The Creative Financing Podcast

On this episode we talk about the last deal we created offers on. What happened and the lessons learned. The Seller initially accepted the Seller Subordination offer but was confused on the down payment so Jeff had to re-negotiate. Jeff explains why sometimes, it’s not in your best interest to make  more offers because the Seller picks and chooses what purchase price they want, with what down payment. Listen closely to find out what happened and how Jeff was still able to get the deal done. And more importantly the lessons learned. Here is the summary of offers-

4 offers.

-Cash $162,220.

-Short term $173,000pp w/20K down. Make the existing payment for 7months. 

-All inclusive 200K w/ 8K hybrid interest 2.5% interest. 900/month payment 36 months. $173,327 balloon.

-Seller subordination of $197,000pp, 90K down, owe 107K to Seller, payments 450/m principle only for 4 yrs. Balloon 85,4000. 7% interest only on first mortgage, payment to be 525/month.  Cash flow estimated to be 313/month.

Deal structuring straight from the CRM- Jonathon’s turn.

Now it’s Jonathen’s turn to structure the offers… In this series we pull leads straight from Jeff’s CRM for some deal structuring. If you are generating leads and want to utilize creative financing then you’ll need to go through the same process as we are in this series. Here are the details of the property and notes on offer structures...

Deal #1

Property info- Wyoming SFH, 3 bed, 2 bath, 1 car garage, 2200 sqft, .23 acre, built in 1963. Occupied by the owner. 74K owed on mortgage. 736 piti/monthly payment. Owner wants to move right away to join husband in Texas who has taken a new job opportunity. Minor repairs needed. Taxes 1421/yr.

Before we create offers we must- Pull comps, check taxes, and pull Rental comps. Sources: Zillow, County Assessor, Biggerpockets and Rentometer.

Worth 260K-270K by realtor opinion. Asking 170-175K. To be structured as All inclusive trust deed/wrap around mortgage for existing loan terms plus new note.

Offers

1. Cash 160K 

1. Short term finance offer 175K. 15K  1,000. At 4%  6months 157,176. Plus taxes and insurance. 

1. Long term 4 yr. 190K 10K 2.5% ,1000/month  Balloon to Seller $148,483. Sell to an owner occ for 275K with 3K. 228,740 Difference $80,257 + 20K =110,257 13,344 cash flow over 4yrs= 13,344+110,257= $113,601. Seller grosses 206,483 over 4yrs.

1. Subordination 210K 80K down. 3yrs Seller financed 130K. 533.33/ month int only to our lender.  500/month principle only to the seller. Seller balloon 112,000. Our Buyer’s  Ballon $233,098= 41,098 difference plus 8,820 cash flow= 49,918 plus 30K down from our buyer = 79,918 profit. 

Hope you enjoy!

Deal structuring straight from the CRM- Jonathon’s turn.

Now it’s Jonathen’s turn to structure the offers… In this series we pull leads straight from Jeff’s CRM for some deal structuring. If you are generating leads and want to utilize creative financing then you’ll need to go through the same process as we are in this series. Here are the details of the property and notes on offer structures...

Deal #1

Property info- Wyoming SFH, 3 bed, 2 bath, 1 car garage, 2200 sqft, .23 acre, built in 1963. Occupied by the owner. 74K owed on mortgage. 736 piti/monthly payment. Owner wants to move right away to join husband in Texas who has taken a new job opportunity. Minor repairs needed. Taxes 1421/yr.

Before we create offers we must- Pull comps, check taxes, and pull Rental comps. Sources: Zillow, County Assessor, Biggerpockets and Rentometer.

Worth 260K-270K by realtor opinion. Asking 170-175K. To be structured as All inclusive trust deed/wrap around mortgage for existing loan terms plus new note.

Offers

1. Cash 160K 

1. Short term finance offer 175K. 15K  1,000. At 4%  6months 157,176. Plus taxes and insurance. 

1. Long term 4 yr. 190K 10K 2.5% ,1000/month  Balloon to Seller $148,483. Sell to an owner occ for 275K with 3K. 228,740 Difference $80,257 + 20K =110,257 13,344 cash flow over 4yrs= 13,344+110,257= $113,601. Seller grosses 206,483 over 4yrs.

1. Subordination 210K 80K down. 3yrs Seller financed 130K. 533.33/ month int only to our lender.  500/month principle only to the seller. Seller balloon 112,000. Our Buyer’s  Ballon $233,098= 41,098 difference plus 8,820 cash flow= 49,918 plus 30K down from our buyer = 79,918 profit. 

Hope you enjoy!

Deal structuring straight from the CRM- Jonathon’s turn.

Now it’s Jonathen’s turn to structure the offers… In this series we pull leads straight from Jeff’s CRM for some deal structuring. If you are generating leads and want to utilize creative financing then you’ll need to go through the same process as we are in this series. Here are the details of the property and notes on offer structures...

