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Deals from Thin Air: The Art of Transaction Engineering

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scientistHey, Moguls, we’ve got a terrific video lesson today with a huge chunk of solid info. REI guru Franklin Cruz and I are talkin’ shop about the art of transaction engineering.

It is one of the greatest and most profitable skills you can bring to the REI table.

This isn’t your Mama’s plain vanilla ho-hum approach. It’s the ability to engineer a transaction by creating unexpected opportunities to uniquely meet the needs of your motivated sellers and/or buyers that creates a winning deal for you and them.

The thing is though, you’ve gotta dream up an amazingly creative deal, but still be able to explain it to your potential buyer in a way that’s easy to understand.

An example of transaction engineering could be, rather than simply making an all-cash, wholesale offer, you present three different offers simultaneously:

1. A low, all-cash offer
2. A higher, owner-financed offer with favorable terms to you
3. A mixture of some cash now and some owner financing with favorable terms

For sellers needing to sell quickly, you can frequently buy their house and take over their payments until you can resell the property at a later date to a qualified buyer.

For buyers that need time to improve their credit score or save up for a down payment, you can offer a lease with an option to purchase, owner-financing, or take something other than cash for a down payment, like a car, boat vacant lot or whatever the heck else. 

Will a bank or a builder do that?  Not likely. But a transaction engineer will be considering options like these and because of this, can often make very profitable deals seem to happen right out of thin air, where no deal seemed possible before.

Franklin is one of those guys who’s actually had success with this approach. Listen in as he talks about how some creative thinking enabled him to reverse engineer a deal, including all the specifics with numbers. It really helps you understand the kinda stuff we’re talking about.

Franklin walks us through that transaction and shares with us the sideways-thinking approach he took with the buyer, and how working with the IRS can actually get you closer to closing deals (crazy, but true!).

Think of it this way - transaction engineering for the real estate investor is like being a carpenter with a well-equipped tool box or a surgeon with all the necessary operating instruments to get the job done from every angle, safely, and in a way that everyone involved wins. 

But, it isn’t for beginners. Now I’m not saying you shouldn’t listen if you’re a beginner, actually you definitely should tune in because in this business you’ve always gotta strive to learn more.

First though, get some deals under your belt and then utilize this approach, otherwise it may become a distraction and hinder your deals.

cruzFranklin Cruz’s into Deals

Franklin has been in the game long enough to use this method to his advantage, which he has done numerous times.

After serving as Sergeant in the U.S. Army in Iraq, Franklin came home to pursue his dream as a full time real estate investor and started his REI business from scratch. He’s also an entrepreneur, specializing in property management and property rehabilitation.

Franklin has tons of experience in condo conversions and fix and flip deals as well as historic property restoration. He’s a private lender and thrives on creative financing deals, which is exactly why we pegged him for this video lesson.

You’ll really want to learn and digest all of this great info that Franklin shares with us. He also admits that just like everyone else, he’s human and sometimes he still makes mistakes. But not only does he learn from them, he asks for advice from his long-time mentor.  He explains why it’s important to lean on someone who’s been in this business for a while.

You’ve gotta make sure you tune in through the end where Franklin lays this amazing quote on us that will no doubt change the way you think about real estate investing. It’s a super powerful notion and you don’t want to miss it.

{Mogul Elite: Download a transcript and MP3 of this lesson in the Power Pack tools for this lesson.}


Do It To It! Immediate Action Steps

Understand the Fundamentals of Transaction Engineering – This’ll help: It’s the art of creating win/win transactions by finding out what the other guy’s problem is and working together on creative solutions that may be outside the box of conventional thinking to solve it. 

Think Creatively – We always have options in real estate. Use this approach and think creatively about the offers you can make. Perhaps you make various offers simultaneously to the same buyer, or offer a rent-to-own option, or take a car in lieu of cash as down payment. The possibilities are endless when you get creative.

Consult with Your Mentor – We are always learning and growing in this industry. Don’t feel ashamed if you need a little help or some friendly advice. Talking it through with a mentor you’re comfortable with can only help the situation.

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