The Creative Financing Podcast
Episodes
Monday Sep 27, 2021
Ep 178 pt.3 Understanding Creative Financing; All The Strategies
Monday Sep 27, 2021
Monday Sep 27, 2021
In this series we talk about understanding creative financing, the strategies used, and the pro’s and con’s of each. Here are the different strategies and how they pertain to the following …
Title Transfer
Foreclosure
Taxes
Due on Sale Clause
Maintenance and Repairs,
Closing and Transfer tax
Lease Options- No title transfer, so no closing or transfer tax, no foreclosure, only eviction. No Due on sale. Maintenance can be passed on to the tenant. Taxes are typically paid by the Landlord.
Contract For Deed/Land Contract- No title transfer, there is typically a closing but no transfer tax until the contract is fulfilled. No foreclosure just a Forfeiture process, which differs state to state. Taxes paid by Buyer, Buyer responsible for maintenance and repairs because this is a sale.
1st position Trust Deed and Note- Only used when property is free and clear. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process. Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the property was free and clear.
Seller Subordination- Title does transfer,so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the first mortgage should be paid off at closing. .
All Inclusive Trust Deed/Wrap Around Mortgage- Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. There is a Due on Sale because there is an existing loan in place.
Subject-To- there is no recourse for the Seller to take back the property. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs.. There is a Due on Sale because of the existing loan in place.
We use an example of a property with 4 single family homes on one lot. It needs about 60K in repairs, the seller is asking 110K and owns it free and clear. It can rent for 2400/month with an estimated expense of 800/month, which leaves 1600 in monthly cash flow. We can offer the Seller 750/month principle only. Now with the amount needed in repairs we need to get in light, say 5K, then refinance the property as soon as possible after repairs are complete, in order to recapture our capital. So what strategy do we use? We would just use a 1st position trust deed and note because it's free and clear.
Now Let's say there is a debt of 40K with 550/month payment. Then what? Well we can still offer 750/month, with wrapping their exact loan terms and offer 200 in principal only payments on a second note for the balance of their equity. This is where we would use an All inclusive trust deed and note or wrap around mortgage as our strategy.
Monday Sep 20, 2021
Ep 177 pt2 Understanding Creative Financing; All The Strategies
Monday Sep 20, 2021
Monday Sep 20, 2021
In this series we talk about understanding creative financing, the strategies used, and the pro’s and con’s of each. Here are the different strategies and how they pertain to the following …
Title Transfer
Foreclosure
Taxes
Due on Sale Clause
Maintenance and Repairs,
Closing and Transfer tax
Lease Options- No title transfer, so no closing or transfer tax, no foreclosure, only eviction. No Due on sale. Maintenance can be passed on to the tenant. Taxes are typically paid by the Landlord.
Contract For Deed/Land Contract- No title transfer, there is typically a closing but no transfer tax until the contract is fulfilled. No foreclosure just a Forfeiture process, which differs state to state. Taxes paid by Buyer, Buyer responsible for maintenance and repairs because this is a sale.
1st position Trust Deed and Note- Only used when property is free and clear. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process. Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the property was free and clear.
Seller Subordination- Title does transfer,so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the first mortgage should be paid off at closing. .
All Inclusive Trust Deed/Wrap Around Mortgage- Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. There is a Due on Sale because there is an existing loan in place.
Subject-To- there is no recourse for the Seller to take back the property. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs.. There is a Due on Sale because of the existing loan in place.
We use an example of a property with 4 single family homes on one lot. It needs about 60K in repairs, the seller is asking 110K and owns it free and clear. It can rent for 2400/month with an estimated expense of 800/month, which leaves 1600 in monthly cash flow. We can offer the Seller 750/month principle only. Now with the amount needed in repairs we need to get in light, say 5K, then refinance the property as soon as possible after repairs are complete, in order to recapture our capital. So what strategy do we use? We would just use a 1st position trust deed and note because it's free and clear.
