Creative Financing For Buyers & Sellers

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Bill Tan, President of the San Diego Creative Investors Association gives a presentation to the Ideal 4 Investors Network.

Transcript of Creative Financing For Buyers & Sellers

  • 1. Continued Success on Your Path . . . JD & Suzanne MorrisIdeal 4 Investors Wednesday Night Online Seminar Series March 12, 2008 Creative Financing Strategies For Buyers and Sellers www.ideal4investors.com(877) 825-3508

2. March 19 Short Sale Property Tour Wednesday Night Online Seminar Series Online Seminar: April 16 Investing Your IRA in Real Estate With Lisa Moren Bromma Author & Special Advisor to the Entrust Group www.ideal4investors.com(877) 825-3508 3. Suburban Atlanta Pre-Filled Lease Option Purchase Price - $189,680Builder Paid Closing Costs Up To $5,690Future Sale Price - $214,338 (lease purchase in place) Option Payment - $10,717 (100% yours to keep) Monthly Rent - $1,664 (lease is in place) Your Estimated Monthly Payment - $1,362 Estimated Monthly Cash flow - $136 Total Estimated Out of Pocket After Move in - $11,352 $18,899 Year 1 Gross Profit Order Your Free Investment Guide: www.ideal4investors.com(877) 825-3508 4. Creative Financing Strategies Creative Financing Strategies For Buyers & Sellers For Buyers & Sellers presented by Bill Tan Bill Tan Investments, Inc presented by Bill Tan Bill Tan Investments, Inc 5. Contact Me Contact Me Bill Tan BT Investments, Inc (760) 634-0492 [email_address] Bill Tan BT Investments, Inc (760) 634-0492 [email_address] 6.

  • How do you pay for real estate purchases?
    • Cash
    • Loans

Lets Think Lets Think 7.

  • How do you pay for real estate purchases?
    • Cash
    • Loans
    • Other

Lets Think Lets Think 8. First First You must develop an interest in your fellow man. You must develop an interest in your fellow man. Care about the people as you listen to them. Care about the people as you listen to them. 9. Keep In Mind Keep In Mind People dont care how much you know until they know how much you care. People dont care how much you know until they know how much you care. 10. People & Business People & Business If the sellers are afraid, they wont do business with you. If the sellers are afraid, they wont do business with you. Make people feel secure & they will do business with you . Make people feel secure & they will do business with you . 11. Think On This Think On This Real Estate is a thinking mans game, not a running mans game. Real Estate is a thinking mans game , not a running mans game. Chuck Chatham Chuck Chatham 12. Clarify Clarify Define what the problem is AND make sure the sellers understand their problem. Define what the problem is AND make sure the sellers understandtheirproblem. 13.

  • Write down a proposed solution without considering its feasibility: then set it aside.

Problem Solving Problem Solving 14.

  • Come up with at least two more proposed solutions. Be sure to think them through carefully & individually and write them down also. Youwant multiple possibilities in caseone solution wont work. If you spend time thinking about aproblem: you come up with bettersolutions, you improve the solutions andmake them safer.

Problem Solving Problem Solving 15.

  • Write down the benefits for the sellers and you.
  • Write down the documents that will be necessary to transfer the property in your deal.
  • Determine which solution is most feasible and go out and implementthe most feasible solution.

Problem Solving Problem Solving 16. Note! Note! DO NOT MENTION MONEY IN ASSOCIATION WITH THE SELLERS EQUITY BECAUSE YOU DO NOT WANT THE SELLER TO CONSIDER THEIR EQUITY AS MONEY. DO NOT MENTION MONEY IN ASSOCIATION WITH THE SELLERS EQUITY BECAUSE YOU DO NOT WANT THE SELLER TO CONSIDER THEIR EQUITY AS MONEY. 17. Another Note Another Note SELLERS ARE NOT MONEY LENDERS. They are selling an asset & EXTENDING CREDIT, NOT CASH. SELLERS ARE NOT MONEY LENDERS. They are selling an asset & EXTENDING CREDIT, NOT CASH. 18. A Quote To Use A Quote To Use USE WHAT YOU HAVE, TO GET WHAT YOU NEED, TO GET WHAT YOU WANT. USE WHAT YOU HAVE, TO GET WHAT YOU NEED, TO GET WHAT YOU WANT. Mike Cantu Mike Cantu 19.

