about it
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but he him being smart ended up talking to a lease attorney in the commercial space and they low balled him they
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essentially offered him 50 cents in a dollar in his lease and if he would have took it uh he would have made millions
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of dollars less so I think in his lease terms his his uh lease value was like 3 million and they're offering everywhere
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else you can they should have got closer to $6 million in lease value so they low
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balled them and if he would have took that first offer he would have been screwed and he would have lost money so
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ground leases are dangerous and but it's always location location location no matter what you invest in if you have a
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great location that trumps everything else it doesn't matter what it is currently it can always change gas
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station con CH the Chick-fil-A the triplex can turn into 22 unit multi family like if you have the right
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location you can create and time progresses it gives the opportunity to
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create value if you're in the right location so that's the biggest thing location location location is number one
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in real estate so talk to excerts before executing absolutely yeah so there's a
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lot of nuances with triple net leases uh I will do a case study next week or in
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two weeks now I don't know I'll do it in the future but I'll find a good trip net lease that has bad terms and uh I will
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show it to you they're they're really crazy I was doing I I had a opportunity to mess and I know a lot about it cuz
31:01
I've been I've come across it a few times in the land space early on in my career I came across a commercial
31:08
property and it was right where I was living at the time and I was just sing about land so I'm very I might I may not
31:15
know but I'm willing to learn type of mentality so this deal there were there
31:21
was a I lived in Georgia at the time so Georgia has a Bojangles which is a chicken place and there the first ones
31:28
that came on this exit what they did was is since they're the first ones to come into this new area they locked in a
31:37
restriction on any property that seller owned that they could not sell chicken
31:44
restaurants that sold chicken could not be on neighboring Parcels around that
31:49
chicken place because they're first there and they negotiated that in their purchase or lease of that property
31:56
literally insane whoever signed yes to that lease screwed themselves because
32:02
that means Buffalo Wild Wings couldn't come in I mean they had to go around the corner to another lot maybe not the best
32:08
location they had so there there's different things with leases that uh you
32:14
come across it's uh extensions options it's deed restrictions that come with it
32:21
um there they thrown a lot of curve balls to the unbeknown and unknowing um
32:26
in their leases and once they're signed and in place and that's law that's law
32:32
for that parcel and moving forward it's a dangerous place to to get in oh I
32:37
forgot to put in we put a 1% EMD John Alexander so we're putting down 29,500 bucks EMD but it's all refundable
32:46
during an option period of 1,200 bucks good question I forgot to put that in there so I will find I'll find I'll do
32:53
my homework and I'll find a good lease project uh potential that shows what they could do on leases and I will show
33:00
it to you on one of these future calls that way you guys can understand that a little bit better but telling you land
33:06
is land is an amazing space to be in and once you understand the nuances you know what to look out for and you can see
33:13
where people are trying to potentially screw you especially it happens a lot in commercial it happens a lot
33:19
commercial I saw I saw a story because commercials valued by its
33:25
noi and income minus expenses so I saw
33:30
one where to get people on good lease terms what they did is they'd give them
33:37
like six to 12 months of no payments on a lease but whenever the payments are due they would upcharge them so it
33:44
wasn't necessarily free it was just 12 months of ease while they first moved into that lease but after that it locked
33:51
in their it raised their rates over market value for the rest of their term
33:56
what that did was it by that little trick no cash flow they carry that expenses for whatever 6 to 12 months or
34:03
90 days whatever they negotiated now their rent rate went up
34:08
high because now they can exit that property at higher valuation because they rote in that little lease terms
34:15
favorable to the owner where they can get higher than rent rent pricing that way whenever they
34:22
stabilize it and they're paying they can sell at a higher valuation when they exit
34:30
crazy little tricks in commercial and land and leases it's a very unique space
34:36
and there's a lot of tricks to the trade that people have been using for years and people that don't know they don't
34:43
