Sub2 Empire

Why is Creative Financing essential?! Get to know the basics, and gear up by claiming your FREE Subject-To Calculator, click here! https://bit.ly/3OwjgET #CreativeFinancing #RealEstateSuccess #subjectto #sub2empire

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Don't Miss Out! THE Comprehensive Subject-To Masterclass by The Sub2Empire is just a week away!

Join us on June 24 and 25, 2023, from 8:00 AM to 4:00 PM Central Time for an unparalleled learning experience, 100% online.

You'll learn the ins and outs of Subject-To deals from industry experts, empowering you to take your real estate game to the next level. From understanding the legalities to structuring profitable transactions, this class covers it all! PLUS, invaluable resources and tools will be handed out to you for FREE to support your journey in mastering Subject-To deals.

👉 Register now by scanning the QR code or visiting sub2event.com to secure your spot!

#subjectto #realestateclasses #masterclass #creativefinancing

Subscribe to Sub2 Empire on Soundwise

Don't Miss Out! THE Comprehensive Subject-To Masterclass by The Sub2Empire is just a week away!

Join us on June 24 and 25, 2023, from 8:00 AM to 4:00 PM Central Time for an unparalleled learning experience, 100% online.

You'll learn the ins and outs of Subject-To deals from industry experts, empowering you to take your real estate game to the next level. From understanding the legalities to structuring profitable transactions, this class covers it all! PLUS, invaluable resources and tools will be handed out to you for FREE to support your journey in mastering Subject-To deals.

👉 Register now by scanning the QR code or visiting sub2event.com to secure your spot!

#subjectto #realestateclasses #masterclass #creativefinancing

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Unlock the secrets of Subject-To investing at THE Comprehensive Subject-To Masterclass! Join Sub2Empire on June 24-25 from 8:00 AM to 4:00 PM Central Time. Learn proven strategies, negotiation tips, legal considerations, and more. Register now at sub2event.com and seize lucrative real estate opportunities!

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Unlock the Secrets of Subject-To Investing: Join THE Sub2Empire Comprehensive Subject-To Master Class!

Become a master of Subject-To strategies and deals in just 2 days!

Join us from June 24 to June 25, 2023, for an intensive and transformative learning experience. Learn how to create powerful Subject-To strategies, craft foolproof documents, analyze real-life case studies, and safeguard your investments.

Don't miss out on this exclusive opportunity! Register now for only $129 and secure your spot at the forefront of the Subject-To revolution. But wait, there's more! Be among the first to enroll and enjoy our early bird special promo at just $99.00.

Hurry and reserve your seat today! Scan the QR code or visit sub2event.com to claim your spot in the Sub2Empire Master Class. Prepare to unlock limitless potential and pave your way to success in Subject-To investing!

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We're revolutionizing the real estate industry through the power of creative financing. Find out more at https://sub2empire.com.

Listen to what one of our Ultimate Creative REI Blueprint students had to say about her experience.

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📢 We're revolutionizing the real estate industry through the power of creative financing. Find out more at https://sub2empire.com.

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WHAT IS THE FIRST STEP YOU SHOULD TAKE TO GET A CREATIVE REAL ESTATE DEAL DONE?

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Let’s define what a creative deal is.

There are all kinds of ways to get deals done “creatively”, but nearly 100% of the time when you hear the term “creative financing”, what we’re talking about are terms; what are the terms of the deal and how can we structure the terms so that we can build and offer and execute on those terms without creating tons of risk and expense, but also creating a win for everyone involved in the deal?

You have different forms of terms, but many of them involve some form of seller-financing. Full or partial seller carrybacks where your seller is financing the deal for you. They may fully finance your deal or finance a portion of your deal. In either case, many times your seller will want some skin in the game in the form of a down payment, right?

Do you think it matters to a seller where those funds come from?

It matters to a bank, but 99% of the time, a seller could care less where down payment money comes from. So do you think you could get creative with how you source the funds you need for that down payment?

Of course you can!

One of the most basic forms of down payment funding comes from private lenders. It’s an excellent alternative for people who have individual retirement accounts (IRAs) or 401ks that would like to either capture larger ROIs on their money or who are looking to get into real estate; or maybe both.

This is a perfect model for these folks because it allows them to get into real estate with relatively smaller amounts of cash and they are usually going to see greater returns through real estate vs. paper stocks or whatever they may be invested in at the moment. Then you have one of my favorite ways of getting funds for down payments... equity sharing.

Debt financing would be a loan where you have a promissory note and a mortgage. With equity financing, you’re giving your lender a larger piece of the pie and much more protection in the deal because your lender actually OWNS part of the asset. Offering equity in a deal in exchange for down payment money is usually going to cost you more in the long run because you are giving up a portion of ownership in the deal. So let’s say that you offer 25% equity ownership in a deal in exchange for, say $25,000 in down payment money from your lender. Your lender is going to share in any and all profits (Net cashflow, Net profit on the sale or refi).

