Attract Private Investors
Door Openers Attract Private Investors
Recognize when you have one
Slow down and take full advantage of it
Every now and then you’ll come upon a “Door Opener.” I’ve learned to recognize these certain situations and how to use them to proliferate the number of private investors I can call on.
So what is a door opener? Door Openers are no-brainer deals that anyone would be likely to want in on.
I recently stumbled into a door opener when I purchased a little bread and butter house to add to my investment portfolio.
Here are the acquisition details:
$38, 000 Purchase Price
$ 1, 000 Bird Dog Fee
$ 2, 000 To ME (great job Mitch!)
$41, 000 TOTAL INVESTMENT @ 8% interest only with a 5 year balloon… $274/mo.
I did no improvements to this property (I didn’t even mow the grass). I stuck a sign in the front yard and within a matter of hours I found an eager buyer.
Here’s what my sale looked like;
$65, 000 Sale Price
$ 6, 000 Down Payment
$59, 000 @ 10.5% for 20 years……………………………………………….. $590/mo.
And if this was the end of the story it would have been a fine ending indeed. I would have picked up
$8, 000 to put in my pocket
($2, 000 I paid my self at the acquisition + the $6, 000 Down Payment)
$316/mo. positive cash flow.
Not a bad day’s work!
But what if I could sell that note balance for little to no discounts?
If I could sell the $59, 000 note for par (full price); $59, 000…I’d add tremendously to my profit!
+$59, 000~ Note balance
-$41, 000 Owed to my lender
+18, 000~ Additional profit
This deal became a door opener for me when the owner/occupants did $25, 000 worth of improvements in the first 60 days of ownership. This extra work made the property worth no less that $100, 000. Now look at what I had as an investment.
I’ve got a mortgage with a balance of just under $59, 000 that is paying 10.5% interest for 19+ years…and if I don’t get paid…I get a $100, 000 house back for my troubles.
Do I think I can re-sell that house for $100, 000 with owner financing? You bet I can!
Now this seems to me to be a pretty comfortable position! If it seems comfortable to me, would others feel the same way?
You bet they would!
Are there people happy with a 10.5% return on their money? You bet there are!
The question has never been, “Is the 10.5% good enough?” The question has always been, “What is the risk?”
This deal is a no brainer for a seasoned note buyer, but here’s where I’ve made a big mistake in the past. In the past I’d run to my tried and true private investors and sell this deal in the stroke of a pen.
I’d sell this $58, 000+ loan balance for exactly what it was worth, $58, 000+, because the huge disparity between the loan balance and the current market value takes almost all the risk out of this deal for the note buyer.
Given the numbers on this deal, I no longer have to offer a discount to make my note buyer feel comfortable. The large equity does that for me.
Like I said, the natural is to run to my tried and true note buyers and make my profit in a hurry! Eventually I got smart. Eventually I learned to slow down for just a second. I learned to take great deals like this one and use it to tap some new vein of money…a new private investor note buyer.
Great deals are Door Openers! Learn to recognize when you have a deal that almost anyone in the game would want. Learn to slow down and bring new private investors into your circle. Use your door openers to open doors.
I invite you to my Free Webinar training to learn more about Owner Financing and how to develop Notes! Just fill in your name and email below: