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Learn why Land Flipping allows you to make deals without your own money
- Discover how to do a “Double Close”
- Understand the mechanics of using an assignment
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All right. Hello, everyone. This is another episode of “The Forever Cash Life” real estate podcast with yours truly, Jack Bosch. Today we are going to talk about the four ways that you can sell properties without using any of your own money. Like without using any money. All right.
All right and welcome to another episode of “The Forever Cash Life” real estate podcast. In today’s session with yours truly, Jack Bosch, I co-founder of the landprofitgenerator.com real estate methods with the land profit maximizer tool sets as well as of the land profit coaching program where we teach you how to buy properties for 5 to 25 cents on the dollar and flip them for anywhere between 50% and 10 fold profits.
I know it sounds hard to believe but go check out our websites landprofitgenerator.com, landprofitmaster.com, different kind of pieces like that. All right. So with that said, today we are going to talk about how to flip properties without using any money. We’re going to show the vote to the four different ways that you can flip the property for cash and cash flow without using any of your own money. All right, so let’s talk about that. So the first way that we’re going to talk about…well, first of all, let’s look at this. What we teach, you guys know that in the Land Profit Generator Family, what we teach in the Land Profit Generator family here is a process where we find the people who no longer want their properties and we exclusively focus on land and lots and recreational mini ranches.
That’s what we’re looking for. Lots in the city that I can flip through a builder, lots and land in the outskirts of town that is in the path of growth that’s interesting to people who want to live there or people that want to wait. Financial buyers that want to wait for the for the property to increase in value as the city approaches and those mini ranchettes 10, 20, 40, 80 acres that all the people who have an RV, ATV, dirt bike, things like camping and so love to be away from it all to be able to escape for the weekend and horse around in the nature not have to be close to another person, especially in the kind of like COVID-19 environment that saw where they can be a way of their own space, bring their friends, do social distancing, and have a blast, dirt bike, horse around, be close to a lake etc., etc. Those are the three properties we focus on.
We focus on finding the people who no longer want their properties because the non-workers are willing to let these properties go for literally 5 to 25 cents on the dollar. Sometimes you pay 30, 35 cents but that most of it that. Usually your offers are going to be between 5 and 25 or 5 and 30% of market value. Then the people accept that because they have no more interest in those. They bought them 20, 30 years ago for many reasons. There’s podcasts if you watch the first four or five podcasts episodes that we have ever done, it goes through the different steps on that and gives you all the reasons why people sell these properties.
But then what happens is we turn around and we sell these properties, we market these properties and we are… and we sell them for sometimes 50% more, sometimes, many times 2, 3, 4 or even 10 times more than we bought this property. Our first deal we bought for $400, sold for $4,000. The next deal we bought for $500, sold for $10,000. We bought properties for $1,850 and sold them for $86,000. We have done the gamut of deals. We bought properties for $30,000, sold for $50,000, etc., etc. And our students are doing right now because we teach this, our students are doing right now the exact same thing. But in today’s episode, we’re going to talk about the four ways to flip properties without using any money of your own. So let’s get started.
The first kind of deal that we do that is the kind of way that we do that is with a double close. So again, double close. Now what does a double close mean? Now there’s multiple words for that. One is called ABC transaction. Another one is called simultaneous close. Another one is called a dry close. I call it double escrow or double close. And what that means is that very simple, you take a property, let’s say, that’s worth $30,000, you put it on a contract for $3,000. Again, our focus is the pieces of land between about $5,000 and I recently increased our target rate to about $200,000. The sweet spot is like between $10,000 and $100,000. But we target properties between $5,000 and $200,000. So if that’s our target rate, let’s go to a reasonable deal, a bread and butter deal, the deal that you get on a contract for, let’s say, $4,000 and it’s worth $30,000. So that’s about 12%, 15% offer to value. Like you’re getting that deal for about 12%, 13% of its market value.
Let’s say there’s another $1000 in closing costs. So you now have this deal. Your cost of purchase will be about $5,000 on that deal. Now, this is a reasonable example. One of my own coaching students right now, and I don’t take any more, but we have coaches in our organization that are doing 100 plus deals a year that one of these guys, one of my own coaching students just put a deal in the contract worth $50,000 and they put them on a contract for $1,980. So that is if you look at that, that is about…what is that, $5,000 would be 10%. So $5,000 would be 10%. That’s 4% of market value. My math skills are not the best today, either way. So it’s for 4% of market value. There’s a few extra back taxes. But even if you take the back taxes, then it’s not more than about 10% or 12% of market value. So very similar kind of deal.
