Creative Deal Making

Re: Creative Deal Making
Creative ideas in real estate are a little like Art.  You know it when you see it.
Sometimes you love it, and sometimes you hate it.
And EVERYONE has an opinion.
Some of my favorite deals over the last 20 years have been join ventures with other investors.  The easy part is getting everyone to agree on how to split the profits.  The harder part is agreeing to who will do the actual work.
Renovation is a longer process than most people think.  A LOT of work goes into renovation if it’s done the right way.  We certainly don’t flip houses in 30 minutes like they do on TV.
Everyone has different skills that they bring to the table.  More importantly though is the KNOWLEDGE you bring to the deal.
You certainly don’t want me working on your heat pump.  However, a heat pump technician may find themselves in homes every week that have obvious and major deferred maintenance at every turn.  That same tech may give the owner the bad news that they whole system needs to be replaced.  Maybe the owner says something like “You can’t do anything to put a band-aid on it? I just want to sell it.
 “I know somebody who might buy the house like this – even if the heat pump doesn’t work.”  If the owner shows any interest, the technician will pass on my name.
He found the deal, sure, but he also has something else to contribute.  Knowledge and connections when it comes to HVAC systems.
I love doing joint venture deals with professional tradespeople. They come across a lot of deals, and when they put me in front of a possible seller they know I have knowledge on how to put a deal together.   They also know I will use them to make the repairs or upgrades if I buy the house – bonus!
There is an old joke that has been around for years about a furnace repair person, or some of you may have heard it with an auto mechanic.  It goes something like this:
There’s a hotel owner in Baltimore, MD whose furnace went out in the middle of the winter.  His guests are starting to complain about the cold rooms.  He called the repairman who came over and went down into the basement. He carefully measured a certain distance down the duct work, then he opened his toolbox, pulled out a HUGE hammer and lightly tapped smacked the side of the duct until he liked the sound.
He marks it with an X.
Then he leaned back and WALLOPED the duct work.
Dust goes everywhere and white material falls to the ground. The repairman takes out a little broom and dustpan and cleans up the mess.
“Try it now.”
To the hotel owner’s amazement, the furnace came on.
The joke goes on to say that later that day the furnace repairman sent a bill for $10,000. The hotel operator who had watched the entire thing was naturally upset.
“I want an itemized bill!”
The bill came back the next day:


Hitting with the hammer………..$5

KNOWING where to hit with the hammer…..$9,995
——————-   $10,000
Many people across our area are essentially “one trick ponies”.   They can make cash offers, but don’t know where to go when the deal is rejected.  For many people they simply move onto the next cash offer.
Eventually they find someone.  Maybe it was the 159th cash offer.
What they don’t realize is that they passed up dozens of other opportunities to get a deal done if they would have asked more questions or dove deeper into the situation.
Knowledge.  It’s the difference between cold hotel guests and those warmly snuggled in bed.
Knowledge is also the difference between a successful investor and those left scratching their heads wondering why they keep facing so much daily rejection.
At our May 16th WREIA meeting we will be talking about how to put together Creative Deals. It’s a great topic that I am going to break down into easy steps. If you implement just a few of these changes you may see a giant leap forward in your 2016 results.
May 16th is a great opportunity for you to ask a few questions like:
  • What do I do when the seller rejects my cash offer?
  • How, and where do I find partners that are open to creative deals?
  • Why would anyone not take a full price cash offer?
  • What mistakes do you see people making with creative offers?
  • How and when does a real estate agent get paid on “no money down” creative deals?
Save a few dollars and reserve your seat early.  Then, come join us at WREIA on May 18th. It will be a great way to start the spring season, get you motivated, and get some momentum for the rest of 2016.
Reserve your seat for the fifth 2016 WREIA meeting here.
Make this year a great year for your business!
John Peterson
Washington REIA Network, President
Profitable Property, Founder