Download - Creative Financing For Buyers & Sellers
1 BTi, Inc. © 2008
Continued Success on Your Path . . .JD & Suzanne Morris
Ideal 4 Investors
Wednesday Night Online Seminar Series
March 12, 2008 Creative Financing
StrategiesFor Buyers and Sellers
www.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508
2 BTi, Inc. © 2008
March 19Short Sale Property Tour
Wednesday Night Online Seminar Series
Online Seminar: April 16Investing Your IRA in Real
EstateWith Lisa Moren Bromma
Author & Special Advisor to the Entrust Groupwww.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508
Suburban Atlanta Pre-Filled Lease OptionSuburban Atlanta Pre-Filled Lease Option
Purchase Price - $189,680 Builder Paid Closing Costs – Up To $5,690 Future Sale Price - $214,338 (lease purchase in place)Option Payment - $10,717 (100% yours to keep)
Monthly Rent - $1,664 (lease is in place)Your Estimated Monthly Payment - $1,362Estimated Monthly Cash flow - $136Total Estimated “Out of Pocket” After Move in - $11,352
$18,899 Year 1 Gross Profit$18,899 Year 1 Gross Profit
Order Your Free Investment Guide:Order Your Free Investment Guide:
www.ideal4investors.com □ (877) www.ideal4investors.com □ (877) 825-3508825-3508
CreativeFinancing
Strategies
CreativeFinancing
StrategiesFor Buyers & SellersFor Buyers & SellersFor Buyers & SellersFor Buyers & Sellers
presented by
Bill TanBill Tan Investments, Inc
presented by
Bill TanBill Tan Investments, Inc
5 BTi, Inc. © 2008
Contact MeContact Me
Bill TanBT Investments, Inc
(760) [email protected]
Bill TanBT Investments, Inc
(760) [email protected]
6 BTi, Inc. © 2008
Let’s Think…Let’s Think…
How do you pay forHow do you pay forreal estate purchases?real estate purchases?
CashCash
LoansLoans
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Let’s Think…Let’s Think…
How do you pay forHow do you pay forreal estate purchases?real estate purchases?
CashCash
LoansLoans
OtherOther
8 BTi, Inc. © 2008
First…First…
You mustdevelop an interest
in your fellow man.
You mustdevelop an interest
in your fellow man.
Care about the peopleas you listen to them.
Care about the peopleas you listen to them.
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Keep In MindKeep In Mind
“People don’t care how much you know
until they know how much you care.”
“People don’t care how much you know
until they know how much you care.”
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People & BusinessPeople & Business
If the sellers are afraid, they won’t do business with you.
If the sellers are afraid, they won’t do business with you.
Make people feel secure & they will do business with you.
Make people feel secure & they will do business with you.
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Think On ThisThink On This
“Real Estate is athinking man’s game,
not a runningman’s game.”
“Real Estate is athinking man’s game,
not a runningman’s game.”Chuck ChathamChuck Chatham
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ClarifyClarify
Define what the problem is
AND
make sure the sellers
understand their problem.
Define what the problem is
AND
make sure the sellers
understand their problem.
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Problem SolvingProblem Solving
1.1. Write downWrite downa proposed solution a proposed solution without consideringwithout consideringits feasibility:its feasibility:then set it aside.then set it aside.
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Problem SolvingProblem Solving
2.2.Come up with at least twoCome up with at least twomore proposed solutions. more proposed solutions. •• Be sure to think them through carefullyBe sure to think them through carefully
& individually and write them down also. & individually and write them down also. •• You want multiple possibilities in case You want multiple possibilities in case
one solution won’t work. one solution won’t work. •• If you spend time thinking about a If you spend time thinking about a
problem: you come up with better problem: you come up with better solutions, you improve the solutions and solutions, you improve the solutions and make them safer.make them safer.
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Problem SolvingProblem Solving
3.3. Write down the benefits for the Write down the benefits for the sellers and you.sellers and you.
4.4. Write down the documents that will Write down the documents that will be necessary to transfer the be necessary to transfer the property in your deal.property in your deal.
5.5. Determine which solution is most Determine which solution is most feasible and go out and implement feasible and go out and implement the most feasible solution.the most feasible solution.
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Note!Note!