Deal #1

Property info- Wyoming SFH, 3 bed, 2 bath, 1 car garage, 2200 sqft, .23 acre, built in 1963. Occupied by the owner. 74K owed on mortgage. 736 piti/monthly payment. Owner wants to move right away to join husband in Texas who has taken a new job opportunity. Minor repairs needed. Taxes 1421/yr.

Before we create offers we must- Pull comps, check taxes, and pull Rental comps. Sources: Zillow, County Assessor, Biggerpockets and Rentometer.

Worth 260K-270K by realtor opinion. Asking 170-175K. To be structured as All inclusive trust deed/wrap around mortgage for existing loan terms plus new note.

Offers

1. Cash 160K 

1. Short term finance offer 175K. 15K  1,000. At 4%  6months 157,176. Plus taxes and insurance. 

1. Long term 4 yr. 190K 10K 2.5% ,1000/month  Balloon to Seller $148,483. Sell to an owner occ for 275K with 3K. 228,740 Difference $80,257 + 20K =110,257 13,344 cash flow over 4yrs= 13,344+110,257= $113,601. Seller grosses 206,483 over 4yrs.

1. Subordination 210K 80K down. 3yrs Seller financed 130K. 533.33/ month int only to our lender.  500/month principle only to the seller. Seller balloon 112,000. Our Buyer’s  Ballon $233,098= 41,098 difference plus 8,820 cash flow= 49,918 plus 30K down from our buyer = 79,918 profit. 

Hope you enjoy!

In this series we go straight to Jeff’s CRM for some deal structuring. Here are some details of the property... 3bd 2bath 2 car garage 2100 sq ft. .16 lot built 2016. Owner lives there. Open to terms. Free and clear. Excellent condition. 108/m HOA. The Seller thinks it is worth 400K. Taxes $2051. Zestimate 339K. We think ARV is 375K to 380K. $1900-$2000 is market rents. What would you structure? We came up with the following….

Offers

Interest hybrid offer-  

395K PP 21K down 374K at 2.5% interest for 3rys. Balloon = 343,346.78.  So what do they net- 1600x36 + 21K + 343,346 = Seller nets 421,946 at end of term. Sell to Owner Occupant for 425 with 10% down at 4% interest for 36months. 

Second offer- 

309K PP 27K down 3.5% over 30yrs pmt 1630/m Balloon 325,600.37. Seller nets 450,400. Sell to Owner Occupant at 425K with 10%down at 4.5% interest for 5yrs.

Third offer- Subordination-

405K PP 70K down borrowed at 6% interest= 350/month interest only on first note. 335K owed to Seller. 1,100/m principal only payments for 42months = 46,200. Minus the 335K= Balloon 288,800 at end of term plus 70K. Sell to Owner Occupant for 425K with 40K down at 4.5% for 42months. Seller owes you 361,984 at the end of term.

In this series we go straight to Jeff’s CRM for some deal structuring. Here are some details of the property... 3bd 2bath 2 car garage 2100 sq ft. .16 lot built 2016. Owner lives there. Open to terms. Free and clear. Excellent condition. 108/m HOA. The Seller thinks it is worth 400K. Taxes $2051. Zestimate 339K. We think ARV is 375K to 380K. $1900-$2000 is market rents. What would you structure? We came up with the following….

Offers

Interest hybrid offer-  

395K PP 21K down 374K at 2.5% interest for 3rys. Balloon = 343,346.78.  So what do they net- 1600x36 + 21K + 343,346 = Seller nets 421,946 at end of term. Sell to Owner Occupant for 425 with 10% down at 4% interest for 36months. 

Second offer- 

309K PP 27K down 3.5% over 30yrs pmt 1630/m Balloon 325,600.37. Seller nets 450,400. Sell to Owner Occupant at 425K with 10%down at 4.5% interest for 5yrs.

Third offer- Subordination-

405K PP 70K down borrowed at 6% interest= 350/month interest only on first note. 335K owed to Seller. 1,100/m principal only payments for 42months = 46,200. Minus the 335K= Balloon 288,800 at end of term plus 70K. Sell to Owner Occupant for 425K with 40K down at 4.5% for 42months. Seller owes you 361,984 at the end of term. 

Details. 3bd 2bath 2 car garage 2100 sq ft. .16 lot built 2016. Owner lives there. Open to terms. Free and clear. Excellent condition. 108/m HOA. The Seller thinks it is worth 400K. Taxes $2051. Zestimate 339K. We think ARV is 375K to 380K. $1900-$2000 is market rents. What would you structure? Here are the notes of what we came up with….

Offers

Interest hybrid offer-  

395K PP 21K down 374K at 2.5% interest for 3rys. Balloon = 343,346.78.  So what do they net- 1600x36 + 21K + 343,346 = Seller nets 421,946 at end of term. Sell to Owner Occupant for 425 with 10% down at 4% interest for 36months. 

Second offer- 

309K PP 27K down 3.5% over 30yrs pmt 1630/m Balloon 325,600.37. Seller nets 450,400. Sell to Owner Occupant at 425K with 10%down at 4.5% interest for 5yrs.

