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Understanding Contracts and Paper works

SHOW SUMMARY:

In today's show, Larry and Kandas discuss about the importance of understanding contracts and paper works. They talk about contracts when buying properties, selling properties, lease options, leases and options, and a lot more.

SHOW HIGHLIGHTS:

  • What the hosts have been up to
  • Importance of understanding the contracts you are signing
  • Understanding option fees and option contracts
  • Difference between a contract and an option
  • What happens if the option expires
  • Another type of lease option
  • Land contracts and seller financing
  • 3 different ways for a seller to finance a property
  • - Mortgage
  • - Deed of trust
  • - Land contract
  • Things buyers should be aware of
  • Being Rich and Generous Portion: Carly

QUOTES:

  • “If you think education is expensive, try the cost of ignorance.”
  • “You need to understand what you’re signing.”
  • “An option gives you the right but not the obligation to buy a property.”

RESOURCES AND LINKS FROM THIS SHOW:

SHOW TRANSCRIPT:

Welcome to BRAG Radio which is all about being rich and generous. Every week your hosts Kandas and bestselling author Larry Goins will show you how to be rich and generous by investing in real estate. Broadcasting around the world on the BRAG Radio Network from the flagship station WBT in beautiful uptown Charlotte, here are your hosts the rock stars of real estate; Kandas and Larry.

Larry: What’s happening?

Kandas: How are you doing?

Larry: I’m doing excellent. How are you?

Kandas: Good, were your headphones too loud?

Larry: No, they were too low actually.

Kandas: Mine aren’t loud enough yeah mine are low.

Larry: I wanted to hear myself.

Kandas: Ask me how I know. Talk all the time.

Larry: Shhh, don’t say anything. So today is a really good show I’m really excited about what we got to talk about aren’t you?

Kandas: Sure.

Larry: It’s because you don’t have a clue yet.

Kandas: I don’t, I don’t ever know what we’re doing when we come in here. I just play along that’s what I’m here for.

Larry: That’s funny. You know what is funny though is we’ve been doing this show long enough now where I’ll go into restaurants and stuff and people like see me and start talking about, “You’re on the radio, I know who you are.”

Kandas: Yeah and people hear my voice somewhere in uptown and that happens to me.

Larry: When you’re in Uptown, what are you doing in Uptown?

Kandas: We come to games and things.

Larry: Really? Look there Kandas…

Kandas: Thanks WBT. 

Larry: Thanks to WBT.

Kandas: And Lynn providing scratching and clawing for my tickets.

Larry: I don’t know if I’ve ever received any of those complimentary tickets.

Kandas: Let me ask you a question,

Larry: Would I go?

Kandas: Yeah. Have you asked and would you really go?

Larry: Probably not.

Kandas: My name is standard on every sports list that they have for tickets.

Larry: That’s funny that is awesome.

Kandas: It was great.

Larry: So welcome to BRAG Radio all about being rich and generous. We teach people how to invest in real estate and then we encourage them to go out and be generous with their blessings of time and money. And I really like partnering with WBT because they do a lot of stuff to be generous right.

Kandas: They do. A lot of the different personalities that are on the station do tons of different things.

Larry: Exactly. So one of the things I wanted to talk about today was about contracts and paperwork. 

Kandas: Contracts.

Larry: Well a lot of people want to get into real estate or they are in real estate. I’m telling you, no matter what kind of business you’re in, whether it’s real estate or you are- I don’t care if you have a car dealership or if you have an insurance company, you need to know a little but about paperwork right.

Kandas: A little bit.

Larry: A little bit about contracts alright.

Kandas: Why do you say it like that? Why do you enunciate the contract? So funny. Go ahead sorry I just had to point that out.

Larry: That’s alright I didn’t realize I did that.

Kandas: Contract, let’s get into the contracts.

Larry: Thanks, you always like to point out my faults. You really do.

Kandas: We make a good team that way

Larry: Thanks.

Kandas: You do the same to me.

Larry: You’re welcome. Kind of like when you were saying that word or something you had to shake your head every time you said it.

Kandas: It was when the phone rings apparently whenever I imitate a phone ringing I shake my head with the phone ring. It’s retarded but it’s what I do.