DO NOT MENTION MONEYDO NOT MENTION MONEY
IN ASSOCIATION WITH THE IN ASSOCIATION WITH THE
SELLER’S EQUITYSELLER’S EQUITY
BECAUSE YOU DO NOT WANTBECAUSE YOU DO NOT WANT
THE SELLER TO CONSIDERTHE SELLER TO CONSIDER
THEIR EQUITY AS MONEY.THEIR EQUITY AS MONEY.
DO NOT MENTION MONEYDO NOT MENTION MONEY
IN ASSOCIATION WITH THE IN ASSOCIATION WITH THE
SELLER’S EQUITYSELLER’S EQUITY
BECAUSE YOU DO NOT WANTBECAUSE YOU DO NOT WANT
THE SELLER TO CONSIDERTHE SELLER TO CONSIDER
THEIR EQUITY AS MONEY.THEIR EQUITY AS MONEY.
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Another NoteAnother Note
SELLERS ARENOT MONEY LENDERS.
They are selling an asset &EXTENDING CREDIT,
NOT CASH.
SELLERS ARENOT MONEY LENDERS.
They are selling an asset &EXTENDING CREDIT,
NOT CASH.
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A Quote To UseA Quote To Use
“USE WHAT YOU HAVE,
TO GET WHAT YOU NEED,
TO GET WHAT YOU WANT.”
“USE WHAT YOU HAVE,
TO GET WHAT YOU NEED,
TO GET WHAT YOU WANT.”
Mike CantuMike Cantu
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IdeasIdeas
1.1. Paper OutPaper Out
Financing the Down PaymentFinancing the Down Payment
Creation of WealthCreation of Wealth
Share the WealthShare the Wealth
Shared Appreciation MortgageShared Appreciation Mortgage
2.2. Blanket MortgageBlanket Mortgage
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IdeasIdeas
3.3. PartnersPartners
Owners/RentersOwners/Renters
Down paymentDown payment
Monthly payments orMonthly payments or
negative cash flownegative cash flow
Financial statementFinancial statement
4.4. Substitution of CollateralSubstitution of Collateral
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IdeasIdeas
5.5.Life Insurance policyLife Insurance policy
6.6.Assume the Seller’s ObligationsAssume the Seller’s Obligations
7.7.Use Talents or ExpertiseUse Talents or Expertise
8.8.Split off part of the propertySplit off part of the property
9.9.Refinance “things”Refinance “things”
10.10.OptionsOptions
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3 Ways To Help3 Ways To Help[and Profit!]
[and Profit!]
Seller FinancingSeller Financing
Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout
Wraparound MortgageWraparound Mortgage(AITD or ‘All Inclusive Trust Deed’)(AITD or ‘All Inclusive Trust Deed’)
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The ARM AlarmThe ARM Alarm
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A Quote Of NoteA Quote Of Note(s)(s)
“If you can’t find notes,
make them.”
“If you can’t find notes,
make them.”
Jimmy NapierJimmy Napier
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Seller FinancingSeller Financing
Program BasicsProgram Basics Property must be purchased at Property must be purchased at
50% LTV or less50% LTV or less
Property can’t be trashedProperty can’t be trashed
Buyers must have sufficient Buyers must have sufficient incomeincome
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Seller FinancingSeller Financing
A Sample Scenario A Sample Scenario
Purchase a $400,000
property in foreclosure
at retail for $200,000
Purchase aPurchase a $400,000$400,000
property in foreclosureproperty in foreclosure
at retail forat retail for $200,000$200,000
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Seller FinancingSeller Financing Breakdown: Investor CostsBreakdown: Investor Costs
hard money loan $200,000
points and fees $10,000
holding costs $10,000
taxes, utilities, insurance $6,000
rehab costs $20,000
closing costs $34,000
TotalTotal $280,000$280,000
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Seller FinancingSeller Financing Breakdown: Property Sale CostsBreakdown: Property Sale Costs sale price $400,000 down payment $20,000 1st mortgage (Trust Deed)
30 years at 8% — due in 10 years30 years at 8% — due in 10 years 2,568.2,568.1818/month — $307,035./month — $307,035.7373 balloonballoon
$350,000
2nd mortgage (Trust Deed) 10 years at 10% — interest only10 years at 10% — interest only $250.$250.0000/month/month
$30,000
Buyer’s Credit ScoreBuyer’s Credit Score 600+600+
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Breakdown: Investor StepsBreakdown: Investor Steps sell property $400,000 create 1st mortgage $350,000 sell 1st mortgage
this pays ALL costs! this pays ALL costs! (hard money, rehab, sales costs, (hard money, rehab, sales costs,
etc)etc)
$280,000
carry 2nd mortgage (= $250/month!)(= $250/month!) $30,000 collect your cash!collect your cash!
down payment from 1st (= cash (= cash profit!)profit!)
annual income from 2nd (= cash (= cash flow!)flow!)
