True Investing: Why You Should Always Make Two Offers

Cody Sperber
By Cody Sperber |

You know, when I first started investing I really didn’t give a flipitty-flip about cash flow.

Young and green, I really only cared about creating a spread between the low price I could get a property under contract for and the higher price I could quickly flip to another buyer for.  That’s why the idea of wholesaling appealed to me right from the get-go, and like a junkie I was quickly addicted to the fast, easy payouts and ability to “invest” with no money or credit.

Fast forward a little…

Two years into my full time wholesaling investment strategy (which was humming along quite nicely by then) I decided to take some time off and just enjoy life.  After a few bumps and bruises along the way (part of the journey) I’d cracked the wholesaling code and was banking an average of $30,000 a month at the time. I knew I could easily just flip a house quickly if I needed any extra money.

Huge, huge, HUGE mistake.

During that same time the market crashed (remember the end of 2006?) and suddenly I couldn’t flip a deal to save my life.  I was burning through all my savings and suddenly face the realization that I was never truly “investing” in the first place.

Instead, I had built myself a full time job wholesaling houses.  A very nice paying and fun job, to be sure. But since my income still very much depended upon my productivity and the income was transactional, not passive. And now that all the cash buyers dried up I was out of a job, the paychecks stopped and I started panicking.

Light bulb…

I instantly changed my philosophy on investing and began focusing 80% of my time on creating cash flow through long term buy-and-holds.

lightbulbMy aim from that point became to always offer motivated sellers their choice of two entirely different offers:

The first offer was my Maximum Allowable Offer (MAO) at wholesale pricing – typically calculated by taking the current market value of a property and subtracting out estimated repairs.  Then I would take that number and multiply it by 70% and finally subtract out what I wanted to make as a wholesale fee. The final number would be my cash purchase price.

The second offer would be my “terms” offer, in which I would offer to pay seller’s full asking price, but making a negotiated monthly payment, usually at zero percent interest rate. With this type of structure, I could sometimes offer to pay even more than the seller’s full asking price – so long as the payments and interest were low enough to make it a smoking deal for me.

For these “terms” offers, I also always try to stretch the length of the agreement out 10 years or more years which would allow me plenty of time to decide what I wanted to do with the property.

Now this type of offer will typically only work if the seller has decent financing in place or if they own the property free and clear. But my belief is you should always make the terms offer anyway, because you just never know for sure, do you?

Most investors make the mistake of assuming the seller wouldn’t even consider an offer like this – especially if they’ve already locked into a cash price. But the truth is, you just never know – many sellers haven’t considered it yet because they’re not even aware it’s an option. The fact is your Average Joe may have heard the term “owner financing” at some point, but likely has very little concept of how it might work for them in real life – it doesn’t even make their radar.

But once you lay it out for them in plain English, specifically highlighting the benefits to them, well you’d be surprised how many sellers will very seriously consider a “terms” offer like this.

Let’s make this tangible…

wineHere is an example of my two offer approach on a property where the motivated seller owns a house currently worth $100,000 (just to use round, easy numbers here) which he purchased 10 years ago for $50,000. His current mortgage costs $485 a month and he currently only owes $30,000 left on the loan.


Initially I would offer him $56,000 cash for the property which is my Wholesale MAO.  I calculated this number by taking the current market value ($100,000) and subtracting out the estimated repairs ($15,000 – again, I just made this # up for the purpose of this exercise).  Then I would subtract out what I would want to make as a wholesale fee which in this case is $5,000 then multiply the final number by .70 (70%).  This would give me $56,000

If the seller started back peddling, then I would slowly allow them to talk me into paying more in exchange for the seller carrying back part or all of a note at 0% interest.  My goal is to have immediate cash flow and allow amortization to occur and help me quickly build equity.


My second offer would be a “terms” offer where I would pay $100,000 or even $105,000, but the seller would have to carry back $90,000 – $95,000 at 0% interest.  I would offer $10,000 down and take over the payments of $485/month (including taxes and insurance) for the remaining balance of the original loan.

Side note: This is often referred to as a “Subject To” transaction because I am taking over the sellers property subject to the original loan.  This doesn’t mean I am assuming the loan in the same way banks might offer “qualifying assumable” loans. Rather this is just me, making payments to the lender on behalf of the seller – the loan stays entirely in the seller’s name.

Back to the numbers at hand, on top of the $485/month mortgage payments, I may even offer to pay a $100 a month directly to the seller just to sweeten the deal. Why would I do this?

Let’s take a look at how this would all play out…

  • My cash invested up front in the deal would be $10,000;
  • My goal would be to quickly get the original seller out of the property, clean it up, and rent it out for full market rent, which for this example is around $750 a month;
  • So my cash flow would be in the positive, to the tune of $165 a month after all expenses.
  • My first year or two I would be applying all the money the property earned to pay down the underlying mortgage.
  • Eventually it would get paid off, and my monthly cash flow would jump by $485 a month minus whatever the taxes and insurance costs each month.
  • Plus over time I would be raising the rent on my tenants and increasing cash flow there as well.

In theory I could do as many of these deals as I could get my paws on. And even if I didn’t have the $10,000 to put down, I could always get creative and break the $10,000 into equal monthly payments that would pay it out over the first year or year and a half from the positive cash flow the property produced.


catOver time you would literally have enough cash flow from these deals, that you could stop working altogether if you wanted, and just live off the income the properties produced. This, my friend, is what the real estate investing dream is really all about, isn’t it? This is how you get rich by investing in real estate, and it’s an approach that creates wealth and not just a paycheck.

Again, I’m not knocking wholesaling. I still wholesale a crap-ton of deals every month – it’s our primary mechanism for generating chunks of cash today, and I’m a big fan.

But if you’re looking for the long-haul – if you’re aiming for truly being a real estate investor and not just a real estate dealer, then you need to start seriously thinking about the approach I just described.

It’s easy – just start crafting at least two separate offers on every deal. Don’t assume anything about what the seller will or won’t likely consider. You’re in inside their brain, and believe it or not, many sellers deep down are motivated by more than just the potential cash they can get. Older people would often love to add some extra monthly income to their life if they can, for example.

Don’t assume – just make more than one offer and make one of them a “terms” offer that works great for you. Let them decide which one works best for them.

Also remember this: YEILD IS EVERYTHING in the cash flow business.  In the scenario I just laid out for you, my yield is huge off of just a $10,000 investment and a little creativity.

Now get out there and start making offers to motivated sellers that have equity and decent financing.  I know you may think there are not out there, but they are.  You would be surprised at how many free and clear properties there are – you just have to go hunting for them.  Even in areas decimated by foreclosures you can still find solid deals if you learn how to market for them.

To your continued success,

Cody Sperber

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