Larry: So what made me want to talk about contracts today was we actually had a guy that was going to buy a house from us okay.

Kandas: No we didn’t.

Larry: Believe it or not right. I mean so far we’ve sold what five houses this month or something I can’t remember. Anyway, so we had a guy that wanted to buy a house and- why are you laughing at me? You can’t help it.

Kandas: Because I’m just thinking about the stuff I can say. Go ahead.

Larry: So anyway.

Kandas: They know we got a guy who was going to buy the house.

Larry: So he was going to buy a house apparently he had not bought a house before okay.

Kandas: Lesson.

Larry: Now in our contracts, it says that you’re going to put up $1000 earnest money deposit right.

Kandas: Right.

Larry: And you’re going to put up $1000 earnest money deposit right. Now if you want the option to have a due diligence period right, and in our case I think it’s typically five days or whatever because we’ve already done a lot of the homework.

Kandas: That’s right.

Larry: But typically we do five days. So if you would like to have those five days, you’re going to put up in addition to the earnest money deposit, you’re going to put up a due diligence fee.

Kandas: Right.

Larry: The due diligence gives you the right to a due diligence period. 

Kandas: That’s right.

Larry: And it’s non-refundable.

Kandas: Exactly right.

Larry: Non-refundable whether you close don’t close, it doesn’t really matter. It’s non-refundable.

Kandas: There you go.

Larry: Right, if you go right up to the minute and you got the pen in your hand and then you don’t sign the paperwork you will never ever see that $1000 due diligence fee again.

Kandas: There you go.

Larry: Right, so apparently this guy had not read what he had signed right.

Kandas: Apparently.

Larry: Apparently, so he-

Kandas: No, well this is- never mind go ahead I’m not going to pick on him yet.

Larry: Yet, right.

Kandas: I’ll wait, it’s coming.

Larry: So anyway he signs the contract and he goes through the thing and starts doing his due diligence and everything. And he even gets past the five days or whatever and apparently his wife decided that she wasn’t going to let him buy the house. Which by the way there’s not a clause in a contract for an irrational spouse, a spouse right.

Kandas: Not in ours, I don’t know about anybody else’s I’ve heard you good.

Larry: Whether it’s a husband or a wife buying or a husband or wife saying, “You can’t buy,” there’s not a clause in there that allows you to allow your spouse to back you out of a deal right.

Kandas: But you could put in whatever clauses you want but it is definitely not in ours.

Larry: That’s true. So he was a little upset about it right. So and listen we’ve been doing this for a long time right.

Kandas: You a lot longer than me.

Larry: Whether it’s dealing with students or buying and selling houses, I always try to go above and beyond and be more than fair with people. And you’ll agree with that I mean I know-

Kandas: You are definitely the good cop in this partnership.

Larry: That is true.

Kandas: Because this situation was brought to me too and we had two different approaches.

Larry: I know right. But the first thing I do when I get on the phone with this guy, he’s like crying the blues, “I’m not really happy about working with your company,” and he’s talking about, “They’re keeping my deposit.” And I’m like, “Whoa, whoa now do you understand the difference between an earnest money deposit and a due diligence fee?”
Well now he told me, now do you understand the difference between verbal and in writing?” because our contracts even say, because I’ve had so many people and listen I could have told this guy, “Listen I’m going to go back and listen to the recordings because all of our phone calls-

Kandas: All of our calls are recorded that’s exactly right.

Larry: All of our calls are recorded. I should have done this right. I should have said, “Let me go back and listen to the calls,” right because I mean-

Kandas: Let me go back and listen to the calls.

Larry: Okay. So trying to stand still she’s making fun of me.

Kandas: You guys that are watching the feed you’re getting a show today. He’s moving around like crazy.

Larry: Anyway, it’s because you made me stand a little closer to you for some reason I don’t know why I feel like I can’t like move around.

Kandas: So standing close to me makes you have ants in your pants, you got to move more? Geez.

Larry: I don’t know what it is. I need to push you over there a little bit further. Anyway- 

Kandas: I think we’re out of time y’all.

Larry: So I could have told the guy, “Listen I’m going to go back and listen to the recordings”, okay and I should have told him that, right. But what I did tell him was, in fact it even says this in our contracts that no verbal agreements recognized right.

