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July 29, 2019 @ 3:00 am

Ep 065 How Dustin Hamel (a fellow listener) Structured His First Creative Financing Deal

Dustin Hamel invests in the Fresno California market and has been a follower of our podcast from the beginning. Listen closely as Dustin explains how he was able to offer the Seller more than he would on a standard flip, create a 10yr term at a low interest rate with a small down payment and meet the Seller's needs.

This is a rudimentary episode for anyone who has yet to do their very first creative financing deal because Dustin explains in detail how he presented the option of owner financing to the Seller and how he was able to negotiate a good deal for himself and for the Seller. The Seller was able to net more money opposed to selling for cash and receive a monthly income from the property which she wants to pass on to her heir. This is a great example of using creative financing to create a true win/win deal, and you can do it to!

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July 22, 2019 @ 3:00 am

Ep 064 Contract For Deed In Detail

This episode is all about Contract for Deed. Contract for Deed sometimes called a Land Contract or Bond For Deed is a creative financing strategy were the title or deed of a property is held in ESCROW and does not transfer to the Buyer until the contractual obligations are satisfied. Contract for deed is a form of owner financing that involves signing a deed at closing, but the deed is not transferred to the buyer until the entire purchase price is paid in full, instead the deed is held in ESCROW until that time.

It is very similar to buying a car. The Buyer owns the car but does not have the title until it is paid in full at which time the bank or lienholder delivers the title.

Seller's Benefits for Contract For Deed-

The main benefit of doing Contract For Deed is that it protects the Seller in terms of default. In other forms of owner finance the only recourse the Seller has in case of default is to foreclose on the Buyer. With a Contract for Deed, foreclosure is one option but there are several others including a forfeiture that allows a Seller to reclaim the property within a 60 day timeframe (depending on state/local laws, check with your attorney) through a court hearing.  It costs far less than a foreclosure and takes less than half the time in most states. Keep in mind, all of the money the Seller receives upfront at closing is non-refundable. Therefore, it offers more protections to the Seller than a traditional Trust Deed and Note or Mortgage because title does not transfer up front.

Buyer's Benefits for Contract For Deed-

The benefits offered to the Seller above are reversely the same benefits to the Buyer, because if you have a Seller that is very apprehensive about owner financing or fears the worst case scenario of foreclosure then a Contract For Deed might be easier for the Seller to understand and agree to because the easiest way of explaining it is by the analogy referenced above of buying a car using a bank. The Buyer is the owner of the car but the bank or "Seller" keeps the title. If title does not transfer then foreclosure is not necessary. (This varies by state so be sure to check with a local real estate attorney) Now in order to protect the interest of the Buyer a Notice of Interest or similar is filed at closing on title that way clouding title so that the Seller can't sell the property out from under the contract. This along with the Contract, Bill of Sale, and a Quit Claim Deed held in ESCROW offers the exact same benefits as an owner of the property without being on title because you have equitable interest.

Of course the safest and most secure way to own a property as a Buyer is to transfer title but think of this strategy as a tool in your toolbox and use it in leu of a Trust Deed or Mortgage when a Seller absolutely won't agree to transferring title but is open to carry financing.... It could be THE difference in getting the deal done.

 

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July 15, 2019 @ 8:58 am

Ep 063 Pt. 2 Right and Wrong Ways of Deal Structuring

On this episode Jeff and I talk about the right and wrong ways of deal structuring by comparing offers made by one of Jeff's former apprentices. He reached out to Jeff and asked for help, Jeff had him create some offers and send them to him, then Jeff created some offers on the same properties and they compared notes. These episodes really illustrates the way Jeff stacks his offers and the way he presents them. This may be hard to follow without having visual representation but the key take-aways are this:

#1-  Always send multiple offers in a simple to read Letter of Intent.

By sending multiple offers, the perceived effect on a Seller is that they have to pick one, which lowers their threshold to negotiate. Also by keeping it simple you won't confuse them with jargon and/or information overload. 

#2- Stack your offers from highest to lowest.

