Which Lists To Pulll For Creative Financing Deals
Let’s talk about creative financing deals. This is a subject that obviously a good friend of mine pace morbi has done a great job talking about and educating people on and so I’m going to do an episode just talking about this because my coaching students actually have done a whole week on this and a lot of the questions or things that I think most people are asking themselves and so I want to address a lot of this stuff. So the first thing, the first thing that my students were asking me is like, hey, if I want to do credit financing, what type of list would I want to pull?
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And so what I would tell you there is all lists will work for creative financing, there’s not a wrong or right list. But a lot of times what you’d want to try to find is someone that’s in financial pain, more often than not now could you find a seller that quite literally, you know, owns a home free and clear and you create a creative financing structure. Absolutely. In fact, we’ve done one here in the recent past, where the person actually owned the home outright, he had no financial need to do this. But because we were able to give him a higher offer based around him taking our terms, we created a creative finance deal, even though he wasn’t financially in need. So the first thing I would tell you is list like the pre foreclosure list would be pretty good, I would definitely be focusing focusing on absentee list and people that are landlords that have tenants that aren’t paying couldn’t be absolutely great. And then I still like my virtual door knocking list, right? Because you have a home that is maintenance deferred. And those people typically need to sell they’re in a rough spot financially. And so those are just three lists that you can use to find a deal that would tend to be good for a creative finance deal. Now. The other question that came to light, and many people would ask was, you know, how do you negotiate a creative finance deal? What starts with the motivation of the seller, right, that’s what I really want to tell you guys is you need to understand why they’re selling, if they’re in financial pain, they maybe can’t make their next month’s mortgage, then you can say, Hey, I might be able to give you the opportunity to get out of making these payments. As long as you’re open to creating some more creative terms. Are you open to that? Great, now let’s structure it. And then there’s no wrong answer. At the point of structuring the deal, there’s no wrong answer because you are basically creating the value by getting them to not have to continue to pay their mortgage because they can’t afford to. And then you just work up the term so you might make the mortgage payment and that’s it, you might wrap a loan around it, maybe they have a lot of equity in the home but they still can’t pay their mortgage, well maybe wrap the equity. There’s no wrong way to do that. But most of these deals most of them are going to keep the existing loan in place and that’s why subject to has become such a popular topic is because of this now here’s something really cool.
I did a post on Instagram yesterday, I believe it was talking about how Miami just surpassed LA is the most expensive city to buy real estate in based around the median income of the city and the median real estate price of or the median real estate price. So what the the post was is an again, I didn’t fact check this a ton so forgive me here. But essentially, the median price for salaries or income in Miami is $39,000 which blows my mind. I’m not certain how people actually live off $39,000 a year but
Good for them. But then the median median home sales price was $550,000, which again leads to this idea that the markets going to crash at some point because these individuals who make 40 grand and you’re buying a $550,000 home, they can’t afford it, they shouldn’t be buying a home, I bring this all up, because that is going to create a lot of motivated sellers that can’t afford their home anymore. And doing creative financing deals with those types of sellers is ideal, you’re creating a big value, you’re going to leave their loan in place, because the loans these days have been amazing, right, anywhere from the high twos to low threes, you would keep their loan in place. And you would actually essentially take it over and I guess you could live in it is one thing, but essentially rent it make an incredible rental, you didn’t have to go get a loan, and then you have the tenant paying down the mortgage. Now I actually brought on my creative financing transactional coordinator, she is an animal she’s done 1000s and 1000s of creative finance transactions. And that is only for my students. If you’re interested in me coaching, you can go to the science of flipping calm, and you can have access to my team, such as my creative finance transactional coordinator, but what she has seen is the same thing that I’m going to you guys, when individuals such as people that make $40,000, but by a $500,000. home, they can’t afford it. At some point, it’s going to hit the fan, right and that’s when you coming in and being a solution for them, helping them out and keeping their loan in place really can provide a ton and ton of value. Now, when do you make this offer was the third question like Justin, when do I make a creative financing offer? Well, usually, it’s because your cash offer the traditional cash offer as a wholesaler doesn’t actually work for them. You might offer $120,000 cash, but they can’t take less than 160. Well, then you say something to the effect of well, I might be able to get to your 160. But I would have to have you be more open to terms right and getting a little more creative and open in terms are you are you open to that? Well, yeah, what do you thinking? Okay, well, let’s start with, you know how much you need to put in your pocket to walk away and in make this deal done. Now, depending upon what they say, you sometimes are going to have to, you know, cut a check to get the deal done. And sometimes you’re not, they could say hey, I need to sell for 160 primarily because I owe 160. So they’re not going to put anything in their pocket if you get up to 160, right.
But they might take 160 and they owe 100. So their price is just 160. That’s what they want. So when people want that, then you might need to cut a check at closing, you also might be able to structure again, a wrap, right where you wrap a $60,000 loan that the seller gives you now the sellers being the bank, you’re paying their mortgage, that you’ve escalated them to a bank position, you are the homeowner, you’re also able to structure it that way and be able to pay them over time. Okay. But this situation that I’ve never tably will hit the fan if that data is accurate, and people are making 40 grand a year and buying $500,000 homes, inevitably things are gonna hit the fan, and people are gonna start losing their homes. And that’s the type of individual that you myself in real estate investors can create a massive amount of value for him put together a deal, that’s not a deal, because we were able to be creative enough to create the terms now if you are doing creative financing deals and you have not worked with my transactional quarter and he does all my creative financing deals. Then in the comments below because hopefully you’re watching this on YouTube, you’re liking the video done, I would love that. But also in the comment below, let me know I’m happy to make an introduction to my creative financing transaction coordinator so she can handle your deals. Many people get very scared about creative financing because the paperwork, well guess what, if you have her on your side, she can get you the paperwork that you need, she can get you the authorization form, she can make you the addendum even a subject to type purchase and sale agreement if that’s the type of deal you’re doing. She handles all that for me. I literally don’t have to think about a thing, except for contracting the deal. And figuring out how to exit Am I gonna keep it? Am I gonna wholesale it? Am I going to do a lease option to it? Am I going to remodel it? So all I have to think of is the traditional, how do I acquire it? And then how do I exit it she handles all the paperwork and all the structure. In fact, she at times gives us suggestions like Hey, why don’t you do this and arrange the terms like that. And sometimes that works even better than what we were offering the seller.