Kandas: Right.

Larry: I mean we put it in there because this is not our first rodeo. We’ve had people say, “Yeah but so and so told me or so and so told me.” And let me tell you something guys, I got this term from realtors, realtors have said this term for years, “Buyers and liars.” Right and sellers are yellers. That’s true but I know regardless of who said what, who was right or who was wrong, the only thing that they need to go off of is what is in writing and what did you sign right.

Kandas: That’s right and it’s the only thing that would stand up in any kind of a court.

Larry: That’s exactly right. And I ended giving him his money back because you can’t fix stupid okay.

Kandas: Like I said, two different approaches.

Larry: That’s true but I did-

Kandas: Here’s the thing, remember the quote that I sent you last week? This is a great point to end on too while we go to a break.

Larry: Okay.

Kandas: But you remember that quote that I sent you that said, “If you think education is expensive try the cost of ignorance.”

Larry: That’s a good one.

Kandas: Case in point.

Larry: That’s a good one, now get you some education Kandas is going to tell you how.

Kandas: You guys give me a call 877-LARRY-GO, 877-LARRY-GO and we’ll get the investors kit out to you. I’ve got a digital version for your email. Or if you’re close enough to the office in Lake Wylie you can come over and meet everybody, take a tour, pick up the physical kit. And we can answer any of your questions that you’ve got regarding that. Give me a call, 877-LARRY-GO we’ll be right back.
[09:39] [Break] [09:50]

Kandas: Welcome back to BRAG Radio, want to remind you guys while we are on air I can’t take your phone calls so just leave a message or you can call back.

Larry: Awesome. So in the last segment we were talking about contracts.

Kandas: Oh and I wanted to mention one other thing. If you hear from a girls Zenobia, she’s in our office, she’s helping me with some of the phone calls when I get overwhelmed with them and can’t get back to everybody between Saturday and Monday.

Larry: Zee.

Kandas: Yeah. So she really is in our office, don’t give her a hard time, she’s helping me out.

Larry: Well that is good. Alright so we were talking about contracts, you need to understand a little bit of contract law, you need to understand what you’re reading. You can’t be like the government and sign something before you read it right. You need to read it.

Kandas: And we’re not asking for you to read 2200 pages in seven days.

Larry: And if you don’t understand it lie it says right above your signature, if you do not understand this, please seek legal counsel.

Kandas: Right.

Larry: It’s there for a reason, right guys. I told this guy right in the previous segment we were talking about this guy who signed a contract, put up a due diligence fee, put up an earnest money deposit. And then was complaining when he didn’t get his due diligence fee back because his wife was mad that he was trying to buy a house.

Kandas: I don’t even know if he told her though he was trying to buy a house.

Larry: I don’t think he did. I mean listen I was going to ask him, “What were you going to do when it came time for closing? How were you going to hide the 40,000 if you couldn’t hide the 2,000?”

Kandas: Yeah what was your endgame here guy? What was your endgame man?

Larry: But listen, I did give the guy $1000 back okay. However, 

Kandas: Like I said we have way different approaches when it comes to this.

Larry: Yeah. But listen, I told him I said, “You should be glad that you learned this lesson when the amount was small because think about if it you’d put up a $5000 deposit or a $10,000 deposit or something right.

Kandas: Right.

Larry: And somebody who wasn’t as generous as I am given you your money back.

Kandas: That has never happened you couldn’t call Keller Williams and say, “Hey I lost money here I can’t close this deal I want my earnest money back I mean I want my due dil back.” They’re not going to go for that.

Larry: It doesn’t work, not going to do it.

Kandas: I don’t know another company that would allow that, that’s in our space.

Larry: Me either. 

Kandas: Exactly.

Larry: But guys listen, you need to understand what you’re signing okay. You need to understand what you’re signing you need to know a little bit about contracts. Like our Inner Circle students that’s what they know. They know this stuff because we go through it. In fact I was just talking to one of our students earlier today and we’re going to get on the phone here in a little bit.

Kandas: Are we?

Larry: Yeah.

Kandas: Good.

Larry: Yeah Carly she’s out there, I mean she’s brand new but she is crashing it out there. And she was asking me about whose name goes on this, whose name goes on that what do we do here what do we do there. 