So in that scenario, what do you do? You take that deal and you flip it right away. So how do you flip that deal? Let’s say you split it on the market. Let’s take their students deal actually. It’s not take the first one I mentioned. It’s a $50,000 deal, you put on a contract with all included in closing costs and back taxes, you in it for about $7,000, let’s say. So now $7,000, based on 5, it’s about 14% of the market value is what you have that thing on a contract. So you have two choices, you can pay the 14%, make the property you own. But in this session, we want to talk about how to do the deal with no money of your own. So what do you do next? Is you actually go and you flip that property.
So let’s say you put it on the market for $27,000. Now what is that? That’s just above half of market value. Twenty seven thousand dollars. They actually have it listed for $32,000 and they’re getting quite a bit of interest on it. So in this case, let’s say you sell it for $27,000. So you found a buyer, the seller is willing to sell it to you such that your out of pocket complete expense is going to be $7,000. The buyer is willing to pay you $27,000. And let’s say you also negotiate that the buyer is paying the majority of the closing costs on the buying side. So you don’t really have any extra costs there. So now what you do in order to make that happen is the following.
You have one contract here with the seller for $7,000 all included this, including time, including closing costs. You have a contract over here with a buyer for $27,000. You take both contracts and you bring them over to the title company and you ask the title company, “Are you willing to do a double closing and with using the buyer’s money to fund the entire transaction?” If they say, “yes,” great. If they say, “no,” you go look for a different title company. But if they say, “yes,” the following will happen. The title company will need to disclose the fact of a double closing to both parties, but that’s just like a line item in a document that nobody reads. So don’t be worried about that. Just somewhere in the closing documents, there’s gonna be disclosure, hey, disclosure, this is a double closing transaction. And the seller doesn’t know what it means, the buyer doesn’t care. It’s all good.
The next thing but they do not need to disclose how much we’re selling it for and how much we’re buying it for. So the dollar amounts do not need to be disclosed. So the first thing you want to do is go to your title company, they make it very clear that if they have to disclose it that they did not need to disclose the dollar amounts. Have them give that to you in writing because that’s obviously important. Because it is possible that if you sell it for 27, you have another contract for 7 that the buyer gets upset because you’re making a $20,000 profit in there and he’s only having the property for $23,000 below market value. So you’re making as much pretty much as the buyer will make on the property when they resell the property at full market value.
But usually the buyers are not looking to resell the property, the buyers are looking to do something with a property and they’re getting the property for almost.. for just a little bit about half or half market value. So the buyer should be very happy with the situation. But it’s.. just to play it safe, you don’t want the buyer to know what you’re buying the property for. So therefore the disclosure needs to be of the fact that a double closing is happening, but not disclosing the actual dollar amounts on these transactions to the individual parties. All right, so I sound like a flight attendant. Like our traffic guidance got here. So anyway.
So now the next step comes in. So now what happens is the title company now is going to charge you the cost of escrow fee and title insurance and title search and all this kind of stuff, but you can negotiate with the title company that they charge you less on the buying side, because all they need to do is refresh the title company because it happens on the same day, right? The goal of this entire thing is that both transactions happen at the same day with the buyer wiring in his $27,000 plus his portion of the closing fee, let’s say, an extra $1000. So the buyer wiring in $28,000 to the title company, the title company now takes $2,000 to the seller, $4,000 in back taxes, $1,000 to themselves, $20,000 to you and then give the deed to the property to you and then give the deed to the property to the ultimate buyer because in a double closing, you’re actually buying the property. You’re just not paying for it.
You’re using your buyer, the one that you pass the property to, you’re using that person’s money to actually pay for the entire thing. So in order to do that you want, you can use your leverage that the title company is really doing one set of work. They’re doing a title search, they’re cleaning up the title, there’s changing over the ownership from the seller to you. That’s the major work that they’re doing. But then when they sell again, all they need to do is one extra deed, a couple of disclosures, and they don’t even need to refresh the title search because it happens on the same day. So there’s nothing that could have happened that they haven’t already found. So therefore, you can tell them, “Hey, listen, you guys need to give me a break in the title insurance costs. You can do what’s called a hold open policy.” So you pay a little bit more for the title insurance here, but then you hold it open and you make it cheaper for the buyer to do that which is another incentive for the buyer to buy.
