A Problem with $31K Success Story! - Posted by Kevin (TulsaOK)

Posted by Hal Roark on July 05, 2003 at 08:43:23:

nt

A Problem with $31K Success Story! - Posted by Kevin (TulsaOK)

Posted by Kevin (TulsaOK) on July 04, 2003 at 09:03:19:

Happy 4th everyone! I just read the “$31,000 Profit on a Sandwich Lease Option” Success Story. The only thing that is a “Success Story” is the fact that this person “got off the fence”, because the deal itself is not a success story yet. He says in the story “Well I took action and just locked in $31K in profits in under two months time”. The only thing semi “locked in” is the $4K Option Consideration that he received, the other $27K is anything but “locked in”. What if the house will not appraise for $178K (a real possibility) in one year, or a major repair is needed. Until that money is in the bank, it is NOT “locked in”.

There has to be some better success stories out there, where profit is really “locked in”.

Kevin (TulsaOK)

Re: A Problem with $31K Success Story! - Posted by B.L.Renfrow

Posted by B.L.Renfrow on July 05, 2003 at 08:49:56:

For what it’s worth, I think your point is valid. I see you are getting pretty soundly bashed by those who suggest a “positive attitude” is the answer to locking in profits. Well, it may help, but you can’t pay your bills with just a positive attitude.

I’ve had more than one deal where I thought sure the profits were “locked in” because a buyer or tenant buyer had agreed to a certain price. But the unexpected does have a way of happening now and then. I fully agree that there are all kinds of things which could happen to reduce or eliminate this guy’s expected profit. It’s tough to spend a paper profit until it’s in your bank account.

Now, there is certainly nothing wrong with this guy’s deal, and hopefully it will work out the way he anticipates. But that’s why, as an investor, you’re in a much safer position with multiple deals like this, or better yet, different kinds of deals all working simultaneously, so if this “locked in” profit fails to materialize, you’re not left high and dry.

Brian (NY)

What, you don’t understand Lease-Options? - Posted by Craig-SoMD

Posted by Craig-SoMD on July 04, 2003 at 23:22:28:

I have had tenant buyers fall through on two different properties in the last month. One of them even kinda trashed the property. So what? I will make even more money on both of these properties now that I will be able to put new tenant-buyers in the properties. If anything, the $27K that you think is so tentative is actually the very least he will be able to make on the property. Why don’t you tell us all about all of your many success stories? Or is the only thing you are any good at is complaining about something you know nothing about and are unwilling to step out to do? One of the key skills in this business is being able to recognize a great opportunity, something you need a little work at!!!

OKAY - Try this one! - Posted by Terry Vaughan

Posted by Terry Vaughan on July 04, 2003 at 12:11:19:

I think this story is a great success primarily because this investor started the ball rolling. That ball will eventually take Brian to deals like the following:

More profit in one deal than most make in 10 years! If that’s not enough profit, I don’t know what to say.

Small deals lead to big deals.

Re: A Problem with $31K Success Story! - Posted by JT-IN

Posted by JT-IN on July 04, 2003 at 10:12:44:

Kevin:

What if the 31K does work out…? And the success story is completed, as written… Is the author of the story closer to a 31K profit than you are…?

If so, then I would advise you to GOYA (get off your @ss), and go make some similar things happen. The trick to success is to not have ONE of these deals working, but a bunch of them, and then if ONE falls out, you simply take it in stride.

How sweet is that to have SIX or TWELVE of these kind of deals in the hopper and have MOST of them come thru for you…? That is what this business is all about.

“You throw it on the wall, and some of it sticks…” (of course that saying is actually worded slightly differently, but edited for publication sensor purposes).

Just the way that I view things…

JT-IN

Re: A Problem with $31K Success Story! - Posted by JohnBoy

Posted by JohnBoy on July 04, 2003 at 10:04:28:

It also depends on how the deal is structured. If a major repair is needed that would fall back on the seller, and the tenant/buyer. My deals only require me to pay out up to $500 in repairs with the seller. Anything over that requires the seller to pay. And my deals with my tenant/buyers require them to pay 100% of all repairs. So if my tenant/buyer is not able to pay, I can fall back on the seller to pay. Of course, if neither the seller or the tenant/buyer can pay, then that would require working something else out. But both the seller and tenant/buyer would be in breach of their contract they have with me. :slight_smile:

If the house does not appraise in one year…SO WHAT? That’s GREAT! That just means I get to control the property longer and make even MORE MONEY in the long run. I control the property long enough to where it will eventually appraise. And if for any reason none of my tenant/buyers never exercise the option, where my years of tying up the property expire with the seller, I’ll have options to deal with by then. If the house has gone up in value in 3 - 5 years, then I could just exercise my option with the seller and buy the place myself. All that equity would justify buying it myself in 3 - 5 years. Or I can get the seller to extend my option again. Or I can just walk away if the property didn’t increase in value enough. Or I can list the property a few months prior to my option from expiring with the seller and sell it out right to a retail buyer, if my tenant/buyer is not going to exercise their option. Lots of options to work with here.

In the end if I just decided to walk away, the potential profit may not add up to $31k, but all that option money each year and that monthly cash flow over 3 - 5 years would still add up to a good amount of profit. So it all depends on how you structure the deal, how long of a term you tie it up with the seller for, and how well you qualify your tenant/buyers.

The fact you got off the couch, found a deal and tied it up, found a tenant/buyer that paid you $4k option money and signed a one year lease, providing you with monthly cash flow, and having a potential profit of $31k if the tenant/buyer can buy the property, that is a success story in itself!

Success is not measured by the amount of actual profit, or even losses for that matter. Even if you lost money in the end and you learned something from it, then that is being successful. You gotta have the GUTS to get out their and take action and do something! You gotta have the GUTS to take some risks! You gotta have the GUTS to get back up again if you fall and learn from your mistakes. You gotta have the GUTS to keep pushing forward until you do succeed no matter what! That is where the real success story lies.

Or you can sit on the couch and do nothing making excuses. Do nothing because it might not work out. Do nothing because you are afraid of losing. Do nothing because fear stands in your way. That is where being a failure comes in.

Re: A Problem with $31K Success Story! - Posted by John (Rome)

Posted by John (Rome) on July 04, 2003 at 09:11:19:

gotta luv positive thinking…

Thanks for Backing Up My Point…nt - Posted by Kevin (TulsaOK)

Posted by Kevin (TulsaOK) on July 05, 2003 at 09:36:12:

nt

"Locked In’ - Posted by Kevin (TulsaOK)

Posted by Kevin (TulsaOK) on July 05, 2003 at 10:17:16:

Headline in todays newspaper “The Number of Students Who Know Much About Money Is In Short Supply”. It should have included adults in that headline!

Economics 101: A paper profit is not the same thing as a realized profit. The term “Locked In” should not have been used in this success story! In fact, he can’t even borrow against this profit because he doesn’t own the property yet. It is an unrealized gain! Will he realize his profit? I hope so, but that remains to be seen.

Many things (which he should plan for) could take his profit away. Here are a few nasty things that could happen: Bankruptcy by either party (seller - means new loan, closing costs, down payment, etc.) (buyer - means delayed eviction and loss of income); Lawsuit by either party, although probably unfounded would still have to be defended, which could mean loss of income and/or loss of use; a major repair that both parties refuse to pay for and will have to be negotiated (meaning he pays for all or part of the repair); etc…

Real Estate 101: What can go wrong, may and probably will go wrong. I have been in real estate long enough to know this to be true. And I know people who have been in RE a lot longer and they will tell you that it is true.

Anyway, my opinion stands: “this was a weak success story”.

May all of your unrealized profits be realized!

Kevin (TulsaOK)

Re: OKAY - Try this one! - Posted by Kevin (TulsaOK)

Posted by Kevin (TulsaOK) on July 05, 2003 at 10:33:49:

Terry,

Is there a follow-up to this story? It sounds great, but did the refi. go through. We need closure!

As far as the New Success Story, I agree that getting the deal done is a success, but some of the wording could be misleading to newbies. Here is a part of my reply to Craig-SoMD: “Economics 101: A paper profit is not the same thing as a realized profit. The term “Locked In” should not have been used in this success story! In fact, he can’t even borrow against this profit because he doesn’t own the property yet. It is an unrealized gain! Will he realize his profit? I hope so, but that remains to be seen.”

Anyway, the term “locked in” is what bothered me about the story.

May all of your unrealized profits be realized! :wink:

Kevin (TulsaOK)