Kandas: That’s the kind of access that Inner Circle has.

Larry: Well yeah I mean by getting that access you’re able to get your questions answered. I mean I was on the phone with her in the car on the way over here right.

Kandas: No wonder we didn’t want to talk about what we were going to talk about.

Larry: On a weekend right.

Kandas: Because you were on the phone with a student instead of calling me to say, “Hey what are we going to talk about today?”

Larry: And that’s why we’re talking about contracts, right and paperwork. So the other thing I want to talk about that you need to understand is option fees and option contracts right.

Kandas: Oh yeah that’s a good one.

Larry: There’s leases, there are options and there are lease options okay. Now always if I’m selling I’m doing them separate. Right if I’m the landlord and I have a tenant I do a separate lease agreement and a separate option agreement okay.

Kandas: Right.

Larry: Because if I ever have to evict them, I don’t want to take my option contract into eviction court.

Kandas: Right.

Larry: Right I just want a separate lease agreement, keeps it simple. Plus then the judge is not going to ask any questions about oh wow do they have equitable interest? Do you have to foreclose to get them out?” or whatever.

Kandas: If they’re separate.

Larry: Yeah. So that’s what I would recommend. Now if I’m buying if I’m the tenant I’m going to want in the same agreement if I can get it. So anyway with a contract, a contract is like an offer to purchase, a real estate purchase agreement. It is to buy a property at a specific price by a specific date right. The difference between a contract and an option, an option gives you the right but not the obligation to buy a property.
In other words, if you see a property that you want to buy but you’re not really sure that you’re going to either be able to get it sold or you really want it or whatever, you can write up an option agreement. And the option agreement gives you the right to buy it like let’s say I want to buy this property I’m thinking about paying $80,000 for it okay.
And I want to have 30 or 60 days to be able to decide well am I going to close on it. So I’m going to give let’s say a $500 option consideration to the seller, right. Now that option consideration is non-refundable, I will never ever see that $500 again right. 
Whether I close or not, doesn’t make any difference I’ll never see that 500 bucks again. So the option gives you the right but you’re not obligated. Now what happens if I have a 60 day option period and during that 60 days I put up the 500 bucks but I didn’t close on it?

Kandas: I don’t know, tell us what happens. What happens?

Larry: Some of that is going to happen I know you’re expecting.

Kandas: Tell us.

Larry: Come on tell us.

Kandas: That’s what I was getting to, he does that all the time. It’s funny.

Larry: Well it’s like when you walk into a car repair place and you’re like, “Yeah my car is making a noise,” “so what kind of noise it making? Come on tell us.”

Kandas: They make you do the noise.

Larry: Well at about 30 miles an hour its ch-ch-ch-ch and then you go up about 65 it’s like chk-chk-chk! And then by the time you get up to 80 reeeeeenn!! Can you fix that?” “I don’t know man I just sweep the floors. Hey Bob come over here and listen to this guy.” 

Kandas: Yeah this is a real estate show.

Larry: And you got to go through the whole thing again with Bob because he is the mechanic. So what happens if the lease expires?

Kandas: Right, tell them what happens.

Larry: So anyway if the option I mean expires nothing happens right because an option gives you the right. You have the right to buy it at $80,000 for the next 60 days but if that option expires they don’t have to sell it to me anymore and I don’t have to buy it but they’re keeping my 500 bucks.

Kandas: Right.

Larry: Their incentive to let me tie up the property for 60 days is that 500 bucks. Now in reality it’s probably going to be more than 500 bucks okay. 

Kandas: I would guess yeah, for 60 days if you’re tying up one of our properties for 60 days yeah.

Larry: Well first of all nobody is going to tie up one of our properties for 60 days.

Kandas: Right. 

Larry: That’s not going to happen right.

Kandas: Right.

Larry: So however, if it expires nobody has to do anything right. It’s just like a HUD offer. If they don’t accept your offer nothing happens it expires it’s over, done. That make sense?

Kandas: Yeah.