Third offer- Subordination-

405K PP 70K down borrowed at 6% interest= 350/month interest only on first note. 335K owed to Seller. 1,100/m principal only payments for 42months = 46,200. Minus the 335K= Balloon 288,800 at end of term plus 70K. Sell to Owner Occupant for 425K with 40K down at 4.5% for 42months. Seller owes you 361,984 at the end of term. 

What’s too short. What's too long. Do you wait till a market correction. Longer terms means you have way more flexibility and more options for exit strategies. So it depends upon your Seller and your exit strategy. For owner occupants you want 3 yrs to give them ample time to repair their credit. If you are holding it as a rental, always determine the principal pay down you want to achieve at the end of term. And rather or not you can refi the property at 80% loan to value. Ultimately the term has to work for the seller and that is what you have to work around. 

How to make multiple offers- This is really more of a mindset than anything else once you understand the basics and foundation of creative financing. Try structuring offers based on 3 or 4 different exit strategies. That will help you create different types of offers. Offers you can make every time are Cash, short term finance, long term financing, minimum 3yrs or 5yrs. Try to gauge down payment and terms they are open to 358K offer 5% down 10% down. 

Longer Term Offer- 5 to 7 yrs. This is more for an Owner Occupant or a Landlord if you are not holding the property yourself.  Always ask; How long would you like to continue to make money on your property. The Seller must make significantly more if they are holding a note long term because you really need to incentivize them. Offer a higher purchase price, downpayment, and/or interest rate, and show the Seller what they will net or gross at the end of the term. You want the longer term balloon payment to always be less than the shorter term balloon payment because you need more principal paydown over that time.

Subordination- This is where the Seller takes their equity in second position. We borrow the down payment in first position. Always consider what your payment will be on your first position note. You still need the payment to work for you. Plus you still need to offer the seller a note and monthly payment. These are longer term deals because. Offer 1. 358 Offer 2 350. Offer 3. 350 w/100K down. 250K in second position. 2.5% int. 900/month for 48months. 19k paydown. 

Wrap Around Mortgage or All Inclusive Trust Deed- If there is debt on the property, what do you do? It really depends on what that debt is and what the monthly payment is. If you can make a cash offer then you can make a short term financing strategy 6-12months, offer a down payment and offer to make the monthly payment. Ask if they are willing to wait on their equity, this strategy works if you can wholesale to a landlord or hold it longer term. Or if you can use it as an AirBnB or rent rooms out individually to create more cash flow. Break it into its component parts, 1 is debt, 2 is the Seller’s equity. Another option, You can offer to pay interest only payments on the Seller’s equity to keep you payment lower especially if the loan is further along in amortization to get more principal paydown. 

Hope you enjoy, And to get special access to a step by step video on how to structure creative financing offers, text CFP to our hotline at 877-409-8090 or click HERE.

How to make multiple offers- This is really more of a mindset than anything else once you understand the basics and foundation of creative financing. Try structuring offers based on 3 or 4 different exit strategies. That will help you create different types of offers. Offers you can make every time are Cash, short term finance, long term financing, minimum 3yrs or 5yrs. Try to gauge down payment and terms they are open to 358K offer 5% down 10% down. 

Longer Term Offer- 5 to 7 yrs. This is more for an Owner Occupant or a Landlord if you are not holding the property yourself.  Always ask; How long would you like to continue to make money on your property. The Seller must make significantly more if they are holding a note long term because you really need to incentivize them. Offer a higher purchase price, downpayment, and/or interest rate, and show the Seller what they will net or gross at the end of the term. You want the longer term balloon payment to always be less than the shorter term balloon payment because you need more principal paydown over that time.

Subordination- This is where the Seller takes their equity in second position. We borrow the down payment in first position. Always consider what your payment will be on your first position note. You still need the payment to work for you. Plus you still need to offer the seller a note and monthly payment. These are longer term deals because. Offer 1. 358 Offer 2 350. Offer 3. 350 w/100K down. 250K in second position. 2.5% int. 900/month for 48months. 19k paydown. 

Wrap Around Mortgage or All Inclusive Trust Deed- If there is debt on the property, what do you do? It really depends on what that debt is and what the monthly payment is. If you can make a cash offer then you can make a short term financing strategy 6-12months, offer a down payment and offer to make the monthly payment. Ask if they are willing to wait on their equity, this strategy works if you can wholesale to a landlord or hold it longer term. Or if you can use it as an AirBnB or rent rooms out individually to create more cash flow. Break it into its component parts, 1 is debt, 2 is the Seller’s equity. Another option, You can offer to pay interest only payments on the Seller’s equity to keep you payment lower especially if the loan is further along in amortization to get more principal paydown. 

Hope you enjoy, And to get special access to a step by step video on how to structure creative financing offers, text CFP to our hotline at 877-409-8090 or click HERE.