I love this model because it really incentivizes lenders because their investment is back by NOT just the asset, but actual ownership in the asset. We also incentivize them with the guarantee that once they fund one of our deals, we’ll never ask them for another cash infusion, so it’s our job to make sure that our exit is sound and rock-solid.

The examples I just gave only scratch the surface of what is possible if we just start thinking and taking creative approaches to getting deals done. I have built my entire business over the past 7-8 years around these concepts.

So, what does creative financing really mean? The answer to that question is probably better addressed by explaining what it is not.

It is NOT going to a bank, applying for a loan, qualifying for that loan, providing years and years of personal financial information, collateralizing other assets, risking your personal credit history, giving a blood sample, urine and stool sample. You have to go through this process on every single property you want to buy.

There are loan products out there like DSCR (debt service coverage ratio) loans that will lend, NOT based upon your particular financial situation, but upon the income that is generated from the asset. A lot of these DSCR products cover a wide range of asset classes from SFR’s to Apartment complexes and other commercial properties. There are even DSCR products for buying businesses. But guess what? 99% of these loan products are still based off of your personal credit history AND you still have to go through the rigmarole of applying and qualifying for these loans for every single deal you do. There are tons of people who are willing to go through this process but there is one major hurdle…

Money loves speed.

Most of you know that in this business, we have to move fast. This is a very competitive business. If you have to apply for a loan for every deal, well you’re just going to miss out on A LOT of good deals.

Now, you could use hard money or transactional funding to take these deals down. I recommend that this is the ONLY scenario you use hard money for, but it’s going to cost you. It’s going to be an expense that, many times, is totally unnecessary IF you can wrap your mind around creative financing concepts.

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📢 We're revolutionizing the real estate industry through the power of creative financing. Find out more at https://sub2empire.com.

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Want to know what to do if you’re seller has agreed to subject-to but wants to buy another home after the sale?

Let's break this down...

You have come to an agreement with your seller to buy their property subject-to the existing mortgage. You are taking over the responsibility of paying their mortgage in exchange for the deed to the property. You will be making the payments directly to the lender. It MAY be the case that your seller is going through a rough patch and you’re saving their credit. Or you’re buying their property that has virtually no equity, but YOU, as a smart investor, realize that the property has the potential to cash flow rather well.

The stars are aligning, and then out of nowhere, you’re seller says “will I be able to buy another house if we do this deal?”. All of the sudden, you’re a deer in the headlights

What do you say? What do you do in that situation?

There are a couple of ways to handle this situation. Our job, as investors, is to solve problems. The trick to getting this deal to the closing table is having solutions to the problems that will undoubtedly arise.

What do you do when you’re presented with this question (will I be able to buy another house if I have a mortgage on this house?)

Here’s what you're going to do.

1st, we’re going to look at the property itself. Is this a rental property? If this is a rental property, the lending guidelines imposed by secondary market note buyers (i.e. Fannie, Freddie, etc.) will allow for 75% of the rental income to be credited toward the borrowers DTI. See this link for information... https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of-Income/1032995141/B3-3-1-08-Rental-Income-05-04-2022.htm

This will required that you work with your seller to provide documented evidence of rental income. This can get a little complicated because the borrower is no longer the owner of the property once you close on the deal.

You do have another option. Fannie allows for debt paid by others to be 100% excluded from a borrowers DTI. See this link for more information... https://selling-guide.fanniemae.com/Underwriting-Borrowers/Liability-Assessment/Monthly-Debt-Obligations/Debt-Paid-by-Others/1047098271/When-can-debt-paid-by-others-be-excluded-from-the-DTI-ratio.htm

All that is required to comply with Fannies policies for 100% debt exclusion is simply writing a letter (actually an affidavit) stating that we are “obligated” to make the borrower’s monthly mortgage payments. We have been very successful with this strategy. Our affidavit has been accepted as evidence 100% of the time. But let’s say that property in question is the seller’s primary residence and NOT a rental property. How can you still buy the property without affecting the seller’s debt to income ratio and still be legally protected as the owner of that property?

The answer is pretty simple…

You buy the property on a mortgage wrap. The seller’s loan stays in place, but you’re going to “wrap” their mortgage with a new one. This is accomplished through an “all-inclusive trust deed”. How does this prevent the debt to income problem? How does this keep the sellers new lender from applying the original mortgage to your sellers DTI?

When your seller sells on a mortgage wrap, there are usually terms in the mortgage that provide the seller with INCOME. This not only wipes out the debt but your seller can declare any profit off of a seller-financed mortgage as income. This will offset the DTI deficit. So, here is how this looks in the eyes of the lender...

The borrower (your seller) has sold the property in question. Not only have they sold the property, but they sold it on installments of which they are now generating income off of the principal/interest income is directly applied and actually DECREASES their DTI ratio. You now hold legal title to the property.

Don’t get me wrong, we would much rather take title via subject-to (it’s a cleaner solution), but the DTI problem exists in MANY, MANY situations, and buying on a mortgage wrap can definitely a solution to this problem.

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