Larry: Yeah so there’s a couple different kind of options like I might be wanting to buy a property and get it tied up to be able to try to figure out what I’m going to do with it, am I going to wholesale it am I going to fix and flip it am I going to seller finance it or do a lease option or whatever? 
So that might be the way I tie it up whenever I’m trying to buy it at the deep discount. There’s another type of lease option, two separate agreements where I’m going to lease option a property. I’m going to get my tenant buyer, I call them HITs, Homeowners in Training right.

Kandas: That’s what we call them yes.

Larry: That’s what we call them HITs Homeowners in Training. So I’m going to get them to sign a lease but they’re also going to sign an option agreement as well and I typically like to see about five to 10% down something like as option consideration. But now I’m planning on them buying it and they’re planning on buying it and closing.
But those leases are somewhere between like one and three years or something like that. And when we come back I’m going to go into some more detail about that as we as some seller financed paperwork and contracts as well. But in the meantime call Kandas during the break.

Kandas: 877-LARRY-GO we can answer any questions that you’ve got about the contracts if you were driving hopefully you weren’t trying to write stuff down at the same time. So you can email me at info@bragradio.com as well with calling me asking me any questions. Ask for the investors’ kit, digital to your email or physical if you can come by and take an office tour. We will take a quick break and we’ll be right back. 877-LARRY-GO.
[19:43] [Break] [19:53]

Kandas: Welcome back to BRAG Radio all about contracts today, contracts.

Larry: Yeah paperwork good stuff.

Kandas: Contracts, we’ll be talking about today.

Larry: Say that’s you’re making fun of me that’s the way you say it.

Kandas: No I’m making fun of you, I say contracts.

Larry: Alright.

Kandas: They can tell, the people know.

Larry: The people know. Right sure they do.

Kandas: They do.

Larry: Alright so in this episode we’ve been talking about all about paperwork contracts you need to know a little bit about law. If you don’t understand it you should seek legal counsel.

Kandas: Seek it.

Larry: Yeah I mean you really have to know a little bit about contracts. You got to know we talked about contracts on buying properties, selling property. We talked about lease options, leases and options or lease options.

Kandas: Right.

Larry: And the last thing I want to talk about in talking about contracts and paperwork are land contracts and seller financing.

Kandas: Okay.

Larry: So we do lease options when we’re selling a property, we’ll put a lease option tenant in there they give us the option consideration which is non-refundable. And then they’ll make lease payments rental payments based on the lease. And we typically try to do somewhere around 12 months, 24 months, 36 months max something like that. 
We also do land contract agreements where we’ll actually write up a land contract. Now this is another form of seller financing right.

Kandas: Right.

Larry: Now lease option it’s not really seller financing I call those Homeowners in training right because they don’t really technically own the house. But I want them to treat it like it’s their own right. It’s very important. 

Kandas: Yeah pride of ownership is what we want them to have.

Larry: Yeah exactly. So I want them to treat it like their own but also if we’re going to seller finance a property, there’s three different ways that that can be done as well. And one some states are in a mortgage state. Like South Carolina is a mortgage state. All that means is the foreclosure process is handled a little bit different. It can take a little bit longer to foreclose on a property in South Carolina okay or in a mortgage state. 
North Carolina is what’s called a deed of trust state. There’s a deed of trust there’s a trustee, and then the lender or beneficiary right. So with a deed of trust state like North Carolina is, you can foreclose a little faster right. The process is speeded up. It depends on whether it’s judicial or non-judicial foreclosure okay. Look Lynn’s over there taking notes right now look at her go. 

Kandas: Is she taking notes or is she on Facebook?

Lynn: I’m writing.

Larry: That’s funny. And I thought it was something to do with what I was saying and apparently not. I got a meeting on Monday. So anyway a land contract is another form of seller financing. However in this form of seller financing, the best way to explain it is, it’s a contract where you’re going to sell someone a house but there’s no closing date right. There’s not closing date. 
In other words like I’ll agree to sell my house at say $50,000 they’re going to put $5000 down, they’re going to make payments of X on the $45,000 balance for X number of years. Let’s say they’re going to make payments of whatever $500 or whatever and that’s full amortized over 10 years. And at the end of the 10 years, once I’m paid in full then I will deed them the property. But the deed stays in the seller’s name until the loan is paid in full right.

Kandas: Right.