know they get caught till they're trying to sell and they get devalued based off of their income so it's a really unique
34:51
space to learn about these things because you can use them to your advantage we've made offers with leases in place you can offer so here's a
34:59
little quick tip instead of asking for seller financing like uh if a seller ask for seller financing no I don't want to
35:05
sell our finance I don't want to sell our finance ask for a lease with an option to buy a lease with the option to
35:12
buy is just sell our financing with different terms different wording and you can credit all that to the
35:18
purchase so there's a lot of ways to word things that it makes it more favorable to you
35:26
or to them based off of your wording of your lease and what's in your documents
35:32
this has been leasing 101 any questions that's leasing 2000 that's not 101 oh I
35:38
like it thank you thank you leasing 2000
35:46
yeah yeah John you got any wisdom on leases y dud I mean Daniel you know I
35:53
was reviewing a uh an HB lease time and it's exactly what you're you're
36:01
saying Home Depot has they go in there and they'll write in all these products that HB sells like donuts for example so
36:09
they don't want a dut you know company in the same area so Chinese food
36:15
whatever that HB is planning on selling there they'll lock it up so that they're the only ones in that entire Center that
36:21
can sell that so you're right they you you have to look at those leases carefully and and yeah right the the 12
36:28
months a abatement basically that is very common and you
36:34
can negotiate actually up to 24 mon that's rare but you you know if if your
36:40
lease is big enough and you're talking attractive number yeah you can do
36:50
it all right I'm meating them you can you can also get them to throw in money
36:55
you can actually have them actually pay pay money for improvement so if if if
37:01
it's a lease that's already there that's another thing that you know can be done
37:06
so and that's very common so like when when I when I uh like whenever you lease
37:12
a space for example and this goes back down to individual lease but it shows you you know how they work you know in
37:22
in these situations like when you move into a space you you usually have to do improvements you got to paint the place
37:28
you got to put in carpet sometimes you got to put in like if you're going to turn into a restaurant you got to put in all that infrastructure and anything
37:35
that's permanent to the to the uh space itself they get to keep so like if you
37:41
rented it for like three months and went bankrupt and left they get the benefit of everything that you improved on that
37:48
property and so there's a certain amount of that that they they will pay for automatically but you have to ask for it
37:54
if you don't ask for it they they're not going to volunteer it so yeah there's a lot to there's a lot
37:59
too ly it's a whole another world and why it's good to have somebody you know
38:05
that that that's that's done it before been there to help you help walk you through that maze you just uh you just
38:12
reminded me of something too I heard another story where in the leases these leases are expensive they could be5 to
38:19
$20,000 a month so the landlord is giving you a lot of
38:25
dway because it's affects their value ation so they'll ask for like personal guarantees and Credit Credit
38:31
requirements and big down payments and 3 months up front like the the the leasing
38:37
can get really stringent for and the reason why I learned a lot about this is
38:44
I had a buddy of mine and this is another leasing strategy too I had a buddy of mine it's
38:50
actually my brother-in-law my sister it's a family member's husband from on
38:55
my wife's side they got uh they essentially Master lease the property on accident now what a Master
39:03
Lease is is they essentially negotiated the rent for all of the units at a at a
39:09
base rate and they negotiate their terms but they have the ability to essentially
39:15
sublease it at whatever current rate values and all terms they want they can kind of control the terms with the end
39:21
usage as long as they make that payment let say apathetically they got 10,000 ft and it's 20,000 a month they owe that to
39:27
the landlord or to the owner but if they can charge 30 to 40,000 a month they essentially keep the cash flow off a
39:34
lease and they control the the units so he he did one on accident with no like
39:40
real estate experience he kind of came across the owner that wanted to do Master Lease with him and he kind of walked into it blindly and he said his
39:47
master lease and he he he negotiated it needed the space but he was making more on the
39:56
leasing of the property than he was in his business of leasing the space so he just shut the business down and just got
40:01
into Leasing and all he does is manage the Master Lease because he makes more money off the Master Lease than he does
40:07
running the business it's insane yeah Master leases are
40:12
are they they became less popular you know in the gross in the growth area
40:18
when the market crashes they become very very plentiful out there you'll see a lot of Master leases start up now so
40:26
that's going into almost any kind of commercial building and instead of
40:31
trying to buy it you go in at first with a Master Lease hopefully you negotiate an option of course and then do exactly
40:39
what you just said and uh it was so popular back in
40:44
200 S eight and nine there were like I guess there was
40:49
three or four gurus big you know big big name gurus at the time too selling the master leas
40:57
