Augie 
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My grand mother baked the most amazing pies! Apple, cherry, lemon meringue and my favorite… chocolate crème pie. We didn’t have the Great American Pie Festival as we do today, but had it existed back then…she would have been tough to beat. As a boy I remember my mom asking grandma how she made that fabulous pie crust. Grandma’s response was priceless because since she had been making pies for many years, she basically did it by feel. She told my mom that she took a little flour, some water, egg, baking powder, salt and whatever and mixed it with her hands and when it felt right she rolled it and it went into the oven. As my wife Audrey likes to say, “you take a little of this and a little of that.”
My mom was absolutely flustered because she was looking for a recipe, how much flour, how many eggs, was it a special brand of flour or baking soda? Exactly how long did it have to bake? Needless to say, while my mom could make a Duncan Hines cake with the best of them, she never, ever baked a pie. So what does this have to do with real estate investing? Simply this, recipes for successful investing may be harder to come by than you think and every time someone tells you they have a system…you had better recognize the fact that it will likely have its limitations. And like grandma’s pies, it can take years to perfect!
I was recently asked the question, “What exactly is Transaction Engineering?” It is a subject I speak about regularly but seldom define because when you have been doing something for a long time you learn to use, “a little of this and a little of that.” But since I was asked a direct question I had to think about a more direct answer. What follows is my answer.
Fundamentally, Transaction Engineering is the art of creating win/win transactions either on the buy side or the sell side of a real estate deal. We thoroughly explore the prospect’s needs and work toward a mutually beneficial solution. As an example, the conventional way to buy or sell a house is to call a realtor, find a house, go to the bank or mortgage broker and obtain a loan. When supply and demand are running equal, prices are stable and credit is available…and for the average person this process works great!
Now what happens when I have to sell my house in 30 days because I’m being transferred to California? Or a couple is divorcing and they want out fast because neither wants to continue making payments in a place they no longer live? Especially when it took two salaries to qualify and neither one can support the house on their own. How about the situation where the market drops 30% and you’re now 130% financed?
Maybe you are looking to buy and have had some past credit problems or you don’t have enough of a down payment to qualify with a bank, now what?
For sellers needing to sell quickly, I can frequently buy their house and take over their payments until I 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, I can offer a lease with an option to purchase, owner financing, or I can take something other than cash for a down payment…such as a car, a boat a vacant lot or a cabin in the woods! Will a bank or a builder do that? Not likely.
Transaction Engineering for the real estate investor is akin to a carpenter having a well equipped tool box or a surgeon having all the necessary operating instruments to get the job done correctly, safely, and in a way that everyone involved benefits. In our business it includes acquisition, property management, asset protection, negotiating, and tax planning to name a few.
Transaction engineering is finding out what the other guy’s problem is and working together to solve it. I tell my mentoring clients that if we can’t solve the problem then tell them so and walk away. Investors that can’t engineer transactions usually wind up making someone else’s problem their own. Transaction engineers make the problem go away and everybody wins.
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Great article. Investors helps people. People who can’t turn anywhere else. Investors creates an innovative solution to a difficult problem. We think outside the box and about the box itself. To look past the obvious to find a solution to a sellers dilemma. To create a transaction where the seller gets out of a difficult situation and gets on with their lives.
Amen, my friend, I couldn’t have said it better.
Great info.I like all your posts. It’s good to see you speak from the heart..
Damn, cool website. I actually came across this on Yahoo, and I am really happy I did. I will definately be revisiting here more often. Wish I could add to the conversation and bring a bit more to the table, but am just absorbing as much info as I can at the moment.
Thank You
Houses for Sale in Drogheda
Hi, is there some online seminars or webinars about Property Management on the internet?,`”
Yeah great article.
Thanks for posting!
I think that agents and brokers who view themselves as craftsmen in the art of putting together agreements for buyers and sellers are the ones that will be able to hang in there in this market. Fewer sellers and buyers are willing to use a friend or familiy member for real estate like in the past. They are looking for a pro.
Thanks for the post. I like the term…Transaction Engineering!
Russ Fielden
Broker-In-Charge
Southern Coast Realty
Beaufort SC
Duties of property management include accepting rent, responding to and addressing maintenance issues, and providing a buffer for those landlords desiring to distance themselves from their tenant constituency *’.
Hi Russ,
You are right this is a business for professionals. I wouldn’t use my brother-in-law or my buddies to perform surgery, unless they were a qualified surgeon. Its the same with real estate there are both agents and investors who are both knowledgeable and professional as well as those who are not. Using a pro can make a huge difference in the engineering of a successful transaction.
Thanks for the comment!
To your success…
Augie
Hi,i totally agree that Transaction Engineering is the art of creating win/win transactions either on the buy side or the sell side of a real estate deal.
So many new investors will put money into advertising. They’ll setup their office. They’ll print business cards. They’ll run ads. That phone will ring. They’ll look at a strange number on their caller ID and say, “I’m letting it go to voicemail.” If you sit down and figure the average cost of a quality lead, it might be $1,000, but if you figure the average transaction should net about $27,000, how many times would you spend $1,000 to make $20,000 or more?
That’s the idea, when you invest marketing and advertising dollars…be prepared for the leads in order to capitalize on your investment.
Check out Mike at MikeButler.com!
I couldn’t agree more with @mercy. I can’t tell you how many would be entrepreneurs I’ve met who are “afraid” to talk directly to prospects. I’m in the lead generation business. So I generate qualified leads in a variety of industries (real estate being one of them). People pay me big bucks per lead to take those phone calls and pre-qualify prospects. It’s certainly a “win” situation for me, but I’m not doing anything they couldn’t do on their own. Sometimes it’s a time issue, but more often than not, it is an innate fear of talking to strangers on the phone. I don’t quite get it, but I’ll “take it” all day long.
“Transaction Engineering for the real estate investor is akin to a carpenter having a well equipped tool box or a surgeon having all the necessary operating instruments to get the job done correctly, safely, and in a way that everyone involved benefits. This is soo true..its also like buying a nice furniture set and you know to ensure safety, you need to contact an expert to take care of the furniture assembly. Nice one..its been a long time since the last time I read something like this..something that is full of actual content..great article!! It was worth my time reading it..
I find out a thing new on a range of blogs and forums day-to-day. It is usually exciting to see content of other internet writers and learn a little a thing from their site. Thanks for giving.
Very well said, Augie. I couldn’t have said it better. This post is really very informative and reminds us to see real estate in another manner.
Augie great job on making other options easy to understand for others.. There are so many more options than just relying on a big dumb financial institution that has little to offer in the way of creative financing.
The numbers still have to make sense to all involved. But if there is a will then there is a way.
Michael
Thank you Michael. Options are one of the most flexible tools for helping sellers, buyers, and tenants to get their needs met. They are also a great tool for helping mortgage professionals increase their prospect base, fill their pipeline full and produce more revenue as they help get the optionees qualified for new financing. I agree the numbers have to make sense.
Happy investing…
Augie