Now Let's say there is a debt of 40K with 550/month payment. Then what? Well we can still offer 750/month, with wrapping their exact loan terms and offer 200 in principal only payments on a second note for the balance of their equity. This is where we would use an All inclusive trust deed and note or wrap around mortgage as our strategy.
Monday Sep 13, 2021
Ep 176 pt.1 Understanding Creative Financing; All The Strategies
Monday Sep 13, 2021
Monday Sep 13, 2021
In this series we talk about understanding creative financing, the strategies used, and the pro’s and con’s of each. Here are the different strategies and how they pertain to the following …
Title Transfer
Foreclosure
Taxes
Due on Sale Clause
Maintenance and Repairs,
Closing and Transfer tax
Lease Options- No title transfer, so no closing or transfer tax, no foreclosure, only eviction. No Due on sale. Maintenance can be passed on to the tenant. Taxes are typically paid by the Landlord.
Contract For Deed/Land Contract- No title transfer, there is typically a closing but no transfer tax until the contract is fulfilled. No foreclosure just a Forfeiture process, which differs state to state. Taxes paid by Buyer, Buyer responsible for maintenance and repairs because this is a sale.
1st position Trust Deed and Note- Only used when property is free and clear. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process. Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the property was free and clear.
Seller Subordination- Title does transfer,so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the first mortgage should be paid off at closing. .
All Inclusive Trust Deed/Wrap Around Mortgage- Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. There is a Due on Sale because there is an existing loan in place.
Subject-To- there is no recourse for the Seller to take back the property. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs.. There is a Due on Sale because of the existing loan in place.
We use an example of a property with 4 single family homes on one lot. It needs about 60K in repairs, the seller is asking 110K and owns it free and clear. It can rent for 2400/month with an estimated expense of 800/month, which leaves 1600 in monthly cash flow. We can offer the Seller 750/month principle only. Now with the amount needed in repairs we need to get in light, say 5K, then refinance the property as soon as possible after repairs are complete, in order to recapture our capital. So what strategy do we use? We would just use a 1st position trust deed and note because it's free and clear.
Now Let's say there is a debt of 40K with 550/month payment. Then what? Well we can still offer 750/month, with wrapping their exact loan terms and offer 200 in principal only payments on a second note for the balance of their equity. This is where we would use an All inclusive trust deed and note or wrap around mortgage as our strategy.
Monday Sep 06, 2021
Ep 175 How To Deal With A Seller’s High Asking Price
Monday Sep 06, 2021
Monday Sep 06, 2021
We use the example of a seller asking 700K for a property worth only 600K. Here are the important things that have to work for you, if you overpay for a property-
These are probably deals you should hold yourself, so you don’t have to convince someone else to over pay for the property.
You need a low down payment because you are already overpaying for.
You need considerable principal paydown. Either by principal only payments or low hybrid interest rate for a longer term.
You need to be able to pick your monthly payment. This is probably the most important thing.
You need a longer term 5-10yrs.
Let's say we offer 700K with 25K down. That's a light down payment. Now we need to pick a payment that works for us. So let's say you can rent this property for 4K/month then you would want your payment to be 2,500/month so you have some cash flow. Now you need a term long enough to end up at an 80% loan-to-value by the end of your term. So that when you refinance or sell the property you won’t have to come up with money out of pocket to do so.
Now what kind of offer can we put together? Well, given that your financing 675K (PV on your financial calculator) and your payment is -$2,500 (PMT on your calculator), you need to play with the term (N on your financial calculator) and the interest rate (I/YR)...
Here is what I came up with.
Purchase price 700K with 25K down. Present Value 675,000. 1.8% interest for 10yrs (120 months) with a monthly payment of 2,500 would give us a balloon payment of $479,582.22 at the end of our term which is right where we need to be for 80% loan-to-value. This offer allows you to over pay, to cash flow the property, and to be in a position to refinance at the end of your term without any significant money out of pocket. If the Seller wants a premium price then you need premium terms. By the way, if you can find a deal like this, you could earn about a 50% cash on cash return. That’s the power of Creative Financing.