courses to teach you how to do that so you see how plentiful it actually is out there on those Mar you know at the
41:04
market bubbles goad Cory joh you you remember here in Houston now that you
41:10
you're talking about master leases and you sparked something in my in my brain it was a guy that that must have been
41:17
what he was doing was it boxer properties he had properties all over Houston and he had his signs on all of
41:24
them and um I don't know I'm assuming that's what that's what he was doing he was in he was more into like management
41:31
or something he wasn't I don't think he was and they were all commercial commercial uh spaces around town so
41:38
that's what when you were talking made me think of I didn't know if you were talking about if he was one of those
41:43
gurus you were talking about I didn't hear the name though I think it was boxer Properties or something like that
41:49
oh yeah no that it does sound familiar but there there was a lot of them I mean they were
41:54
plentiful yeah and and that tells you how many uh owners out there will
42:00
actually be willing to do that they you know they're it's a same mindset these owners
42:07
don't want to do management and they can't count on the management companies because the management companies all
42:13
they do is nickel and dime them to death they don't do a good job etc etc so they much rather have somebody invested
42:19
they're okay with you making the money they're okay with you making the spread and and so they love a Master Lease and
42:26
and with the pressure that's going to be coming like I said this is really big when the when the bubbles start to burst
42:32
like they are they don't want the headache of it and so people who rent in
42:38
those buildings they start to go bankrupt right and they start to lose their business so these guys suddenly
42:46
they're saying well my management company can't can't keep people in there and I don't want the headache and I would rather have one payment coming
42:53
from me from one guy I master leas to and let him deal with a headache yep and that's that's why these Saints can
42:59
become very popular right now and they're not hard they're not
43:06
hard to do you go to a lawyer and you ask for a Master Lease they all know how to put the Master Lease together it's a
43:11
very common agreement and any commercial real estate attorney will know how to
43:16
put it together and and and help you put the deal together wow hope you all
43:22
learned about leases today this has been a this has been a lease course today
43:27
day a day I'm I'm going to release this on the podcast as a as a leasing
43:34
101 about to you by h n this is this is really good this is really good information and like all the
43:40
all these things have it once you understand understand it you have tools in the tool belt
43:47
that's all it is tools in the tool belt if they say no to this let me ask for this I think I think once you get enough
43:53
experience and I know John knows this you can ask for the same thing tend different ways
44:00
yeah you can ask for the same thing 10 different ways and they all sound different but they're all wins to you
44:06
based off of you knowing what to what to do and what to say and what to offer and what makes sense and is arbitrage yeah
44:14
it's just Arbitrage that's it Arbitrage Arbitrage Arbitrage that's the name of
44:19
the game it's a it's a it's a way to create a lot of opportunity without actually buying and it's just Arbitrage Arbitrage
44:26
of debt Arbitrage of price Arbitrage of leases Arbitrage of anything you can you
44:32
don't have to a lot of people think they need to own own own if you can just Arbitrage you don't need to own
44:38
anything and that's the that's the key so go out there make some offers make
44:45
some crazy offers everybody here we're going to Corpus Christie like Saturday
44:51
come check us out can't make it we'll do it again next year I don't know where we're going to do it but we'll do it again next year if you can't make it
44:57
this year but we're excited to meet everybody here uh go to the hives live.com event go get a ticket I think
45:05
we're expecting about 100 to 150 people there Rock said not to own but control that's it that's it if you control the
45:12
financing you control the lease you never have to own anything that is it there you go Edward put the thing in the
45:18
chat if everybody here watching this recording thanks for tuning in I'll probably put set podcast episode it was
45:23
a really good episode I think we covered a lot of good stuff but Dani I got I got a question if you don't
45:29
want for cut it here well as far as I got an example so let's say person had a listed I think it was like 90 something
45:34
Acres it's a little bit further than one hour of I think Dallas for worth uh I offered him 900,000 uh I got him to of
45:41
course I did traditional 30-year financing he said he could Max he could do 12 years not the best looking parcel
45:47
kind of like a shitty looking like half U shape but then he got 12 years and I only gave him 10,000 down he said that
45:53
wouldn't fly today but I maybe I get up to like 10% then oh he was asking how how's the monthly payment structure I
45:59
told him annually he may do that at 10 grand a month but I guess we'll see no not month 10 grand a year and then of
46:05
course 10,000 down but maybe he'll maybe 30,000 down something but because
46:10
because the seller and the uh no the agent is one of the sellers pretty much so him and his partner so I guess
46:16
different than you know agent to direct the seller so uh anual payments is is a
46:21