Typically highest purchase price with longest term, and lowest downpayment will be your first offer, then lower the purchase price with each succeeding offer to your short term financing offer, then to your last and lowest offer which should be your cash offer on your letter of intent.

#3- Differentiate your offers enough so that you give a certain benefit to your seller to pick one offer over the other.

i.e. such as a higher purchase price, a higher down payment, a higher interest rate, or a shorter term. If all of your offers are netting the Seller the same amount of money especially if it's over a shorter period,  they have no incentive to take a longer term offer or one with less money down.

#4- Spell out the benefits with each offer.

i.e. show the Seller what they are netting or grossing total over a longer term offer or highlight the higher down payment or higher interest rate, or shorter term etc.. Make the benefit of each offer clear so that the Seller has a compelling reason to pick one offer over another.

#5- High light the additional benefits a Seller will get by choosing a term offer.

i.e. Seller will continue to receive tax benefits of the property (Depreciation) if your offer is a Lease Option. Buyer will be responsible for taxes and insurance (which will increase Seller's cash flow) if title is being transferred. And always mention that the Buyer will be responsible for All maintenance and repairs because that is a huge relief for most Sellers willing to consider terms.

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July 8, 2019 @ 3:00 am

Ep 062 Pt.1 Right and Wrong Ways of Deal Structuring

On this episode Jeff and I talk about the right and wrong ways of deal structuring by comparing offers made by one of Jeff's former apprentices. He reached out to Jeff and asked for help, Jeff had him create some offers and send them to him, then Jeff created some offers on the same properties and they compared notes. These episodes really illustrates the way Jeff stacks his offers and the way he presents them. This may be hard to follow without having visual representation but the key take-aways are this:

#1-  Always send multiple offers in a simple to read Letter of Intent.

By sending multiple offers, the perceived effect on a Seller is that they have to pick one, which lowers their threshold to negotiate. Also by keeping it simple you won't confuse them with jargon and/or information overload. 

#2- Stack your offers from highest to lowest.

Typically highest purchase price with longest term, and lowest downpayment will be your first offer, then lower the purchase price with each succeeding offer to your short term financing offer, then to your last and lowest offer which should be your cash offer on your letter of intent.

#3- Differentiate your offers enough so that you give a certain benefit to your seller to pick one offer over the other.

i.e. such as a higher purchase price, a higher down payment, a higher interest rate, or a shorter term. If all of your offers are netting the Seller the same amount of money especially if it's over a shorter period,  they have no incentive to take a longer term offer or one with less money down.

#4- Spell out the benefits with each offer.

i.e. show the Seller what they are netting or grossing total over a longer term offer or highlight the higher down payment or higher interest rate, or shorter term etc.. Make the benefit of each offer clear so that the Seller has a compelling reason to pick one offer over another.

#5- High light the additional benefits a Seller will get by choosing a term offer.

i.e. Seller will continue to receive tax benefits of the property (Depreciation) if your offer is a Lease Option. Buyer will be responsible for taxes and insurance (which will increase Seller's cash flow) if title is being transferred. And always mention that the Buyer will be responsible for All maintenance and repairs because that is a huge relief for most Sellers willing to consider terms.

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July 1, 2019 @ 3:00 am

Ep 061 Pt. 2- How To Talk To Sellers About Creative Financing

On this series Jeff and I answer a question from one of our listeners about how to talk to Sellers about creative financing. And what you’ll learn is, really, that the less you go into detail about the mechanics of the method used or the documents used, the more success you will have because a confused mind always says “NO”. One of the keys to Jeff’s success is simple; find out first if they are open to taking payments for their equity and if the answer is yes or even maybe, then sending them 3-4 offers and having a conversation with them on which one is the most appealing to them. He only answers the concerns they bring up. He NEVER hits them with how the transaction is recorded on title or what documents are used and how they work, he simply sends the offers in a letter of intent, then asks them which one they like. The more simplistic you can keep the conversation with your Seller the better your chances are of getting them to agree on terms. Also to further add value Jeff and I go into a Seller/Buyer dialog to show you exactly what that conversation sounds like.

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