(now & later)(now & later)$20,000$20,000 nownow
$3000$3000 annuallyannually
Seller FinancingSeller Financing
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Seller FinancingSeller Financing If you do just one deal each month, If you do just one deal each month,
here’s what happens over time…here’s what happens over time… 1st year
12 deals * $20,00012 deals * $20,000 12 deals * $3,00012 deals * $3,000
profit$240,000 $240,000 cash now!cash now!
$36,000/year $36,000/year cash flow!cash flow!
3rdyear 12 deals * $20,00012 deals * $20,000 3 years * $36,000/year3 years * $36,000/year
more profit$240,000 $240,000 cash now!cash now!
$108,000/year $108,000/year cash flow!cash flow!
in comparison,…in comparison,…to create that much passive income with ‘traditional’ rentals, an investor would need to rent out…
value neededvalue needed$108,000
÷ 3.5%= $3,085,714
…of free and clear properties! (yes, that’s 3 million!)
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Seller FinancingSeller Financing If you do just one deal each month, If you do just one deal each month,
here’s what happens over time…here’s what happens over time… 1st year
12 deals * $20,00012 deals * $20,000 12 deals * $3,00012 deals * $3,000
profit$240,000 $240,000 cash now!cash now!
$36,000/year $36,000/year cash flow!cash flow!
3rdyear 12 deals * $20,00012 deals * $20,000 3 years * $36,000/year3 years * $36,000/year
more profit$240,000 $240,000 cash now!cash now!
$108,000/year $108,000/year cash flow!cash flow!
in comparison,…in comparison,…to create that much passive income with ‘traditional’ rentals, an investor would need to rent out…
value neededvalue needed$108,000
÷ 3.5%= $3,085,714
* passive income after just 3 years
* passive income after just 3 years $108,000$108,000
$108,0003.5%
* Investors commonly use 3.5% as an average estimate for expected net ROI* Investors commonly use 3.5% as an average estimate for expected net ROI
…of free and clear properties! (yes, that’s 3 million!)
32 BTi, Inc. © 2008
Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout
Program BasicsProgram Basics 11stst and 2 and 2ndnd in default in default
Work with owners to sell house Work with owners to sell house on a short saleon a short sale
Looking to get a discount of Looking to get a discount of at least 85-90% on 2at least 85-90% on 2ndnd
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Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout
A Sample Scenario A Sample Scenario
Purchase a $100,000Purchase a $100,000
note for $5,000note for $5,000
and make $30,000and make $30,000
Purchase aPurchase a $100,000$100,000
note fornote for $5,000$5,000
and makeand make $30,000$30,000
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Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout Breakdown: Scenario $Out Breakdown: Scenario $Out && $In $In
property value 11stst mortgage mortgage
22ndnd mortgage mortgage
$300,000$200,000$200,000$100,000$100,000
buy 2nd mortgage - $5,000
‘short sale’ of property + $260,000
pay off 1st + closing costs $200,000 + $25,000$200,000 + $25,000
- $225,000
collect your cash!collect your cash! $30,000$30,000
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Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout Breakdown: Scenario $Out Breakdown: Scenario $Out && $In $In
property value 11stst mortgage mortgage
22ndnd mortgage mortgage
$300,000$200,000$200,000$100,000$100,000
buy 2nd mortgage - $5,000
‘short sale’ of property + $260,000
pay off 1st + closing costs $200,000 + $25,000$200,000 + $25,000
- $225,000
collect your cash!collect your cash! $30,000$30,000
- in default -- in default -
- in default -- in default -
($ out)($ out)
($ in)($ in)
($ out)($ out)
($ in… your pocket!)($ in… your pocket!)(that’s net profit!)(that’s net profit!)
