The Creative Financing Podcast

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

1. 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.

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. 

Wrap Around Mortgage: 1 Note Example: Property info-  SFH with ARV of $250K. Owes 57K. Payment 635/m PITI. Rented for $675. Could rent for 1400/month. Needs 25K in repairs. Cash offer at $165K. 

Offered 180K PP. 9K down.  New note $171K @ 2.5% 850/m principle and interest. Term 3.5 years. Balloon 149,351. 

Wholesale to a landlord for $201K with $30K down. 

Wrap Around Mortgage: 2 Notes Example: Create 1 note for exact terms of the existing note on the property. So 57K principle, same interest rate and term with same amortization schedule.

Second note-  114K principle with 225/month principal only payments for 42 months. Balloon of 104,550 on seco

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

1. 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.

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. 

Wrap Around Mortgage: 1 Note Example: Property info-  SFH with ARV of $250K. Owes 57K. Payment 635/m PITI. Rented for $675. Could rent for 1400/month. Needs 25K in repairs. Cash offer at $165K. 

Offered 180K PP. 9K down.  New note $171K @ 2.5% 850/m principle and interest. Term 3.5 years. Balloon 149,351. 

Wholesale to a landlord for $201K with $30K down. 

Wrap Around Mortgage: 2 Notes Example: Create 1 note for exact terms of the existing note on the property. So 57K principle, same interest rate and term with same amortization schedule.

Second note-  114K principle with 225/month principal only payments for 42 months. Balloon of 104,550 on seco

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

1. 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.

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. 

Wrap Around Mortgage: 1 Note Example: Property info-  SFH with ARV of $250K. Owes 57K. Payment 635/m PITI. Rented for $675. Could rent for 1400/month. Needs 25K in repairs. Cash offer at $165K. 

Offered 180K PP. 9K down.  New note $171K @ 2.5% 850/m principle and interest. Term 3.5 years. Balloon 149,351. 

Wholesale to a landlord for $201K with $30K down. 

Wrap Around Mortgage: 2 Notes Example: Create 1 note for exact terms of the existing note on the property. So 57K principle, same interest rate and term with same amortization schedule.

Second note-  114K principle with 225/month principal only payments for 42 months. Balloon of 104,550 on seco

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

1. 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.

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. 

Wrap Around Mortgage: 1 Note Example: Property info-  SFH with ARV of $250K. Owes 57K. Payment 635/m PITI. Rented for $675. Could rent for 1400/month. Needs 25K in repairs. Cash offer at $165K. 

Offered 180K PP. 9K down.  New note $171K @ 2.5% 850/m principle and interest. Term 3.5 years. Balloon 149,351. 

Wholesale to a landlord for $201K with $30K down. 

Wrap Around Mortgage: 2 Notes Example: Create 1 note for exact terms of the existing note on the property. So 57K principle, same interest rate and term with same amortization schedule.

Second note-  114K principle with 225/month principal only payments for 42 months. Balloon of 104,550 on seco

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

1. 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.

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. 

Wrap Around Mortgage: 1 Note Example: Property info-  SFH with ARV of $250K. Owes 57K. Payment 635/m PITI. Rented for $675. Could rent for 1400/month. Needs 25K in repairs. Cash offer at $165K. 

Offered 180K PP. 9K down.  New note $171K @ 2.5% 850/m principle and interest. Term 3.5 years. Balloon 149,351.  Exit Strategy Wholesale to a landlord for $201K with $30K down. 

Wrap Around Mortgage: 2 Notes Example: Create 1 note for exact terms of the existing note on the property. So 57K principle, same interest rate and term with same amortization schedule.

Second note-  114K principle with 225/month principal only payments for 42 months. Balloon of 104,550 on second not

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

1. 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.

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.

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

1. 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.

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.

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

1. 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.

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.

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

1. 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.

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.

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-

1. These are probably deals you should hold yourself, so you don’t have to convince someone else to over pay for the property.

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.