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Investing Strategies

Protect Your Business: Use the Letter of Intent This Way

glueFrom Chain of Title (which I covered in my previous lesson about how to properly be recorded on chain of title as the owner of record), now to Letters of Intent – both key elements to getting and closing more deals. They may not be the most stimulating of real estate investment topics to talk about, but they are crucial components to your success.

Hey Moguls, Jason Lucchesi back today to talk about how you can make your offers without using an executed contract. Yes, it IS possible with the right paperwork.
First order of business: Disclaimer! I’m helping you cover your butt here, and I’ve got to cover mine too, right? I’m talking about protecting yourself and your business…

Important Note: I am NOT an attorney – don’t want to be (no offense to my attorney partners and friends). But I am looking out for your best interests, so no matter what kind of document you plan to use during your investment negotiations and communications, always, always (did I mention always?) consult an experienced attorney who knows the laws in your state.

Now, with that said, let’s get into letters of intent and how you can make them work in your favor...

Letter of Intent Defined

Simply stated, a Letter of Intent is a non-binding agreement stating the desire of two or more parties to enter into a real estate transaction, such as a sale or lease. It provides an outline of the proposed transaction so the parties can negotiate before committing to a contract and finalizing details.

Notice the key word here – proposed.

The letter of intent simply documents your intentions as an investor. It shows good faith, good intentions and commitment –it shows the seller you are serious… but it is, as I mentioned, non-binding. And that’s the key to using letters of intent.

Letters of intent actually look like purchase agreements and contain some of the same content, but letters of intent are NOT executed contracts.

Raise Big Bucks, Not Eyebrows

So, here’s why letters of intent are relevant and important to you, as an investor…

If you’re like many, you’re probably pursuing a high volume of deals. And that’s a good – no, a great – thing. But here’s the catch…

If you’re submitting a bazillion offers and not closing the majority of them, you’re going to tick off some people in a big way – people who have the power to cause you major headaches, people who could shut your business down.

nonbindingAnd here’s where the letter comes into play – more than likely, your first offers on given properties won’t be accepted by sellers. That’s the nature of the business. But a letter of intent with each seller will allow you to go back and forth if need be with multiple sellers with less confusion and more cohesion.

Remember that you want to submit at least 15 offers each week, so about 60 per month. That will break down to about 8 to 10 deals under contract (at prices that will generate profits for you), which ultimately will result in 2 to 3 closed deals.

I’ve covered this ground, but it’s worth mentioning again...

Be sure you run the numbers to come up with profits that make sense for all parties involved, and above all, be sure you’ve got the funds – on your own, from a private investor or a funding company like Best Transaction Funding – to cover the close.

The Wrap Up

Look, a letter of intent is simply a non-binding note stating your intent to purchase. That’s it. Don’t make it harder than it is. Start incorporating these letters into your own business today.

Using a letter of intent allows you to submit multiple offers, and it can even accompany your direct mail campaign.

So, where can you get a letter of intent “template” to follow?

Well, your attorney can certainly create one for you. My letter, for example, is simple, self-explanatory and easy for sellers to review and understand. Remember, the more complicated you get, the more likely your seller will walk.

So keep your letter simple and to the point so your seller feels confident in YOU as an investor.

Here’s how mine starts:

This letter will serve as a non-binding letter of intent to purchase the above referenced property located at 1234 Main Street under the following terms and conditions…

Once you and the seller agree to the terms, you then put together a binding executed contract for the sale of the property.

See, I told you it was simple but important. I encourage you to start using a letter of intent in your business today.

Talk to Me

Have questions or comments about letters of intent? Talk to me below.


Do It To It! Immediate Action Steps

Use letters of intent to show your good intentions to purchase.

Always have the funds to back up any offer.

Don’t be afraid to submit a high volume of offers – just cover your butt with the proper chain of title and a letter of intent.

Always consult an attorney for all your documents.

Start using a letter of intent today.

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