Hot Tip! Your creativity can be a bigger financial
resource than actual money; to the point where you don’t even NEED
money or ACCESS to bank loans. Think about it, no need for money…
or credit… just words and imagination — it’s like one red paperclip,
you know the kid who traded from a paperclip to a house in a year? Except…
this isn’t nearly as difficult. If he can do that, you can do this.
Hang on to your eyeballs, because my primary method of finding money for
my deals might shock you. Here it is.
FIRST, I look to the seller to provide financing for my deal as opposed to
getting a conventional investment property loan or trying to round up friends
and family. I look to the seller first. Typically, this is referred to as seller
financing or seller carry-back. Listen up before you roll your eyes or fry
your brain trying to figure out how to do this… Understand this…
There are endless ways to creatively finance a deal, but before you craft your
numerical masterpiece, you’ve got to first know WHAT the seller needs and
WHEN they need it. You’ll also need to know:
How much money they owe on the property, and if the payments are current.
After you’re firm on those items, you can get to work massaging terms to
see how THEY can help YOU help THEM. There are three scenarios you’re likely to
encounter. Scenario #1. FREE & CLEAR PROPERTIES
If they own it free and clear, and they’re open to seller financing, then that’s
an easy deal. But wait! Why would someone want to take payments
instead of cash out? Well, maybe they don’t want to be landlords, but they’d like the
cash flow. Maybe they’re up there in their years and
have no use for a chunk of money but would rather live out their days in extra
comfort with some extra income. Maybe they don’t want to pay the taxes on
the whole amount. Who knows?! The reason doesn’t matter, either. I can tell
you there are more reasons than you can conceive of, so stop trying to figure
out why they wouldn’t finance the sale, and just ask.
Here’s Another Hot Tip!: Don’t waste your time trying to figure out why
a seller won’t finance your deal and focus on figuring out why they will.
Scenario #2. AN EXISTING LOAN ON THE PROPERTY The property won’t always be owned free and
clear. If there’s a loan in place, my first choice is to leave it there
and transact what’s known as a ‘subject to’ deal. Subject to means I take
ownership subject to the existing loan. At the end of the transaction, I’m on
title but the loan remains in the seller’s name.
Essentially I’ve become their loan-sitter. I make the payments on time and in
full, and I’m free to flip the property and pocket the profit or rent it out and
hold on to it for cash flow. “Why would a seller let me be on title while
they’re still responsible for the loan?”
Remember! Don’t try to figure out why they won’t, but rather focus on why
they will. Get out of your own way, and don’t negotiate in your mind on the
Seller’s behalf. That’s their job… you do yours.
Scenario #3. AN EXISTING LOAN AND THEN SOME Sometimes the seller wants cash above and
beyond the existing loan. In those cases I look to the seller AGAIN and
present them with the option to carry back an ADDITIONAL loan.
If they agree, you can either keep the loans separate, i.e.: pay the bank and
pay the seller separately. Or, my preference, wrap them into one loan using a
third party servicing company who then distributes the payments to each
lender accordingly. It’s tidy, it’s simple, it’s safer, and it’s my preference. Listen,
the more I creatively fashion deals involving the sellers, the less of
my own money I use. But, understand it’s a SKILL. It takes patience and
PRACTICE to develop. You might self-combust in the beginning (not
really), but stick it out because it’s WORTH it.
Not everyone has the ability to make money appear from the words they
speak, but those who do can be found sipping fruity cocktails on remote
beaches whenever they feel like it… and that’s what I mean when I say it’s
WORTH it. Doing what you want with your time… when you want to do it.
The majority of my Epic Pro Academy focuses on negotiating and creative
deal structuring. If you’re serious about honing your skills, maybe it would
make sense to become a member… or not. It’s your decision… you know
your situation better than I do. Go to EpicProAcademy.com and decide for
yourself. See you next week on another episode of Financial Freedom