Making $13,000 With No Money Invested

Want to see how to make $13,000 in two short weeks with no money invested and without owning the home?

With creative real estate investing, Jack Miller taught us to structure on purpose. Pete Fortunato taught us to use what we want, to get what we need, to get what we want. Let’s take a look at these two all-important lessons in action.

Jonathan and Christie help us maintain some of the rental properties we manage. About a month ago, Christie told Kim that her mom wanted to sell her home in Acworth, Georgia.   After meeting with Christie’s mom, Kim determined that the home was worth $90,000 and needed a $10,000 rehab. Kim offered either $63,000 cash or a $90,000 owner-carried note with payments of $300 per month, but the mom turned down both offers.

Kim then asked, “What’s the house of your dreams?” The mom answered, “One out in the country.” Unfortunately, we didn’t have any such property available.

The next day, Kim had an idea. Our friends Joe and Ashley English had a house on the outskirts of Adairsville that had just gone up for rent. Kim called Christie’s mom and asked, “How would you like to trade your house in the city for your dream home in the country?” The mom got so excited at the idea that she loaded up her family and immediately drove to the Adairsville house. She LOVED it! She agreed to a trade.

Two problems: First, Joey’s house wasn’t ours to trade. Second, the mom’s house was worth $90,000. Joe and Ashley’s house was only worth $70,000.

The solution to the first problem was easy. Kim called Joe and explained the creative deal structure she had in mind. He agreed to participate. The solution to the second problem was also easy. Most real estate deals aren’t about money – they’re about the seller giving up something they have in order to get something they want more! In this case, it was the house of the mom’s dreams.

Days later, Lee Perkins, our wonderful real estate attorney, did the closing. The mom bought Joe and Ashley’s Adairsville house for $100,000, and Joe and Ashley bought the mom’s Acworth house for $100,000. In other words, no money changed hands – it was $100,000 for $100,000.

For putting the deal together, Kim and I got an option to buy the Acworth home at anytime within the next ten years for $100,000.

Shortly after closing, Kim found a realtor who had a cash buyer who wanted to buy the Acworth house. The thing was, with our option in the way, the cash buyer couldn’t buy the property. As part of the original deal structure, Kim and I agreed to give up our option in exchange for cash.

Two weeks after buying the Acworth house, Joe and Ashley sold it to the cash buyer. Kim and I got paid $13,812 to release our option. The realtor got paid $10,000. Between the two properties, Joe and Ashley made enough to pay off a number of loans, which increased their monthly cash flow by $915. In addition, using several tax strategies, Joe and Ashley will be able to cut this year’s tax bill by $10,000!

Going back to Jack and Pete: From the beginning, this deal was structured on purpose! And Kim and I used what we wanted (Joe and Ashley’s house), to get what we needed (an option on the Acworth house), to get what we wanted ($13,000).

We know creative deal structuring can be confusing, but remember: It’s a learned thing, not a born-knowing-how-to-do-it thing!