Larry: A lot of people who do seller financing tend to use land contracts because a lot of times it’s easier to get the property back if they default. I started to say if you have to foreclose but it avoid foreclosure in a lot of ways. I got to tell you it’s probably been five or six maybe longer years since we’ve had to foreclose on someone. Because we try to keep a good relationship with our buyers, with our borrowers.

Kandas: With our HITs.

Larry: Our Homeowners in Training like you said where look they know even when we go sit down and sign paperwork whether it’s in front of an attorney or notary or closing agent they read all that and I tell them, “Make sure you read every single line.” We even send it to them in advance so they can read it. But we tell them it’s very simple, if you don’t pay you can’t stay right.
It’s very simple, if you don’t pay you can’t stay and they understand that. We’ve had people walk away from $5000, $10,000 and they know that they defaulted so they don’t get it back. Just like as if they had bought the house and got a loan at Bank of America or Wells Fargo or Chase or somewhere and they stop paying, they’re not going to get their down payment back.

Kandas: That’s right.

Larry: Right. So anyway the advantage of a land contract is that the property does stay in seller’s name. Now here’s one of the things that the buyer should be aware of and it’s the tax rate. If the deed is still in my name or as the seller’s name, if the deed’s still in the seller’s name, and I don’t live there, the tax bill goes somewhere else then that tax rate is going to be based on a non-owner occupied tax rate.
Right it’s not going to have what’s called homestead exemption. The only way to remedy this and get a lower tax rate for out HIT, our Homeowner in Training is to have that land contract recorded, right it’s to have is recorded. Because see quite frankly when we service most of these, we’re going to want to include taxes and insurance.
Because I don’t want to have them at the end of the year let’s say the taxes are $1200 right, I don’t want them-we’re going to break it down and we’re going to add $100 a month to their payment right. Because if they don’t have that money at the end of the year, their tax bill is going to be in default and I don’t want that happen. It’s a lot easier to get them to send an extra $50 or $100 or whatever. So we typically always- typically always does that sound right?

Kandas: No.

Larry: We typically generally for the most part.

Kandas: Alright however you want it, keep going.

Larry: Have them Escrow. No here’s the way we really do it. If it’s an owner occupied buyer, we’re going to Escrow. If it’s an investor that we already that has money and they’re collecting rent and they have reserves then we’re not going to escrow for taxes and insurance right. But the investor is not going to get that lower tax rate anyway right.

Kandas: Right, that’s right.

Larry: If we’re selling with seller financing to an investor. And I got to tell you there’s a lot of people out ther even investors that want to buy property with owner financing. I ran an ad just last week I just wanted to run a test okay, we didn’t even have a property, I put in some pictures of a property we’d sold like six months ago.
And I put some pictures of this property and I said, “This is a fix and flip rental property. Owner will finance to landlord only.” And I put 15% interest, five points 25% down. And my phone rang off the hook I’m tell you. And we got so many inquiries. One inquiry and every time they called I said, “It’s sold, it’s gone.” 
And I said, “But else would you like?” “Oh yeah I want owner finance and I want to be a landlord I’ll put 20% down, 25% down.” And I couldn’t believe the people even though I put 15% and we don’t 15%, and I put five points, and it just blew me away and the price was 499. I said you could fix it up and rent it out and rent it out and make a cash flow.
And I couldn’t believe it one lady even called she had another property in Nashville that she wanted to sell and we ended up buying it. Is that crazy or what? 

Kandas: It’s awesome that’s what it is.

Larry: Yeah so there’s people out there that want to owner finance.

Kandas: It’s crazy awesome.

Larry: And when we come back in a minute we’re going to get a student on that actually did one of these deals.

Kandas: Yeah I’m excited for her.

Larry: I know right.

Kandas: Yeah.

Larry: So call Kandas she’s got an investors’ kit that’ll include a couple of my books my bestselling books available wherever books are sold. 

Kandas: Or you can get them in the investors’ kit. 877-LARRY-GO to ask me to send the kit to you. You can also text the word BRAG to 803-897-6063. Text the word BRAG to 803-897-6063, give me a call 877-LARRY-GO, send me an email info@bragradio.com. Check out this whole show and other show archives on bragradio.com as well. We’ll be right back.
[29:44] [Break] [29:57]

Kandas: Time for the fourth segment.