really good strategy that you could do even even ugly stuff you can make stuff on ugly you can make money on ugly stuff
46:28
100% if you get terms I tell people all the time if it is an ugly deal if you
46:33
get good terms you could probably still make it work but yeah annual payments are good monthly payments are fine as
46:40
long and just like we did Kyle Kyle's deal that he negotiated with for John 360 divided by whatever was that Bon
46:47
Mount he cut that in half and it was 4,000 a month so technically my offer
46:52
would have been around five or six and you probably would have made a $7,000 offer literally they're willing to take 4,000
46:59
so there's a lot of ways to make ugly deals attractive with good financing so
47:06
$10,000 down is if you can get 10% down it's probably still killer yeah Bill if
47:12
we can if we can arage as Deb if we can Arbitrage it as debt uh rrap it or even
47:18
do you know a subdivide so where we can at least collect you know two three down payments to cover our down payment and
47:23
what we uh what we did and then we can cover our debt service I mean we don't have to low ball am as far as if we can get monthly down to $10,000 annual I
47:30
mean that'd probably be pretty large pretty large cash flow but uh we probably don't have to to give them that
47:36
low of amount we could probably up that for sure I was say anything anything seller financed over 36 months you are
47:43
doing really good if you get in five year seveny year 12 year financing you're going to do just fine okay makes
47:51
sense yeah cuz he wanted 7.5% interest but he said that's the highest he'll go and he said if the market drops he'll go down with the market Mar kind of thing
47:57
so I was like okay that's fairly reasonable but so whenever you whenever you're negotiating on interest rates
48:03
prime interest has actually dropped I think Kyle told me it's like 6% now six and a half percent and it was like eight
48:10
few weeks ago so you can use that as leverage to get a lower interest rate if you're value adding interest rate
48:16
becomes less irrelevant not that it's irrelevant but it becomes less irrelevant um the more you value add so
48:24
that's where my creative offers kind of they kind of they they mold to whatever
48:29
the seller wants so let's say hypothetically he wants $200,000 for it
48:34
I might offer 10% down and a th000 a month for 180 months but he's like no I
48:40
want interest okay well it's going to be 10% down and I'll buy it for 150 with 5%
48:46
interest and it probably comes right around the same number but to them they're like I'm getting interest I'm going get interest in my money but they
48:51
don't actually look at the payments so I was helping Ruben with the lead Ruben's in here too um I don't want to take up
48:57
too much of anyone's time but uh I did backloaded interest so I did backloaded interest on the balloon price so we
49:04
offered them a three-year balloon and we did backload I think it equaled out to like 75 grand in interest over 24 months
49:11
so we still gave them interest we still give what we want but that's another way you can you can structure it yep and
49:17
like I said there there's a lot of ways to structure interest I know Bill you asked me for that calculator that I made
49:23
I just learned of a new way to structure interest too but if you guys get deals with want interest just bring them to us
49:29
this is how you learn the game you learn the game by bringing us opportunity and we'll teach you of how to make interest
49:36
offers so I'm not going to say it on here but there's adding interest to the purchase price there's there's a couple
49:43
different ways to do it uh if seller wants interest but you don't learn that unless you bring a deal that wants
49:48
interest that's creative so for everybody here you learn by doing and
49:54
actively doing so if you want to learn the game go find go find a deal go negotiate a deal make some crazy offers
50:00
make some crazy terms and they come back with interest let us know and we we'll come up with counter that makes sense
50:05
for us if they don't want interest you do equal payments it's always our go-to you earn the money in most cases so it's
50:13
all about your offer it's less about the price oh and for everybody here I want I
50:18
want to make a goal in here there's 30 there was 30 people in the room I want everybody here to find a half million
50:24
dollar deal that's my caveat half do there more everybody has the ability to do it we we've gotten a couple people in
50:31
here that have have done it and are currently doing it but I want to encourage everybody here to find a half million dollar deal or larger and get
50:38
some type of sell financing you never know but for everybody here good luck if we'll see you next week we'll see you
50:44
next week I'm working a $2 million doll deal with Mike absolutely absolutely these are the this is the crazy stuff
50:51
that happens one of our students last year he brought us a $2 million deal that we bought January he brought us a
50:58
half million doll deal we bought in uh last week in July and then he's bringing
51:04
us another deal so one student's already uh G to get paid hopefully on three Deals uh in the in the last 12 months
51:10
and it was off somebody working on of this room so plenty of opportunity out there plenty of land out there and uh
51:19
once you bring opportunity will help you negotiate better and you learn by doing this over and over again all right we'll
51:26
see you next time thanks for tuning in like share subscribe share with a friend you need help let us know we'll
51:34
see you next time thanks guys [Music]