Real Estate Investment
Five Things to Know About a Letter of Intent
Today I’m going to be talking about your letter of intent. What has to go in this letter of intent? If you don’t know what that means, a letter of intent means your intent to purchase a property. Who’s the letter going to go to? How are you going to write it? What should it say? What won’t it say? What will you include? What reinforcements? I’m going to share with you today, the five things you must say on this letter of intent to get everybody’s attention, to get you the deal and make you top of the seller’s list. The most important question is not how much. How do I make sense of it? Where do I get the money? How do I get financing? How do I get a return? How do I manage it? Those are not the most important questions. The most important thing in buying real estate is how do I even find the deal? Once I find a deal, how do I get them to sell me the deal? These are the two most important things with apartment investing, multifamily, multiple units. Can I find a deal? Once I find that deal, can I get them to sell me that deal? The reason this is a problem today is because there’s a shortage of great product. You’re going to look around and going to be like there’s no shortage of this stuff. It’s everywhere. You say there’s no shortage. I say get on the phone then and see if you can get a deal because nobody wants to talk to you. They want what’s called a letter of intent. The intent to purchase. The letter of intent is going to include who I am, how I’m going to close, the date. It’s the terms of the deal without getting into a purchase and sale agreement. The bank is going to help you lay out the legalities of your transaction. If you’re doing a four-unit, eight-unit, twelve-unit, thirty-units, or three-hundred-unit deal. That’s one of the reasons why loans are good – because the bank will lay out exactly how they want that agreement. So, in my first few deals, I didn’t know anything. Nothing. I knew nothing. I did not get a lawyer. I did not go buy an LLC. I didn’t hire somebody to walk me through it. I did not go to a school, nor did I read a book. What did I do? I got a partner. The partner was the bank. Again, what is a letter of intent? A letter of intent is a written document suggesting the intent to purchase something. I could use the letter of intent to buy a business. I could use the letter of intent to get a job. I could use the letter of intent to buy an apartment. But first, you need to find a deal. Then you commit to the deal. See, most of you try to find out where the money is first. I don’t need to figure out the money first. Without a commitment, you’re not going find the money anyway. The letter of intent needs to include your bio and your wealth situation. If you don’t have one, you need to hook up with somebody that has one. You need a story. Everybody likes a story. You also need to include terms – price, closing date, financing, and if you need any due diligence. You also need to include the deposit amount. How much money am I giving? If you got big cajones, maybe you give him a check right now and get their attention. These are the five main things, but before you do the five main things, sell yourself with your bio. Use it to talk about your experience. How many properties do you own? Include everything that’s positive. Come up with a list of things that you love about yourself. This is where my books come in, Sell Or Be Sold, Be Obsessed Or Be Average. The 10X Rule… Your bio can include your bank partners and how much property you have. It would include that you’ve never gone bankrupt. I’ve never gone bankrupt or gone bad on a loan. The fact that you’ve never renegotiated the loan package. No lawsuits going on, having great credit. A quick word on due diligence. All I need is about 21 days. Keep it short. The more you add time, the more you show the lack of the assurance to close and commitment. And the last thing is the deposit. Don’t be so scared of the deposit. And by the way, I haven’t gotten a lawyer involved… Remember, find the deal and commit. Create a great letter of intent to stand out from the crowd and sell yourself. Make sure you have a bio, and your LOI has terms like price, closing date, financing, due diligence and deposit in it. Invest every penny, every penny into income-producing real estate. As long as you can hold on for a long period of time, I promise you your money will become worth more money – as long as you pick the right properties in the right locations, manage them correctly and can hold on.