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.