Episode 238: How Tim Benskin Scored a $53,000 Profit Without Renovations Using Private Money

In the latest episode of the Raising Private Money podcast, Jay Conner sat down with mastermind member Tim Benskin to discuss his latest deal in Swannanoa, North Carolina. 

Tim shared his unique approach to acquiring, financing, and profiting from real estate investments, offering invaluable lessons for aspiring and seasoned investors alike. Today, we will dive deep into the key topics discussed, providing a comprehensive guide to understanding Tim Benskin’s successful strategies and tactics.

A Fortuitous Encounter: The Genesis of the Deal

Tim Benskin’s latest deal began with an unexpected opportunity. While working on a property purchased from a wholesaler, Tim was approached by a neighbor who inquired if he would be interested in buying his house. This initial conversation set the stage for a profitable transaction.

Key Takeaways:

  • Networking and Relationship Building:
    Tim’s success in this deal highlighted the importance of maintaining good relationships with contractors, neighbors, and other stakeholders in the real estate industry. An open line of communication can often lead to new opportunities.
  • Opportunistic Mindset:
    Being present and attentive during property renovations can present unforeseen chances to acquire new properties at favorable prices.

Negotiating the Purchase Price

The neighbor initially asked for $150,000, but after assessing the property and understanding the seller’s needs, Tim successfully negotiated the price down to $130,000. This $20,000 reduction set the foundation for a profitable investment.

Key Takeaways:

  • Negotiation Skills:
    Tim’s ability to negotiate effectively saved him a substantial amount on the purchase price. Understanding the seller’s motivations and maintaining a flexible negotiation stance is crucial.
  • Assessing Property Value:
    Conducting a thorough property valuation, including an understanding of After Repair Value (ARV), is essential in negotiations.

Leveraging Financing: Private Money and Profit Centers

Tim financed the property using private money, borrowing a total of $130,000 from two private lenders. The strategic use of private money enabled Tim to acquire the property without using his capital while structuring repayment terms that supported a positive cash flow.

Key Takeaways:

  • Private Money:
    Utilizing private lenders can provide flexible financing options, often with more favorable terms compared to traditional lending institutions.
  • Multiple Profit Centers:
    Tim created several profit centers through this deal, including monthly cash flow, a nonrefundable lease option deposit, and potential appreciation upon sale.

Innovative Selling Strategy: Work for Equity

Tim’s decision to sell the property through a lease option with a “work for equity” component was a masterstroke. This approach not only minimized his upfront renovation costs but also incentivized the buyer to invest in the property’s improvement.

Key Takeaways:

  • Work for Equity Concept:
    Allowing buyers to reduce their purchase price by undertaking necessary repairs encourages them to buy into the property’s value and care for it. Tim’s buyers stand to receive a $10,000 credit for completing specific agreed-upon repairs.
  • Reducing Risk and Increasing Profit:
    This strategy reduced Tim’s risk and repair costs while increasing the property’s sale price to $187,000, considerably higher than its ARV.

Monthly Cash Flow and Final Profit Analysis

Post-financing, Tim’s monthly outgoing payments to his private lenders totaled $940. His lease option agreement brought in $1,450 a month, leading to a net positive cash flow of $284.34.

Key Takeaways:

  • Positive Cash Flow:
    Ensuring a positive cash flow is essential for sustainable real estate investments. Tim’s careful budgeting and strategic financing allowed him to achieve this.
  • Final Profit Calculation:
    Over the two-year lease term, Tim projected a total of $53,044.86 in profits, underscoring the importance of detailed financial planning and monitoring.

Final Thoughts and Lessons Learned

Tim Benskin concluded by highlighting the importance of legal agreements and strategic planning. His meticulous approach to creating a shared driveway agreement increased the value of both properties involved.

Key Takeaways:

  • Legal Diligence:
    Proper legal documentation, such as shared driveway agreements, can significantly enhance property value and marketability.
  • Continuous Learning:
    Each real estate deal offers unique lessons, emphasizing the need for continuous learning and adaptability.

In summary, Tim Benskin’s latest real estate deal showcases a blend of strategic negotiation, innovative selling, and effective financing. His approach provides a valuable blueprint for investors aiming to maximize their profits while minimizing risks. This episode is a must-listen for anyone involved in real estate, offering timeless wisdom for achieving success in the industry.

