$700 a month. It was located one freeway exit away from the location of the annual Del Mar Summer Fair and Del Mar Thoroughbred Race Track, where the Turf Meets the Surf. The tenant was planning on staying.

The seller sold us the condo for $63,000, which was the loan amount to the bank. The value of the condo was $72,000. The seller basically signed over the deed and walked away from the property. We made no down payment. We took over the existing $63,000 bank loan. Why would a seller do this?

As real estate investors, we must allow sellers to make up their own minds. While we might never, ever accept that same offer if we were the seller, we cannot presume to know the sellers motivation or ultimate goal.

Potential Profit

Value of Condo $72,000

Purchase Price $63,000

Potential Profit $ 9,000

How did we make money in this deal? We found another real estate investor who wanted rental income property. The real estate investor gave us $4,000 cash, and we gave him the title to the property in the form of a quitclaim deed. We owned the property one week! By flipping the property, we had an immediate $4,000 profit and no landlord-ing headaches.

Our Profit

Sales Price $67,000

Purchase Price $63,000

Our Profit $ 4,000

Example 2 We found a piece of vacant land that was worth $1 million. We discovered the seller was motivated to sell. The seller wanted his price but was flexible on terms. We have found a fundamental truth in the real estate investing marketplace. If the seller wants their price, you get your terms. We have found the corollary to be true, too. If the seller wants their terms (like all cash for their equity), you get your price.

We offered the seller $1 million for the property. Did we have $1 million? No! How much down payment did we have? Zero. How much of a bank loan did we want to get? Zero. Who was going to be the lender? The seller!

How much was the seller willing to loan us? $1 million. For how long was the seller willing to loan us the $1 million? Five years. What was the monthly loan payment we wanted to make? Zero. What was the interest rate the seller would accept? 6 percent. How was the interest to be paid? Annually.

Let us summarize. We offered the seller $1 million for his piece of land. We made no down payment and had no monthly payments. We would owe the seller $60,000 annually (6 percent of the $1 million loan ).

Did we want to pay the seller $60,000 in 12 months? No! Did we have any money in this deal? No. How did we make money on this deal? We flipped the property! We turned around and sold the property to a new buyer within 30 days after closing.

How much did we flip the property for? We flipped the property for $1 million. How much down payment did we get? We accepted zero down payment! Did we ask the new buyer to get a loan from a bank? No. How much did we loan the buyer? $1 million.

For how long did we loan the buyer $1 million? Five years. Did we get monthly payments on our $1 million loan? No. What was the interest rate we negotiated? 8 percent. How was the interest to be paid? Annually.

The buyer would owe us $80,000 annually (8 percent of the $1 million loan ). Do you see how we made money? When we received our $80,000 payment, we paid our $60,000 payment, leaving us $20,000 profit! The fact that we had to wait 12 months to make our money was fine with us. It worked out to be $1,666.67 per month!

Purchase Price

Purchase Price Down Payment Loan Amount

$1,000,000 0

$1,000,000

Resale Price

Sales Price Down Payment Loan Amount

$1,000,000 0

$1,000,000

Our Profit

Money Received Money Paid Out Our Profit

$80,000 $60,000 $20,000

Find, Fix, and Flip

Example 3 We found a property that was a three-bedroom, two-bath, 1,900-square-foot, single-family residence in a good neighborhood. The owners were in the process of getting a divorce. They had moved out of the property in anticipation of foreclosure.

The property was a mess. The roof needed repair. The carpets had to be replaced. The floor coverings were beyond repair. Painting was needed inside and out. The landscaping was early jungle. The pool was a breeding ground for West Nile virus-carrying mosquitoes.

We got the sellers written permission to talk to their lender. We were able to delay the foreclosure for 60 days. We wrote an offer for 65 percent of what we determined to be the retail value of the property. The retail value is the value a property has for an end user like a homeowner.

We felt the retail value was $135,000. Our offer was for $84,500, all cash, at closing. The offer was also contingent on our money partners approval. If our money partner didnt approve of the deal, we had no deal. The sellers accepted our offer with no counteroffer.

We brought in our clean-up crew and in five days had stripped out the carpeting and floor coverings, cut back the jungle landscaping, drained and cleaned the pool, and painted the entire interior of the house Navaho white. We did nothing about the roof. Our total cost was $2,200. We left the big stuff for the next real estate investor.

We started calling down our list of real estate investors who liked to do major fix up. The third real estate investor we showed the property to wanted to buy it. We had the purchase price of $84,500 plus our fix-up cost of $2,200 in the property,for a total of $86,700.We sold the property for $92,500 10 days after we had made our offer to the seller. We got our fix-up cost back plus made $5,800. Not bad for 10 days work.

Potential Profit

Value of House Purchase Price Potential Profit

$135,000 $ 84,500 $ 50,500

Our Profit

Sales Price Purchase Price Fix Up Our Profit

$92,500 $84,500 $ 2,200 $ 5,800