So like, “You know what? You paid all the title costs, insurance costs dear Mr. Buyer on the purchasing side, however, I already negotiated with the title company, that it’s only costing you much less, so you’re not paying a whole lot.” It’s a really nice way to talk to this buyer and convince him to pay the full buying title insurance cost because it’s not that much. It’s a discounted escrow fee. It’s a very much discounted, it’s no extra cost for the title insurance policy, because you paid for the title insurance policy here already, and then you ask them to hold it open, to hold the policy open and allows you to assign the policy to the next guy for just an extra 10%.
And therefore for an extra 50…like if the insurance costs $500, you just pay an extra $50 that allows you to now pass it on. So your only costs on the selling side when you sell it, is only 50 bucks. Bottom line is you do that but the key is again, there’s two transactions, you’re buying it, you pay for the title insurance here in the way we do the land deal, we pay for the full closing cost, our seller doesn’t pay for it. And then when we pass it on in that same day to the buyer, the buyer ideally pays for most or all of the title insurance costs to take that property over. So that’s an area of the buyer now. You do it as a bulk transaction. As a matter of fact, in this double-closing scenario, often the way it is done in order to make sure that it all goes through is that you actually sell the property first before you even own it, you fill out the selling documents, you sign the deed that the title company sends you to, you sign all the things, the buyer signs, all their documents, the buyer wires the money in.
And only when that money is all there, does the title company then have you complete the buying documents and have the seller file out the selling documents then because then you know that you can go… then the entire transaction is complete. So you’re buying it on let’s say on Monday and you’re selling it that same Monday and actually usually you sign the selling documents first then you sign the buying documents, but you’re doing that like five minutes from each other, literally simultaneous and that’s why it’s often called simultaneous closing. And at that point, now what the title company does is the following. The buyer has wired in $28,000, I already said it, let me repeat it, the buyer wired the $28,000. Of the $28,000 the title company takes $1,000 for their costs on the ultimate selling side when you sold it to the buyer. They’re going to take another $1,000 that you have to pay the title company for their efforts when you bought the property. All right, so now they take $2,000. They now take $4,000 send it to the county for back taxes.
So now we’re down to $22,000 which they have in their account. Now they’re taking the $2,000 that you offered the seller as a compensation like as a sale price, they’re going to send the $2,000 to the seller, and now what they have left over is $20,000. And that belongs to you. So now they sent the $20,000 to you. So in this scenario, you have done a complete deal from buying it to selling it, including title and costs, including paying back taxes, all funded by the money that the ultimate buyer put into the transaction. It sounds much harder than it is. It’s really very simple because the title company does everything. All you need to do is have a contract with the seller, in this case for $2,000 plus back taxes plus closing fees $7,000 or $6,000 or $7,000. Then you have a contract with the buyer for $27,000 plus an agreement of how the title cost is split.
And then the title company will create HUD statements and will tell the ultimate buyer how much money they need to wire in. They send out documents to all three parties to sign. You’re signing buying documents and you’re signing selling documents. The buyer is only signing buying documents and the seller is only signing selling documents. All that gets sent to the title company, the title company, figures it all out, gets the money in and then distributes the money such that you get the difference between what you bought it for and what you sold it for minus back taxes minus title insurance costs. Very simple. So this is one way that you do it.
So here’s one of our students that…his name is Anshul. Anshul is was one of our land profit generator students. He’s an immigrant from India. And his very first deal, he put a property and I don’t have the numbers exactly right. But approximately something like this. He put the property on a contract for $65,000. He then sold it for about $115,000. And if you do the math, it’s about a $50,000 difference. And he sold for $115,000. And then after taking into consideration title insurance cost, he did a double closing so the buyer wired in $115,000 plus probably some closing costs. And then after paying off some back taxes and closing costs and things like that, they took the $65,000 sent it to the seller, and what was left over was $46,000.
Those $46,000 now were sent to Anshul and that was his profit from the deal. Never did he see the property. Never did he wire any money in. He made $46,000 without using any money in the transaction. Was one of his very first deals, if not his first deal. And again, your first deal if you’re in a situation that you don’t have $65,000 that’s the perfect way to do it. Benefits of doing that is number one, that you don’t have to have any money. Benefit number two is that you don’t have to have any money. Benefit number three is you don’t have to use any of your money. Bottom line, it’s a simple thing.
Benefit number four is the seller and the buyer don’t know what they’re making or paying on the deal. While they know what they receive, the seller knows what they receive, the buyer knows what they pay, but they don’t know what you are making in the middle. That’s a great benefit. So if the title company for many reasons doesn’t allow that, or you just don’t want to do that, the second way to do that is by using an assignment. Now, an assignment is basically a similar kind of situation. Let’s take our deal again, the total close, you have it on a contract for $2,000, $4,000 in back taxes, and so $6,000 is what you’re having to pay for that property plus closing costs.