10 Discussion Questions from this Episode:

  1. Deal Sourcing: How did Tim Benskin initially find the property, and what role did word-of-mouth play in securing the deal?
  2. Negotiation Tactics: What strategies did Tim use to negotiate the price from $150,000 to $130,000? Would you have approached it differently?
  3. Lease Options: Can you explain the concept of a lease option and how it provides value to both the buyer and the seller in real estate transactions?
  4. Work for Equity: What does “work for equity” mean, and how did Tim structure this arrangement with the buyer to benefit both parties?
  5. Private Money: How did Tim utilize private money to finance this deal, and what were the terms of the loans from his two private lenders?
  6. Cash Flow Analysis: What was Tim’s monthly cash flow from this deal, and how did he calculate this amount after accounting for insurance, taxes, and loan payments?
  7. Option Fees: Why is a nonrefundable lease option deposit significant in a lease option deal, and how did Tim benefit from the $8,000 option fee?
  8. Shared Driveway Agreement: How did Tim’s decision to create a shared driveway agreement enhance the value of the property? Have you encountered similar situations in your real estate ventures?
  9. Risk Management: What are the potential risks involved in a lease option with a work-for-equity buyer, and how can these risks be mitigated?
  10. Lessons Learned: What key lessons can be drawn from Tim’s experience with this deal, and how might these lessons be applied to future real estate investments?

Fun facts that were revealed in the episode:

  1. Spontaneous Purchase Opportunity: Tim Benskin purchased a house after the neighbor of another property he was working on approached him asking if he was interested in buying their house.
  2. No Renovation Strategy: Tim decided not to do any renovations on the newly purchased house and instead opted for a lease option to purchase with a “work for equity” agreement.
  3. Creative Financing: Tim used private money from two lenders to finance the deal, paying different interest rates to each lender, while ensuring a positive cash flow from the lease.

Timestamps:

00:01 Neighbor offered house; price was too high.

06:21 Shared driveway agreement boosted neighboring property value.

06:59 Amazing deal; valuable lessons shared.

 

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How Tim Benskin Scored a $53,000 Profit Without Renovations Using Private Money

 

 

 

Jay Conner [00:00:05]:

Let’s talk another deal. Up on deck is mastermind member, Tim Benskin. Hello, Tim. How are you today?

 

Tim Benskin [00:00:13]:

Hello, Jay. Good. Good. I just got back from North Carolina.

 

Jay Conner [00:00:17]:

I heard that yesterday.

 

Tim Benskin [00:00:18]:

Yeah. Last night. Yeah. Alright. So we’re in Swannanoa, North Carolina.

 

Jay Conner [00:00:24]:

Okay. Alright, Tim. We wanna hear about your deal.

 

Tim Benskin [00:00:27]:

Okay. Well, this one is gonna be a little bit different than the other ones you’ve heard, kinda like what Crystal was saying. So, this house we bought, this was the last house we bought. It was the next house we had bought from a wholesaler, and we had contractors working on that house. And I just happened to be over there one day, and the neighbor comes over and says, hey. Would you buy my house? And I said, well, it depends on the price. So so, anyway, he wanted 150, at the time, and I said, no. We can’t do that.

 

Tim Benskin [00:01:02]:

And so we got him after talking to him and trying to figure out what his needs are. We settled on 1:30. The ARV net was 180.

 

Jay Conner [00:01:12]:

So wait a minute. So your your your your source of finding this deal was word-of-mouth. Right?

 

Tim Benskin [00:01:18]:

Yes. Yeah. Okay. Referral, you know, from the guy I bought it from.

 

Jay Conner [00:01:22]:

Alright. You purchased it for 1.30. Right?

 

Tim Benskin [00:01:26]:

Yep.

 

Jay Conner [00:01:27]:

Now the asking was 150.

 

Tim Benskin [00:01:29]:

Yeah.

 

Jay Conner [00:01:30]:

So you bought it for 20,000 less than what you were asking for. Alright. So the purchase is 1.30. Go ahead.

 

Tim Benskin [00:01:37]:

Okay. And when we walked us, we decided we weren’t gonna do any work to it whatsoever. No work. No work. And we’re gonna do a lease option to purchase, and we’re gonna do a work for equity and what little bit it needed.

 

Jay Conner [00:01:53]:

Alright. Well, tell so just to make sure all of our listeners understand, what do you mean by work for equity and what is that?

 

Tim Benskin [00:02:02]:

Okay. Well, when we found our buyer, there were a few things that needed to be fixed. So what we did is, we came up with a price. So for each item that needed to be fixed, we added that in as an addendum to the lease purchase agreement that our lawyer did, and so we worked it out. So everything he fixes, I gotta inspect it, and I gotta approve it. And if we agree on it, he can get another $10,000 off his purchase price at the end of 2 years.