Larry: That’s one of my favorite Van Halen songs.

Kandas: Is it?

Larry: Real guitarist.

Kandas: Doesn’t he say that with every Van Halen song? Every one right, that’s what I thought. Yeah that’s what I heard too. Thanks TJ.

Larry: That’s awesome I love that. 

Kandas: So time for the fourth segment, it is time to have a bragger on.

Larry: Awesome, really excited too because we’ve got a bragger that’s actually in the Carolinas. I mean we’ve had them from Tennessee, Texas, and Jackson Mississippi.

Kandas: California, [Inaudible] [30:31] Alabama.

Larry: Oh my gosh.

Kandas: We’ve had them from all over. We’ve had a few from the Carolinas as well too though.

Larry: Yeah. So give a good warm WBT welcome to Carly, what’s up? How are you doing?

Carly: Hi Larry I’m good how are you?

Kandas: 

Larry: I am doing awesome, we’re doing just fine. So Carly I really appreciate you taking the time out on this Saturday afternoon to spend a few minutes with us. We really appreciate that. And tell our listeners a little bit about who is Carly? Tell us about your real estate business.

Carly: Well let’s see, I have two boys and my youngest one is kind of the one that dragged me into real estate. We went for something and he went to the back of the room and I was like, “Wait!”

Larry: Wait, wait. You’ll need my credit card.

Carly: Yeah I got to pay for that you’re not old enough. But yeah so that’s kind of how we started and I started learning. And obviously there was a [Inaudible] [31:30] TREIA and that’s where I met you because you were at the TREIA here in Holly.

Larry: Now that the Triad Real Estate Investors’ Association.

Carly: Yeah triangle.

Kandas: Triangle yeah.

Larry: Oh yeah triangle I’m sorry. 

Carly: So yeah. So you were there and you were talking about filthy riches and my partner Stan and son were there and were like, “We got to do this like this is good.”

Larry: That’s awesome. So you heard me speak at the REA group, you got my Filthy Riches Program and wow believe it or not you went on and did it right/

Carly: I did.

Larry: So I want you to tell us a little bit about your deal that you did. Tell us a little bit about that.

Carly: Well it was I had an agent I was talking to and I told her what I was looking for. I said it had to be in good condition somebody could move into right away but not very expensive.

Larry: Right.

Carly: So it’s small, it was two bedroom one bath that didn’t exactly fit healthy [Inaudible] [32:29]. And it was in good condition, livable on an acre down near Wilmington North Carolina.

Kandas: Good market.

Carly: Yes I think they were asking 24 25,000 for it but I got it for $6900.

Larry: Whoa. They were asking 24 or 25,000 and you got it for $6900 right, less than a third?

Carly: Yes.

Kandas: Who taught you those negotiating skills?

Carly: Larry. I learned to be not emotional about it like if I got it, I got it if I didn’t then I moved on to the next one. So I did that.

Kandas: That’s so important, that’s good Carly I’m proud of you.

Larry: If you’re not embarrassed by your offer it’s too much right.

Carly: Exactly. And it was low I wasn’t having [Inaudible] [33:16] actually I offered $4500 originally.

Larry: I love it. Now –

Carly: I was like oh these people are going to think I’m crazy.

Larry: And that’s even in Wilmington you’re not in Wilmington that’s a couple hours away from you right.

Carly: Yes that’s two and a half hours away.

Larry: Wow that is good. So you got the deal under contract then what happened?

Carly: It was fast. I started marketing, I actually marketed on Facebook I got 100 people to respond that day.

Larry: I love Facebook to market properties, right.

Carly: Yes. Yeah they didn’t have Marketplace yet because that’s fairly new because I did this last year. So I actually went to the county that Wilmington was in and posted it there on their buy sell site.

Larry: Wow, that’s great. So you marketed the property and you found a buyer now you have 6900 in it plus closing cost right. So you marketed it and tell us what kind of buyer did you find?

Carly: It was a nice family, she had gotten injured so she hadn’t been working for a little while so they were staying with family, they didn’t even have a place at that point because they were living off his income with two little girls. So we ended up going through it, ran the credit and checking everything, got deposits. The deposit was just $2000 for a down payment for it.

