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The Deal After the Deal Is Where the Real Money Is Made

When we teach real estate investors how to structure their seller financed deals when they buy a property, we give them a toolbox of fifty or more points to negotiate the terms in their favor. You’ll never need all fifty on any deal. You will need six or seven on pretty much every deal. But I get asked all the time, “What is THE most important point to negotiate on every deal?” It’s a great question, and I want to give you the answer.

Whenever I buy a property where the loan is financed by the seller, I ALWAYS include in the contract what’s called “the right of first refusal.” After years in the business, we know that 99% of all mortgages don’t stay with the same lender for the entire length of the loan until it’s paid off. At some point in the future—and it might be 4 years down the road or 12 years—most note owners will decide that they want their money in a lump sum payment. After years in the business, I can assure you that most loans become available to buy back before ten years have passed. It’s a very common pattern. There are lots of bankers and mortgage companies out there who will want to purchase that note at a big discount, and I want to be first in line to buy it.

You could easily buy back your loan just four years after it started and pay as little as 50¢ on the dollar. If your original note was for 100K, four years later you might still owe 96K. But you could potentially buy that entire note for just 48K!|

This is a point that is definitely worth negotiating for, and most note owners are pretty agreeable to letting you include it in the terms.

I’ve included the right of first refusal in my contract negotiations for decades. It’s what I call “the deal after the deal.” And that, my friends, is where the real money is made!

Thanks for reading,

Eddie

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