So what you can do now is you can go market the property. Again, you find the buyer, the buyer is willing to pay $27,000 for that property. So what you can do now is you can say, “Well, obviously, your cost of purchasing is going to be 6 plus closing costs and your selling is for 27.” That’s a $21,000 spread. So you can go to the buyer now and you can say, “Hey, Mr. Buyer, we can do the following. We can do a double closing, in which case, I will have to go cover about $1,000 or so or $1,500, let’s say, $1,000 in closing costs, and then I can buy it and then I sell it over to you. Or I can just assign this contract over to you. I’m giving up my rights in this purchase of this property and I’m passing on my rights to purchase that property over to you. And instead you just pay me an assignment fee.”
Now, there’s two ways to do this. The traditional way is the way that you say, “Hey, Mr. Buyer, if you pay me a $20,000 assignment fee, then I’ll just pass you on this contract over here. And let’s just think here, this is a contract that I’m working with. It’s a different kind of contract, but I’ll send you over this contract. And then you use… you go to the title company and you close the deal.” In this scenario, you’re literally handing him your contract and he gets to look at the contract and he gets to see what you paid for the property. So that is okay if you take the property. If you have the property under contract for $6,000 in this case, back taxes and there’s $6,000 and you’re flipping it to him for $16,000 and he’s getting this property $33,000 below market value, he’s going to be totally happy. He’s like, “Yeah, you make 10 grand, I make 33. Awesome.”
This is not usually cool. The buyer is not usually cool with it if he sees that you’re making the same or more than he’s making in the deal. So when you sent this assignment over and they see that you’re making $21,000 and they’re only making $23,000 they’re gonna be like, “Yeah, man, come on. That’s a bit rich here. It’s like I’m okay with you making like 10 grand or so but I don’t want you to make the same as I’m making.” So therefore the traditional assignments should only be used if you are making a substantially lower amount on the deal than the person you assign the deal over to. Like if a deal is worth $100,000, you get it under contract for $30,000 and you assign it to somebody over $15,000 assignment fee, they’re going to be happy as a clam. They’re getting this property at $45,000. So making $55,000 on the deal once they sell it, you’re making $15,000. That’s fine.
Even a $20,000 or $25,000 assignment fee in that scenario would be fine. But if you’re assigning the thing over to that guy for a $50,000 assignment fee, in other words, you have it under contract for 25 and you’re charging 50. So he’s going to buy it at $75,000 then he’s not gonna be a happy camper. If you do that, though, in such a case you rather want to use the double closing because in the double closing the buyer and seller and particularly the buyer in this case does not know how much money you’re making on the deal. However, there’s an assignment agreement that we have in our program, in our land profit generator/investment dominator package that we have available for students is it’s a software combination of a program over course together with a best in class CRM system that automates most of the pieces, really one doesn’t go without the other, they go together, is we have an actual brand new document in there that allows you to assign the deal without the buyer knowing what you’re making on the deal.
So in other words, in this assignment, what happens is that you say I’m assigning you this property such that you are buying…I’m assigning you my contract such that you are buying the property at $27,000. In our example remember, $6,000 purchase price, $2,000 plus back taxes and the buyer is willing to pay $27,000. So we said like, okay, this an assignment agreement that says that they are going to buy the property for $27,000 and that you are making an assignment fee, which is the difference between what you have the property under contract and what you’re assigning it over to. But it does not mention what you have it on a contract for nor does the buyer get to see your contract. Instead, you send your contract to the title company, you send the assignment to the title company, and the title company then draws up the HUD, does all their things, and then the buyer buys the property for $27,000.
And only at the very last moment when the buyer already wired the money in then the buyer sees what’s called the HUD statement, which is the outline of where the money goes and what all the costs are and so on, that’s when they see that you are going to make a $21,000 assignment fee. At that moment, he might be upset. At that moment, he might be not liking this anymore. But at that moment, he sent the money in, he’s emotionally involved. He’s committed to buying this property. He’s excited about the deal. And he’s just gonna go through with the deal. I’ve never seen a case when at that moment they said like, “Wait a second. I have everything ready to sign here. Now, I’m realizing you’re making too much money. Let me dismantle all this thing.” No, there’s so much emotional effort and so much time that already gone into that, that they’re not going to stop anymore. They’re just going to go make the deal happen. So that’s a great way to do an assignment without the buyer knowing what you make in the deal.