Larry: How much down?

Carly: 2000.

Larry: 2000, good for you. 

Carly: And which wasn’t much I figured I put 6900 in it so I was alright. 

Larry: Now how much did you sell it to them for? What was their purchase price?

Carly: $47,000.

Larry: Wait a minute, hold on. So it’s listed for $24-something, you pay 6900 and you sold it for 47,000 with owner financing?

Carly: Yes. Because it wasn’t [Inaudible] [035:19] so I got it at a great price.

Larry: Yeah apparently. So did they give you a hard time about the price or anything? Hey you just bought it for this or it was listed for 24 something, did they complain about the price?

Carly: Not at all because their payment was far less than the local rent. So it was well within their budget of what they could afford. They were more concerned about the monthly payment than the overall purchase pay. 

Larry: So what you’re saying is you were able to buy a property, for less than a third of what it was listed for and sell it for five times, six times right what you paid for it. And they were ecstatic right. They were happy.

Carly: Oh they were so thrilled they were staying with family and they had their own place and they were so excited to own their own home, they moved into a really good school district which they were excited about for their girls. A quiet little community, it was really nice.

Larry: That’s awesome. And the bonus is their payments were less than rent right.

Carly: Yeah. It was much less than rent.

Larry: Wow.

Carly: So they were happy they could afford it, they could get into it and get their own place.

Larry: So now you sold it to them for forty what, seven you said.

Carly: Yes 47, yes.

Larry: And you got a $2000 down payment, so you financed you’re holding note for $45,000 correct?

Carly: Right.
Larry: Now how much are they paying you a month?

Carly: They pay me $500 for the first three months or so before I sold the notes, I sold a partial of the note.

Larry: Right. So guys just to let everybody listening know, she’s got an asset here that’s paying her every month a payment every single month. And now that asset has a value she can sell it. So you seasoned that note for a little while right?

Carly: Three months or four months.

Larry: Now all that means guys is Carly collected three months’ of four months’ worth of payment where they paid the payment and now she has what’s called a seasoned note. Any potential note buyer that wants to buy this note, they know that this borrower already has a track record for being able to make the payments and making them on time, correct?

Carly: Right. And they actually made a double payment once during that period too so it was really good.

Larry: What? That never happens for me.

Carly: They were like, “Oh here we’re going to pay a little extra,” I was like, “Okay.”

Larry: That’s awesome I love it. Now you sold the note right after a few months you sold the note. Now you sold what’s called a partial. You didn’t sell the whole 45000 or the whole-how long was the term?

Carly: The term is 15 years.

Larry: 15 years so you didn’t sell off 15 years on the note, how many payments did you sell?

Carly: Five years.

Larry: So you sold five years’ worth of that note. So at the end of five years right the payments will revert back to you. So you made money upfront and now you’ve also built yourself your own annuity where you got payments coming in that will start five years from now, correct?

Carly: Exactly.

Larry: Good. How much were you able to sell that note for?

Carly: I sold it for $17000.

Larry: Whoa, whoa.

Kandas: Five years’ worth.

Larry: $17,000 you only sold five years’ worth of the note and you had seven in it, that’s $10,000 profit plus you got $2000 down. So you made $12,000 now and in five years from now you can either sell another five years for $17,000 or you could keep it and collect the monthly payments. Is that right?

Carly: Exactly.

Larry: Awesome you got to be loving me about now.

Carly: I do. No doubt look there’s a book that said Larry said do this I do this, Larry do that I do that.

Larry: That’s awesome, Carly thank you so much for being on. I really appreciate it and you keep getting out there and you keep getting it. Thank you so much for being on.

Carly: I will, thank you so much. Thanks for all your help. 

Make sure to tune in every Saturday for BRAG Radio leading the world to be rich and generous. Larry and Kandas will show how to invest in real estate and the many ways real estate creates the ideal investment. For more information about what Larry and Kandas talked about on today’s Brag Radio or to get a free investor’s kit, call 877-LARRY-GO that’s 877-527-7946.
You can also text the word BRAG to 803-897-6063. It’s Brag Radio be rich and generous on News Talk 1110993WBT.