36 BTi, Inc. © 2008
Wraparound MortgageWraparound Mortgage
Program BasicsProgram Basics Fully amortized, low-interest mortgage Fully amortized, low-interest mortgage
on propertyon property
Purchase property for zero moneyPurchase property for zero moneydown, subject to existing loandown, subject to existing loan
Sell property with higher interestSell property with higher interestrate and longer term financingrate and longer term financing
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Wraparound MortgageWraparound Mortgage
A Sample Scenario A Sample Scenario
Purchase a $500,000Purchase a $500,000
SFR for $0 downSFR for $0 down
and make $638.and make $638.4545/mo/mo
PuPurcrchase a hase a $500,000$500,000
SFR for SFR for $0$0 down down
and make and make $638.$638.4545/mo/mo
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Wraparound MortgageWraparound Mortgage Breakdown: How to wrap itBreakdown: How to wrap it
purchased 2004 (existing financing) $25,000 down, $525,000 1st$25,000 down, $525,000 1st 30 years @ 5%, $2,818.30 years @ 5%, $2,818.3131/month/month 27 years and ~$500,000 27 years and ~$500,000 remaining remaining
$550,000
purchase now ‘subject to existing’ current property value = current property value = $500,000 $500,000
$0
sell on a ‘wraparound mortgage’ 40 years at 8%, $3,456.40 years at 8%, $3,456.7676/month /month
$500,000
collect your cash!collect your cash! $3,456.76 - $2,818.31
(AITD income - existing note payment)(AITD income - existing note payment)
$638.$638.4545/mo/mo
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Wraparound MortgageWraparound Mortgage Breakdown: How to wrap itBreakdown: How to wrap it
purchased 2004 (existing financing) $25,000 down, $525,000 1st$25,000 down, $525,000 1st 30 years @ 5%, $2,818.30 years @ 5%, $2,818.3131/month/month 27 years and ~$500,000 27 years and ~$500,000 remaining remaining
$550,000
purchase now ‘subject to existing’ current property value = current property value = $500,000 $500,000
$0
sell on a ‘wraparound mortgage’ 40 years at 8%, $3,456.40 years at 8%, $3,456.7676/month /month
$500,000
collect your cash!collect your cash! $3,456.76 - $2,818.31
(AITD income - existing note payment)(AITD income - existing note payment)
$638.$638.4545/mo/mo
$2,818.$2,818.3131
$3,456.$3,456.7676
AITD = AITD = All Inclusive Trust DeedAll Inclusive Trust Deed
$3,456.$3,456.7676 - $2,818. - $2,818.3131 = net cash flow= net cash flow$638.$638.4545/mo/mo
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Wraparound MortgageWraparound Mortgage
One more thing… One more thing…
Any principal paydownon the wrap
is…
Any principal paydownAny principal paydownon the wrapon the wrap
is…is…
TAX FREE!!TAX FREE!!
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Wraparound MortgageWraparound Mortgage
OK, one last thing…OK, one last thing…(really!)(really!)
After 27 years of payments, the 1st is paid off.After 27 years of payments, the 1st is paid off.YouYou get the entire get the entire $3456.$3456.7676/month/month yourself! yourself!
Remaining AITD balanceRemaining AITD balance (now in 1st position)(now in 1st position) is is
$336,524$336,524If the buyer now refinances the propertyIf the buyer now refinances the property
and pays you off, you get the entire…and pays you off, you get the entire…
$336,524$336,524
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Wraparound MortgageWraparound Mortgage
OK, one last thing…OK, one last thing…(really!)(really!)
After 27 years of payments, the 1st is paid off.After 27 years of payments, the 1st is paid off.YouYou get the entire get the entire $3456.$3456.7676/month/month yourself! yourself!
Remaining AITD balanceRemaining AITD balance (now in 1st position)(now in 1st position) is is
$336,524$336,524If the buyer now refinances the propertyIf the buyer now refinances the property
and pays you off, you get the entire…and pays you off, you get the entire…
$336,524$336,524 tax free!tax free!
43 BTi, Inc. © 2008
Review: 3 WaysReview: 3 Ways[To Profit!]
[To Profit!]
Seller FinancingSeller Financing
Junior ‘Bene’ BuyoutJunior ‘Bene’ Buyout
Wraparound Mortgage Wraparound Mortgage (AITD or ‘All Inclusive Trust Deed’)(AITD or ‘All Inclusive Trust Deed’)
Thanks For Joining Us
—•—
Any
Questions?
Thanks For Joining Us
—•—
Any
Questions?
45 BTi, Inc. © 2008
Contact MeContact Me
Bill TanBT Investments, Inc
(760) [email protected]
Bill TanBT Investments, Inc
(760) [email protected]