In this lesson we'll discuss "taking it to lunch", but what does it mean?
LET'S START WITH A QUESTION
If you show up at an auction and there are only you and 2 competitors there, what do you do?
1) Do you leave and let the competition buy it?
2) Do you bid agains them and jack the price up way high?
3) Or do you join the competition, let one of them buy the house for $1 over starting bid, and then the 3 of you "take it to lunch"?
Option #3 is obviously the best business choice, the property was bought for $1 over starting bid instead of $30,000 or more, $29,000+ were saved today.
BUT HOW DO YOU MAKE MONEY "TAKING IT TO LUNCH"?
For this example, Gary and Louis are your competitors and Gary was the one that "brought it in" for $1 over starting bid
At the lunch table, a small auction begins,
1) Louis say $1,000, I say $2,000, and Gary says $3,000.
2) Louis say $4,000, I say $5,000, and Gary says $6,000.
3) Louis says "I'm out", I say "me too", Gary pays Louis and me $3,000 each which totals the $6,000 winning bid.
Do you see the benefits for everyone involved?
YOU BASICALLY GET PAID TO SHUT UP AT THE SALE
1) Louis made $3,000 without spending the $40,000 he was prepared for the house
2) I made $3,000 without spending the $45,000 that I was prepared to pay for the house, I was going to beat Louis.
3) Gary bought the house for $26,000 ($20,000 loan balance which is the starting bid + $6,000 for the lunch auction winning bid) instead of the $50,000 that he was prepared to pay for the house.
WIN WIN WIN
As you can see, Gary was going to wipe out both Louis and me with a $50,000 highest and best offer at the sale.
Louis and I would have gone home empty handed bitching at Gary behind his back, lol
But instead, we all came out with "lunch money".
Obviously, the numbers are 10 times higher on a property 10 times more expensive, this example was just a 3 bedroom house "coming out" at a $20,000 starting bid at the bank auction, aka, "foreclosure sale".
HOW FAR UP CAN LUNCH MONEY GO?
My best "lunch money check" was a bit over $250,000 on a $12,000,000 stripcenter that "came out" at a $6,000,000 starting bid but I've seen others make much more.
Obviously, a $250,000+ lunch money check is very extremelly unusual and it only happened to me once but it happened to me and 2 others on that deal so I am not unique whatsoever.
But... $3,000- $20,000 is common.
SUMMARIZING THAT STRIP CENTER DEAL
$750,000 was paid by the "lunch auction winner" ($250,000 x 3) to buy that $12,000,000 strip center for $6,750,000,
About half price and 90% occupied...
HERE IS THE CATCH THOUGH
To be able to do this, your competitors must know that "you are for real", that you are a real buyer with a history of buying at auctions, you must be a real competitor in their eyes.
Otherwise they are not afraid of you and will never "take you to lunch with them".
So this won't happen to you the first or second year in business but now you know the importance of "becoming for real" this year.
IF YOU ARE COACHABLE, I WILL MAKE YOU REAL
I have vested interest in your success as my partner.
I have a 100% success rate so you will only fail if you refuse to be coachable and do exactly as I say, capisce?
FAILURE IS NOT AN OPTION!!!
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I have a simple "Mr. Myagi type wipe on / wipe off" approach that has worked on my entire team of students the past 20 years.
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Only your resistance to my instructions leads to failure.
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