Sometimes it’s impossible to try to gulp down two deals in a single transaction, so a sequential structure provided by a split real estate option is required. Tim needed $10,000 to buy into a special stock deal. George only had $5,000 and he was holding on to it. Tim offers George a $10,000 cottage plus an Option on a lot he values at $13,000 in return for $5,000 cash plus George’s promise of an additional $5,000 within 30 days to close the Option on the bargain lot. Tim then OPTIONS the stock with his $5,000 to hold it for 90 days.
George takes title to Tim’s cottage and immediately advertises it for sale for $9999 with a $3,000 down payment and the balance to be carried back at 7%, fully amortizing with $175 payments per month for 46 months. With his low interest rate and reasonable down payment he finds a buyer right away. That gives him $3,000. He takes the fully qualified buyer’s 1st Mortgage and Note to his bank and PLEDGES it for a $6,000 loan in cash. From this, he takes $5,000 and gives it to Tim. HE PUTS $3000 PLUS $1000 PLUS THE $13,000 LOT INTO HIS POCKET AS GAIN.
His $175 payments from the buyers is just enough to cover his payments on his note to amortize them at the same rate. He is left with only $1,000 remaining in his investment in the land. The bottom line is that Tim got what he came for, and so did George.
| TIM WANTS: $10,000 | GEORGE OFFERS: $5,000 PLUS |
| GEORGE GIVES: $5,000 FOR HOUSE | OPTIONS LOT: $5,000 IN 30 DAYS |
|
PLUS 30 DAY OPTION ON LOT. AS A CONDITION OF THE PURCHASE. |
|
| TIM GETS $5,000 MORE FROM GEORGE | HOUSE SALE NETS $3,000 PLUS NOTE. |
| FROM BANK LOAN PROCEEDS. | NOTE IS PLEDGED FOR $6,000 AT BANK LOAN. |
| TIM BUYS HIS STOCK BY CLOSING HIS NOTE PAYMENTS REPAY BANK LOAN. |
|
| STOCK OPTIONS WITH THE CASH. | ENDS UP WITH $4,000 CASH PLUS $13,000 LOT. |