  • Paper Out
    • Financing the Down Payment
    • Creation of Wealth
    • Share the Wealth
    • Shared Appreciation Mortgage
  • 2. Blanket Mortgage

Ideas Ideas 20.

  • Partners
    • Owners/Renters
    • Down payment
    • Monthly payments or negative cash flow
    • Financial statement
  • Substitution of Collateral

Ideas Ideas 21.

  • 5. Life Insurance policy
  • 6. Assume the Sellers Obligations
  • 7. Use Talents or Expertise
  • 8. Split off part of the property
  • 9. Refinance things
  • 10. Options

Ideas Ideas 22.

  • Seller Financing
  • Junior Bene Buyout
  • Wraparound Mortgage (AITD or All Inclusive Trust Deed)

3 Ways To Help 3 Ways To Help [ andProfit ! ] [ andProfit ! ] 23. The ARM Alarm The ARM Alarm 24. A Quote Of Note A Quote Of Note (s) (s) If you cant find notes, make them. If you cant find notes, make them. Jimmy Napier Jimmy Napier 25.

  • Program Basics
    • Property must be purchased at 50% LTV or less
    • Property cant be trashed
    • Buyers must have sufficient income

Seller Financing Seller Financing 26. Seller Financing Seller Financing A Sample Scenario A Sample Scenario Purchase a $400,000 property in foreclosure at retail for $200,000 Purchase a $400,000 property in foreclosure at retail for $200,000 27.

  • Breakdown: Investor Costs

Seller Financing Seller Financing $280,000

  • Total

$34,000

  • closing costs

$20,000

  • rehab costs

$6,000

  • taxes, utilities, insurance

$10,000

  • holding costs

$10,000

  • points and fees

$200,000

  • hard money loan

28.

  • Breakdown: Property Sale Costs

Seller Financing Seller Financing 600+

  • Buyers Credit Score

$30,000

  • 2 ndmortgage (Trust Deed) 10 years at 10% interest only $250. 00 /month

$350,000

  • 1 stmortgage (Trust Deed) 30 years at 8% due in 10 years 2,568. 18 /month $307,035. 73balloon

$20,000

  • down payment

$400,000

  • sale price

29.

  • Breakdown: Investor Steps

$350,000

  • create 1 stmortgage

$280,000

  • sell 1 stmortgage this pays ALL costs!(hard money, rehab, sales costs, etc)

(now&later) $20,000 now $3000 annually

  • collect your cash! down payment from 1 st(= cash profit!) annual income from 2 nd(= cash flow!)

$30,000

  • carry 2 ndmortgage (= $250/month!)

$400,000

  • sell property

Seller Financing Seller Financing 30.

  • If you do just one deal each month, heres what happens over time

Seller Financing Seller Financing profit $240,000cash now! $36,000/yearcash flow!

  • 1 styear 12 deals * $20,000 12 deals * $3,000

more profit $240,000cash now! $108,000/yearcash flow!

  • 3 rd year 12 deals * $20,000 3 years * $36,000/year
  • in comparison, to create that much passive income with traditional rentals, an investor would need to rent out

value needed $108,000 3.5% = $3,085,714 (yes, thats 3 million!) of free and clear properties! 31.

  • If you do just one deal each month, heres what happens over time

* passive income after just 3 years $108,000 $108,000 3.5% * Investors commonly use 3.5% as an average estimate for expected net ROI Seller Financing Seller Financing profit $240,000cash now! $36,000/yearcash flow!

  • 1 styear 12 deals * $20,000 12 deals * $3,000

more profit $240,000cash now! $108,000/yearcash flow!

  • 3 rd year 12 deals * $20,000 3 years * $36,000/year
  • in comparison, to create that much passive income with traditional rentals, an investor would need to rent out

value needed $108,000 3.5% = $3,085,714 (yes, thats 3 million!) of free and clear properties! 32.

  • Program Basics
    • 1 stand 2 ndin default
    • Work with owners to sell house on a short sale
    • Looking to get a discount ofat least 85-90% on 2 nd

Junior Bene Buyout Junior Bene Buyout 33. Junior Bene Buyout Junior Bene Buyout A Sample Scenario A Sample Scenario Purchase a $100,000 note for $5,000 and make $30,000 Purchase a $100,000 note for $5,000 and make $30,000 34.

  • Breakdown: Scenario $Out&$In

Junior Bene Buyout Junior Bene Buyout $30,000

  • collect your cash!

- $225,000

  • pay off 1 st +closing costs $200,000 + $25,000

+ $260,000

  • short sale of property