 

Jay Conner [00:02:37]:

So you’re selling it on term. So yeah. Yeah. Yeah. So what’s your what’s your, selling price?

 

Tim Benskin [00:02:45]:

And then we sold it for 187.

 

Jay Conner [00:02:49]:

Alright. So 187, and you didn’t have to touch it. I like that.

 

Tim Benskin [00:02:55]:

Yeah. The only thing we did, was we had a carpet cleaner come and include the carpets. That’s it.

 

Jay Conner [00:03:00]:

Gotcha. So you’re gonna have multiple profit centers on this deal. We are. If and when the buyer gets mortgage ready, which if you don’t force them into credit repair, that’s sort of slim. Now did you collect a nonrefundable lease option deposit?

 

Tim Benskin [00:03:21]:

We did. We got $8,000.

 

Jay Conner [00:03:23]:

Alright. There’s a write or down there. You collected What? An $8,000. The legal term is option fee, but, most of the time we call it a nonrefundable lease option deposit. Now did you buy it on terms, or did you use private money?

 

Tim Benskin [00:03:42]:

We used private money on this one.

 

Jay Conner [00:03:43]:

Did you did you pay all cash?

 

Tim Benskin [00:03:46]:

Yes.

 

Jay Conner [00:03:46]:

Alright. So let’s take a look at the cash flow per month.

 

Tim Benskin [00:03:51]:

Sure.

 

Jay Conner [00:03:51]:

So how much did you borrow?

 

Tim Benskin [00:03:54]:

We borrowed a 130.

 

Jay Conner [00:03:56]:

Alright. So you borrowed a 130.

 

Tim Benskin [00:04:00]:

And we used 2 private lenders.

 

Jay Conner [00:04:02]:

So it’s a total borrow of 100

 

Tim Benskin [00:04:05]:

And The first yep. The 1st private lender, we borrowed 85,000 at 8%.

 

Jay Conner [00:04:12]:

Right.

 

Tim Benskin [00:04:13]:

And we pay him $566.66 a month. And the second private lender, we borrowed 45,000 at 10%. We pay them $375 a month.

 

Jay Conner [00:04:26]:

Alright. So both of you this is very important to take a look at here. So

 

Tim Benskin [00:04:31]:

So that’s 94166, Jay.

 

Jay Conner [00:04:35]:

9.40 per month. So you got $940 a month going out to your private lenders. And how much are you gonna bring in per month from your work for equity buyers?

 

Tim Benskin [00:04:48]:

Okay. So, our our our lease to him is 14.50 a month. Nice. And then we pay we pay insurance and taxes out of that as well. So our cash flow every month is $284.34 a month, cash flow every month.

 

Jay Conner [00:05:06]:

Okay.

 

Tim Benskin [00:05:07]:

At the end of the 2 years, just on that month

 

Jay Conner [00:05:12]:

2-year term to get to, exercise the option. Right?

 

Tim Benskin [00:05:16]:

Yes. So at the end of those 2 years, with him with that cash flow, we’ll have $68124 that we would have collected, plus the 8,000 we already collected. And then once he cashes us out, you know, with the 187, we’ll get a $39,000 payday at that point. Nice. If he exercises touching the house. Right.

 

Jay Conner [00:05:44]:

I’m sorry. What were you saying?

 

Tim Benskin [00:05:45]:

Oh, and, you know, and I’m sure he’s already working on the house. So he’s gonna act like he’s gonna have $10,000 credit in there. So that’s why I put 30, 9,000. So at the end of the whole thing, after paying, you know, for the carpet cleaner, you know, everything, we’re gonna end up with, $53,044.86 when he cashes us out, you know, total on the deal.

 

Jay Conner [00:06:10]:

I’ll take $53,000 all day if I ain’t got to touch a house.

 

Tim Benskin [00:06:14]:

Right.

 

Jay Conner [00:06:15]:

That’s amazing. So any takeaways or lessons on this deal you’d like to share, Tim?

 

Tim Benskin [00:06:21]:

Well, we kinda lucked out because when we bought the house next door, I bought it from a wholesaler, and it had a shared driveway. And I don’t usually like to buy shared driveways, but in this neighborhood, they’re kinda commonplace. So after looking at it, there wasn’t a shared driveway agreement with the 2 properties. So what we did is when we bought the other property, we did a shared driveway agreement and had our attorneys do that, and that made the other house sell for more money because we had an agreement in place.

 

Jay Conner [00:06:59]:

Love it. Love it. Fantastic. Tim, congratulations on this amazing deal, and I’m giving you right now the very, very sophisticated golf clap right there. Thank you so much, Tim, for sharing. Valuable lessons right there.